Shipping is playing an increasingly major role in the successful growth of the Cypriot economy. The Cyprus Maritime Register is the 10th largest in the world, the third largest in the management of third-party vessels in Europe, is 15% of the EU Fleet. Not to mention the fact that it is one of very few countries to have an “open registry” and full or partial exemption from income tax.
Due to the open registration regime, owned by only two EU countries, most owners of foreign ships can register their vessel in parallel. It is sufficient as a prerequisite that 50% of shares belong to a Cypriot citizen or a citizen of another EU country. When registering a vessel in Cyprus, the relevant laws that apply include the Tonnage Tax System (TTS), as opposed to profit tax. Thus there are a number of tax advantages arising from owning a vessel through a Cyprus company.
In 1963, Cyprus granted full exemption from taxes on income and dividends, which occurred at all levels of distribution of qualified shipping operations. This law was approved for 10 years, following repeated updates. However, the most important point of the current legislation is the law approved by the European Commission on March 24, 2010.
For whom the new taxation system is intended:
For owners, freighters or ship managers who own, charter or operate *qualified vessels under *qualified shipping activities.
*Qualifying ship is any seagoing vessel certificated under the relevant international or national rules and regulations and registered in the ship register of any member of the International Maritime Organization (IMO) or the International Labour Organization (ILO) which is recognized by the Republic of Cyprus.
*Qualifying Shipping Activity means any commercial business or activity which constitutes maritime transport, or crew or technical management of qualifying ships.
The essence of the law is the complete exemption from the Corporation tax of the profit tax, which is replaced by the Tonnage Tax (TT), which in turn is calculated from the Net tonnage of the vessel at the rates indicated below:
Net Tonnage (NT)
0 – 1.000
|1.001 – 10.000||10.001 – 25.000||25-001 – 40.000||Above 40.001|
|€36.50 per 100 NT||€31.03 per 100 NT||€20.08 per 100 NT||€12.78 per 100 NT||
€7.30 per 100 NT
Any vessel owner, freighter or manager choosing a TT should remain in the system for at least 10 years. In the event of an early exit from the system, they will be fined.
It should be noted that due to the introduced changes in the legislation, qualified entrepreneurs in the shipping industry are regulated only by the Department of Merchant Shipping, rather than by the Tax Authorities, which was the case prior to the amendment.
Our team of legal experts will be happy to assist you regarding ship management and vessel registration in Cyprus as well as the tax implications that this carries.