A world-class international maritime cluster, offering efficient and high-quality services in a vast spectrum of activities.

The maritime sector has historically been one of Cyprus’ most important and well-developed industries. Cyprus has successfully built a diversified and sophisticated maritime sector, based on the strategic location at the crossroads of busy sea trade routes, while at the same time offering attractive legislative and operational shipping infrastructure, a solid and efficient tax framework with the support of high-level maritime service providers.

More than 1,022 registered vessels with a 21 million gross tonnage are registered under the Cyprus flag making the country the:

  • 3rd largest merchant fleet in the EU
  • 10th largest merchant fleet in the world
  • Top 3 Ship Management Centre globally
  • Largest third party Ship Management Centre within the EU

 

Advantages that make Cyprus a maritime hub.

  • Ship owner companies and management companies are taxed according to the net tonnage of the ship and not on the basis of the local corporate tax (12.5%)
  • The tax obligations of the company are controlled by the Department of merchant shipping and not the Tax registrar
  • Total exemption of the profits from the corporate tax and the tax arising from the sharing of the profits (dividends)
  • Cyprus allows the operation of a variety of activities to a company/group of companies, as well as the taxation of the shipping activities on the tonnage tax law and any further activities based on the corporate tax at 12.5%
  • Transparency of the registered corporations and vessels list

 

Tax advantages of Cyprus Merchant Shipping.

  • Low corporate tax - 12.5%
  • Exemptions on the dividends taxation (including criteria that can be easily met)
  • Exemption of profits arising from permanent establishment based abroad
  • Exemption of profits arising from the purchase/sale of shares, bonds, currency or any financial derivatives
  • Exemption from withholding tax from the source when transferring profits in the form of dividends, interest and almost in every form of intellectual property
  • Extensive double tax treaty agreement for the avoidance of double taxation between more than 80 countries worldwide.
  • Total compliance with the EU directives
  • Legislation governing the relationship between non-controlled foreign companies
  • No low capitalization rules
  • Neutral tax treatment in cases of rearrangements related to EU companies as well as from third countries

 

 

cyprus merchant shipping

 

 

Shipping companies.

The legislation provides exemption from all direct taxes and taxation under tonnage tax regime of qualifying shipowners, charterers and ship managers, from the operation of qualifying community ships ( EU member state or of a country in the European Economic Area) and foreign ships (under conditions), in qualifying activities.

The Merchant Shipping Legislation also, allows non community vessels to enter the tonnage tax regime provided the fleet is composed by at least 60% community vessels.Non community vessels can still qualify if certain criteria are met, even if they don’t qualify the above requirement.

The legislation includes an “all or nothing” rule. This means that if a shipowner/ charterer/ ship manager of a group choose to be taxed under the Tonnage Tax regime, all shipowners/ charterers/ ship managers of the group should choose the same.

Exemption also applies to the salaries of the crew of a Cyprus ship.

 

The Cyprus Tonnage Tax system (TT).

The law provides full exemption to ship owners, charterers and ship managers from all profit taxes and imposes tonnage tax on the net tonnage of the vessels.

A qualified vessel is a sea-going vessel that:

  • has been certified in line with international principles and legislation of the flag country, and
  • is registered in the register of a member country of the International Maritime Organization (IMO) and International Labor Organization (ILO).

Excluded vessels:  fishing boats, Boats that are primarily used for the athletic and entertaining purposes boats that have been constructed exclusively for domestic navigation, Ferry and trailer boats that are used in ports, mount of rivers and / or rivers, fixed offshore constructions that are not used for maritime transport, Non self-propelled floating cranes, Floating hotels and restaurants, Floating or movable casinos

 

Ship owner companies.

Tax exemptions.

  • Profits from the use of a qualifying vessel
  • Profits from the disposal of a qualifying vessel and/or share and/or interest in it
  • Profits from the disposal of shares in a ship owning company
  • Dividends paid out of the above profits at all levels of distribution
  • Interest income relating to the financing/maintenance/use of a qualifying vessel and the working capital, excluding interest on capital used for investments

The exemption also applies to the bareboat charterer of a vessel flying the Cyprus flag under parallel registration. Where an option is exercised to enter the Tonnage Tax system, the ship owner must be a Cyprus tax resident and the option must remain in force for at least 10 years.

 

 

Ship Charterers.

Tax exemptions.

  • Profits from the use of a qualifying vessel
  • Dividends paid out of such profits at all levels of distribution
  • Interest income relating to the working capital / qualifying activity provided such interest is used to pay expenses arising from the charter, excluding interest on capital used for investments.

The law grants the exemption provided a composition requirement is met. That is, at least 25% of the net tonnage of vessels subject to tonnage tax are owned or are bareboat chartered. The percentage can be reduced but not for more than three consecutive years. The percentage is reduced to 10% if all the vessels of the charterer if they carry EU/EEA flags or are managed (crewing and technical) in the EU/EEA.

 

Ship Managers.

A legal person, tax resident in Cyprus providing technical and/or crewing services in respect of qualifying vessels (Cyprus/EU/EEA/fleet). Commercial management is taxable under corporation tax.

An option exists to pay TT at 25% of the rates applicable to ship owners and charterers, for all vessels under management. If the choice is not made, profits are taxable under 12,5% corporation tax. The fleet qualifying criteria are the same as the ship owners / charterers and so is the minimum 10 year duration.

Additional requirements for Ship managers.

  • The manager is obliged to maintain a fully-fledged office in Cyprus with personnel sufficient in number and qualification
  • At least 51% of all onshore personnel must be EU/EEA citizens
  • At least 2/3 of the total tonnage under management must be managed within the EU/EEA (any excess of 1/3 taxed under 12,5% corporation tax).

Tax exemptions.

  • Profits from technical and/or crew management
  • Dividends paid out of the above profits at all levels of distribution
  • Interest income relating to the working capital / qualifying activity provided such interest is used to pay expenses relating to ship management, excluding interest on capital used for investments.

 

 

cyprus maritime

 

 

Cyprus Ship registration.

Permanent & provisional ship registration.

Cyprus merchant shipping legislation allows for the provisional registration of a vessel (in case the vessel concerned was not previously a Cyprus ship) and most owners usually opt to have their ship provisionally registered first. The provisional registration is deemed to be a full registration for a period of up to six months and it can be extended further for three months with an application prior to the expiration of the six-month period. This will allow the owners time (up to nine months, including the three-month extension) during which they will be able to complete the administrative formalities for permanent registration.

The permanent registration of a vessel registered provisionally under the Cyprus flag must be completed within nine months, including the three-month extension period, which is the maximum provisional registration period. It is not necessary for the ship to be present in a Cyprus port.

Once the necessary documents are submitted and formalities completed the Registrar of Cyprus Ships will issue the “Certificate of Cyprus Registry” and the vessel will be permanently registered under the Cyprus flag.

 

Parallel Registration.

Under Cyprus legislation the possibility of parallel (bareboat) registration of vessels exists. The legislation provides for the two forms of internationally accepted bareboat registration: “parallelin” registration and “parallel-out” registration. These two options offer some very interesting opportunities for leaseback, hire purchase and finance arrangements.

The administrative practice of the Department of Merchant Shipping has confirmed that the parallel (bareboat) registration of vessels under the Cyprus regime may be affected with more than 20 states whose legislation is compatible with Cyprus legislation. “Parallel-in” registration offers the possibility to a foreign flag vessel on bareboat charter to a Cyprus shipping company to be registered in “parallel” under the Cyprus flag for a period, usually two years, which is renewable.

Cyprus ships may be bareboat chartered to a foreign person or company and registered “parallel” in a foreign register for the duration of the charter party. This so-called “parallel-out” registration allows the financing of a ship and her mortgaging under the Cyprus flag and then her registration in a foreign registry through a bareboat charter arrangement.

 

KTC commitment.

Our firm’s high-qualified experts are continuingly following up with the latest maritime scheme updates. We are committed to provide tailored solutions and advise to your needs. Our team, together with a network of professionals around the world, focuses to support any level of Maritime enterprise.

We provide services such as:

  • Registration of shipping companies (ship owning, charterer, ship management)
  • Tonnage tax compliance
  • Audit and assurance
  • Compliance of Cyprus registered companies
  • International tax planning, structuring and restructuring