tonnage tax shipping in cyprus

Cyprus offers various incentives and advantages to ship owners, ship managers and companies based on tax exemptions and the tonnage tax system.

The Cyprus merchant shipping registry is the 10th biggest worldwide and Cyprus is the third ship management center in the European Union. The EU state member is considered a hub for shipping companies thus some of the most specialized Shipping management companies are based in Limassol where the main port is located.

Cyprus has taken advantage of the great geographical position as a crossroad of three continents and has formed a solid shipping infrastructure that evolves and upgrades through the years. Besides that the country offers various incentives and advantages to ship owners, ship managers and companies based on tax exemptions and the tonnage tax system.

 

Tax exemptions.

Cyprus offers complete tax exemption of all profits and dividends at all levels of distribution arising from qualifying shipping operations.

The legislation provided.

  • Tonnage Tax schemes that apply for ship owners of non-Cyprus flag vessels and charterers. 
  • Tonnage Tax regime – extended and exemption from profits tax, enjoyed by shop owners and ship managers.

Under this legislation, qualifying shipping activities are fully exempt from corporation tax. Tonnage tax on the net tonnage of the vessels is imposed instead of corporation tax on the actual profits. Qualifying persons are also regulated completely by the Department of Merchant Shipping rather than the Tax Authorities.

 

Non-Shipping activity income

Ship owners, charterers and ship managers are known to use surplus funds and invest them for non-shipping income. This income, that is not subject to TT, is subject to corporation tax at the normal rate of 12,5%, one of the lowest corporation tax rate in the EU.

The tax legislation provides for several exemptions that may reduce the effective tax rate on non-shipping income to well below 12,5%. If mixed income is earned (TT and corporation tax), separate books must be kept. Also transactions with related parties who are not in the TT system should be made as an arms’ length.

 

Download the full Cyprus Shipping guide here.

cyprus merchant shipping regime