The Cyprus tax regime is one of the Europe’s most attractive thus making the country a popular destination for big international firms to transfer their base, and operations.
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:
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 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:
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
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.
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.
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.
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.
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.
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:
Cyprus offers various incentives and advantages to ship owners, ship managers and companies based on tax exemptions and the tonnage tax system.
A well established maritime infrastructure one of the most developed in Europe. The Cyprus ship registry is one of the two “open” registries within the European Union and is estimated that holds the 15% of the total merchant fleet in the region.
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