Cyprus is a renowned international shipping centre and is home to some of the world’s leading names in the global shipping industry, such as the Italian MSC Mediterranean Shipping Company, the German-owned Bernhard Schulte Shipmanagement and the Russian Unicom Management Services.
The maritime sector has historically been one of Cyprus’ most successful industries. Capitalising on its strategic location at the crossroads of busy sea trade routes and offering attractive legislative and operational shipping infrastructure, a solid and efficient tax framework and an excellent communications network, Cyprus has successfully built a diversified and robust maritime industry that accounts, including auxiliary services, for over 7% of the country’s GDP.
More than 1,022 registered vessels with a 21 million gross tonnage are currently registered under the Cyprus flag, making Cyprus the third largest merchant fleet in the EU and the tenth largest in the world. It is a top-three ship management centre globally and is also the largest third-party ship management centre in the EU.
Cyprus has an EU-approved ‘Open Registry’ regime, one of the only two ‘Open Registries’ in the EU, with a very wide and legally endorsed Tonnage Tax System (TTS), which was introduced with the Merchant Shipping Law in 2010 and covers the three main ‘maritime transport’ activities – ship-owning, ship-management (crew and technical management) and chartering.
The simplified TTS represents a compelling competitive benefit and contributes significantly to the already strong position of the country in global shipping. It provides full exemption to ship-owners, charterers and ship-managers from all profit taxes and instead imposes tonnage tax on the net tonnage of the vessels. Qualifying taxpayers are also regulated completely by the Department of Merchant Shipping rather than the tax authorities.
Owners of Cyprus flag ships fall automatically under the TTS, whereas ship owners of foreign flag ships, charterers and ship managers may opt to be taxed under the TTS under certain conditions. The TTS further allows mixed activities within a company or group, such that shipping income is subject to the tonnage tax, while non-shipping income is subject to corporation tax at the normal rate in Cyprus of 12.5%, the lowest corporation tax rate in the EU.
In addition, the Cyprus tax system provides exemptions from: tax of dividend income, tax of profits from foreign permanent establishments (PE), tax of profits generated from transactions in titles, withholding tax on the repatriation of income either in the form of dividends, interest and on almost all royalties.
Cyprus also offers an extensive network of double tax treaties, access to EU Directives, tax neutral reorganisations for both EU and non EU group companies and an absence of controlled foreign corporation (CFC) legislation and thin capitalisation rules. The Cyprus tax system is in full compliance with EU requirements and the OECD requirements against harmful tax practices.
The tax incentives combined with the economic and the other advantages provided, including the excellent infrastructure, make Cyprus the ideal choice for ship-owners, charterers and ship managers. Ship registration costs and fees are highly competitive and there are no crew or officer nationality restrictions.
Cyprus has 28 Merchant Shipping Bilateral Agreements and is a signatory to all international maritime conventions on safety, security and pollution prevention. It offers full protection for financiers and mortgagees and the Cyprus flag is on the white list of both the Paris and Tokyo Memorandum of Understanding (MoU).
In addition to ship owners, charterers and ship management companies, Cyprus now hosts numerous shipping agencies, classification societies, marine surveyors, average adjusters, marine insurance and P & I brokers, shipbrokers and bunkering facilities. In addition, a growing number of international banking units are willing to offer their services for ship financing while there are considerable numbers of trained lawyers and accountants specialising in shipping.
With over three decades of experience handling cross-border corporate and commercial matters, Sovereign’s corporate services include forming new corporate structures, reorganising existing structures and repatriating earnings. We also offer the necessary expertise in administering and managing companies, including company law, board procedures, director responsibilities and shareholder relations, and financial and corporate compliance requirements.
We also provide the administrative support to maximise opportunities and achieve long-term sustainability, from full back-office solutions to assistance with tax and regulatory compliance. This includes accountancy, human resources, pensions, insurance, obtaining local licences and permits, executive relocation and specialist tax advice.
Cyprus offers competitive advantages to the shipping market participants. If you want to make the most of these opportunities, contact Sovereign Trust (Cyprus) Limited by phone on +357 25 733 440 or by email to cy@SovereignGroup.com
