The reasons are simple. Cyprus is a well-established shipping center in a strategic geographical location at the crossroads of prosperous financial regions of three continents and next to the Suez Canal and simultaneously is an EU Member State.
The extension and diversification of shipping activity is to a large extent attributable to the island’s excellent infrastructure. All the businesses and services, public and private, which ship owners, banks, investors and individuals require are available in Cyprus at the highest international standards.
Ship management companies feature prominently in Cyprus, along with companies engaged in chartering, crewing, telecommunications, ship broking, surveying, insurance and salvage. Membership of numerous international organizations enables the island to influence at the highest level decisions relating to shipping matters and furthermore helps Cyprus to maintain strong and friendly links with almost all foreign powers. As a result, vessels flying the Cypriot flag receive a warm welcome in ports of call the world over.
Languages
The English and Greek languages are widely spoken by the island’s population. Moreover, German and Russian speaking personnel are also widely available.
Legal system
The Cyprus legal system (and especially its merchant shipping and admiralty legislation) is closely modeled on English law.
Crewing
Ships flying the Cyprus flag have every opportunity to employ foreign crew.
Registration of ships
The registration of ships under the Cyprus flag is quick, easy and straightforward. The Merchant Shipping Laws enable the vessel to be provisionally registered prior to its permanent registration. The possibility of parallel registration to or from a foreign registry is also an option under Cyprus law.
The following types of vessels may be registered under the Cyprus flag provided they satisfy the relevant conditions which in turn are primarily determined by reference to the age of the particular vessel:
– Cargo vessels;
– Passenger vessels;
– Mobile Offshore Drilling Units;
– Offshore support vessels;
– Pleasure craft, yachts and small passenger ships;
– Tug boats;
– Dynamically supported craft;
– Fishing vessels;
– Auxiliary vessels; and
– Research ships.
Ship registration fees are modest, as are the fees for the incorporation of Cyprus shipping companies.
Taxation of shipping activities
The most attractive feature of Cyprus to the shipping community is the favourable tax treatment of shipping activities which may constitute a major factor in successful tax planning, particularly through the use of its extensive network of tax treaties.
Profits of Cyprus ship owning companies which operate their ships under the Cyprus flag are exempt from tax and therefore the shipping profits of such companies whose management is exercised from Cyprus are tax free, both in Cyprus and in most of the other double taxation treaty countries.
Under the laws of Cyprus, the following are tax-exempt:
• Profits of a shipping company which owns ships registered under the Cyprus flag.
• The income derived by any person from the supply of ship-management services . Instead, under section 5A of the Merchant Shipping (Fees and Taxing Provisions) Law, 38(I) of 1992 as amended, ship management companies have the option either to be taxed at a corporate rate of 4.25 per cent or to be subject to a special tax based on the services and which amounts to 25 per cent of the annual tonnage tax payable by Cyprus-flag vessels, taking into consideration the tonnage and age of the vessel.
• Dividends distributed to shareholders of Cyprus ship owning companies which are derived from the operation of ships.
• Dividends distributed to shareholders of ship management companies which are derived from the supply of ship management services.
• Shipping mortgage deeds or other security documents.
• Emoluments of seamen employed on board Cypriot-registered ships.
• Profits from the disposal of ships and shares in ships, irrespective of the flag of the ship.
Annual tonnage tax
For vessels other than passenger vessels tonnage tax is calculated by using the formula of (basic charge + gross tonnage increment) x age multiplier, where the basic charge is €170.86 and the gross tonnage increment is as follows:
Gross tonnage Tax
For each unit up to 1,600 €44.42
For each additional unit between 1,601 and 10,000 €27.34
For each additional unit between 10,001 and 50,000 €10.25
For each additional unit over 50,000 €5.83
The Age Multiplier is as follows:
Vessel’s age Ship rate multiplier
Up to 10 years 0.75
11-20 years 1.00
Over 20 years 1.30
For passenger ships tonnage tax payable is double that payable for other vessels. The tax is payable on 31 March each year.
If a vessel is deleted from the Register of Cyprus Ships, any tonnage tax paid in advance for the remaining period up to the date on which the next instalment becomes due is refunded or credited against other financial obligations of the vessel.
For the purpose of calculating tonnage tax, the age of a ship is determined by deducting the year when the keel of the ship was laid from the year of assessment of the tax.The Merchant Shipping (Fees and Taxing Provisions) Law, 38(I) of 1992 as amended, provides for the reduction and refund of tonnage tax in certain instances.
Technical management and crewing by Cyprus companies
If the vessel’s technical management and crewing are carried out by local, EU or EEA ship management companies operating in Cyprus, a 30 per cent reduction of tonnage tax is allowed provided that the relevant documentary evidence is submitted to the Department of Merchant Shipping in advance of the period for which the reduction is claimed.
Tonnage tax may be refunded on the application of the owner or bareboat charterer of the vessel who should submit relevant documentary evidence to attest the employment of Cyprus citizens on board the vessel.
Laid up ships
If the ship is laid up for a period of more than three consecutive months, the tonnage tax payable is reduced by 75 per cent for the period during which the vessel is laid up. The maximum reduction or refund of tax is 50 per cent of the tax due.
neocleous.com , 25.06.2008
