Shipping industry in Cyprus
(i) the well-founded and fine maritime infrastructure;
(ii) the competitive advantages including favourable income tax regime;
(iii) the full exemption from income tax on profits, dividends and interest of Cyprus flag ship-owners;
(iv) the full exemption from income tax for owners of foreign flags, charterers, ship managers who fulfil the Cyprus tax residency requirement;
(v) the fact that there is no estate duty on the inheritance of shares in a ship-owning company;
(vi) the fact that Cyprus is a full-member of the EU and the Eurozone;
(vii) its convenient geographical and geostrategic position as a trade centre since antiquity;
(viii) the fact that there are no crew/officer nationality restrictions;
(ix) EU approved “Open Registry” with legally endorsed Tonnage Tax System;
(x) the competitive ship registration costs and fees;
(xi) top quality public services for the shipping industry 24/7;
(xii) the fact that Cyprus is included in the “White list” of Paris and Tokyo MOU regarding safety standards and
(xiii) the network of international offices (Piraeus, Hamburg, London etc.)
In the last few years, the sector has seen a further boost reaching new levels in terms of its register’s tonnage capacity, in the number of companies basing operations on the island and in the number of people employed by the industry. Cyprus is also signatory to numerous international maritime conventions and has bilateral cooperation agreements with 25 countries, amongst them leading suppliers of labour. Hence, the tax incentives combined with the economic and other advantages, have further attracted a considerable number of shipping companies to be registered in Cyprus.
There are numerous competitive advantages and opportunities which play a crucial role for a shipping management company when choosing a jurisdiction. Cyprus’ geographical position, as well as the relatively low cost in finding and maintaining a fully-fledged office, are factors taken into account by most international ship-management companies in choosing Cyprus.
Other aspects that many ship managers observe when choosing a jurisdiction are the business environment, the legal expertise in shipping matters available in the market of choice as well as the most obvious of factors such as a good command of the universal language, English. The development of a good business infrastructure as well as tax incentives are undoubtedly key factors taken into consideration prior to choosing a jurisdiction.
Most international ship-management companies choose Cyprus because of:
The Tax System: There is full exemption from income tax of profits of a qualifying ship manager from the rendering of ship management [crew and/or technical management] services to a qualifying ship; dividends paid to its shareholders; and interest earned on their working capital, provided they have opted to participate in the Tonnage Tax System.
The Legal system: Cyprus follows the English legal structure and consequently all statutes relating to business matters and procedures are very similar to those of the English system.
The Business environment: There are friendly international relations, excellent professional services offered by a highly educated and versatile workforce, in combination with a good command of the English language, which provides ground for easy communication and transactions. The relatively low operational costs and the high standard of living as well as the efficient and effective transport network, cannot be overlooked.
The procedure to register under the Cyprus flag is quite straightforward. The legislation makes it obligatory that this should be done only by lawyers. It should be noted that the particular legislation allows for the provisional registration of a ship and most owners usually opt to have their ships provisionally registered first. This allows them time (up to 9 months including a three-month extension) during which they will be able to complete the administrative formalities relating to any previous flag State and/or State of registry and those relating to the permanent registration of the ship in Cyprus.
Our Firm is in a position to assist prospective clients with the registration of ships under Cyprus flag and not only.
• At the time of the provisional registration the ship must be at a port or anchorage where she can be surveyed and certified on behalf of Cyprus.
• The presence of the ship at the port or place where the provisional registration will be effected is not necessary.
• The application requesting the provisional registration of a ship must be made by a local registered advocate acting on behalf of the physical person(s) or legal entity in whose name the ship will be registered. This application is then made to the Registrar of Cyprus Ships.
• In practice, the Registrar will also accept the submission of applications for registration of ships on behalf of legal entities (companies) under formation, so that the incorporation of the company and registration of the ship can progress simultaneously. However, the company must be duly incorporated prior to the registration of the ship.
Extension of provisional registration
The legislation allows for a three-month extension of the period of the ship’s provisional registration, provided the Provisional Certificate of Cyprus Registry of the ship has not expired.
Permanent Registration Requirements:
• The permanent registration of a provisionally registered ship must be effected prior to the expiry of the ship’s Provisional Certificate of Cyprus Registry.
• As for the provisional registration, the application requesting the permanent registration must again be submitted by the local registered advocate acting on behalf of the registered owner to the Registrar of Cyprus Ships.
The Tonnage Tax System (TTS) for Cyprus merchant shipping was the only one approved by the European Commission on the 24th March 2010, is applicable as from the fiscal year 2010 and governed by the Merchant Shipping (Fees and Taxing Provisions) Law of 2010 (Law No. 44(I)/2010). Cyprus’ merchant fleet exceeds 23 million gross tonnage, with the number of companies increasing from 168 in 2018 to over 200 in February 2019, and the sector employs around 3% of Cyprus’ workforce.
The main benefit of the TT regime is the certainty it provides companies on their annual tax obligations, enabling them to do their business planning accordingly. While other jurisdictions might have less expensive TT regimes, Cyprus incorporates all three types of maritime activities - ship-owning, ship management and chartering, making it unique in the EU where other jurisdictions might specialise in just one or two of such areas.
New interest in the Cyprus registry has been sparked in the wake of prolonged Brexit negotiations with many shipping-related companies seeking a safe EU harbour on the island to successfully continue their business.
The creation of an independent Shipping Deputy Ministry, whose head reports directly to the country’s President, was a major milestone in 2018 for the industry’s development, serving to further attract quality shipping companies and tonnage to Cyprus.
A year after its establishment, the Deputy Ministry has created a roadmap to ensure Cyprus maintains its competitive edge. The goal is to protect the stable and business-friendly framework provided to foreign investors in shipping by further expanding the island’s registry and maritime cluster, strengthening international relations, improving maritime safety and environmental protection, implementing a blueprint for blue development and to upgrade available services.
Technology is also in front and centre in efforts to upgrade services, with, for example, plans to implement a better mechanism in the ship registration process. It is also worth noting that Cyprus boasts a thriving education and research sector that contributes to tackling issues facing the shipping and maritime sector. There are a number of dedicated maritime institutes that promote technology, research, innovation, sustainability, and focus on training and educating those employed in the shipping industry. In addition, the Ministry and the shipping industry support innovation programmes that contribute to shipping-related tech solutions.
Cyprus’ growing register of ships, industry’s upgrades and reforms, new opportunities arising from Brexit and the natural gas discoveries in the East Med have and will contribute to Cyprus’ global and long story of success.