Despite the gradual globalization of trade, difficult economic conditions around the world have put the shipping industry under severe pressure.
Cyprus has been well established as a shipping hub since 1963. Cyprus, with its reliable infrastructure, capable of meeting the needs of global shipping business. The island is one of the ten largest shipping registries, with a business-friendly tax regime and many other advantages. In addition, Cyprus is the world’s second largest ship control center. The Cyprus fleet has 2,200 vessels with a gross tonnage of 50 million tons.
Cyprus is the most attractive center as it is the only EU country with an EU-approved Tonnage Tax (TT) system that is fully compliant with EU and OECD requirements.
Among the advantages that the legislation of Cyprus offers to shipping companies:
- No tax on income from the shipping activities of the ship owner in Cyprus.
- No taxes or withholding tax on dividends on profits arising from the operation of a Cypriot vessel.
- No capital gains tax on the sale of a vessel or shares of a shipping company.
- Legislation allows non-EU / EEA vessels to enter TT regime if the fleet consists of 60% or more of EU / EEA vessels.
- No inheritance tax on inheritance of shares in a shipowner company.
- No stamp duty on vessel mortgage documents or security documents, while providing full protection for mortgage holders.
- Competitive ship registration costs and annual tonnage taxes.
- Tax rates equivalent to 25% of the tonnage tax rate or 4.25% corporate tax if the composition requirements are met (60% of EU / EEA ships).
- TT is reduced to 10% if all charterers’ ships are EU / EEA flags or are operated in the EU / EEA.
- No income tax on the use of suitable ships.
- No tax on dividends paid at all levels.
- No tax on interest income from qualifying activities ship management companies.
Ship management companies also benefit from Cypriot law:
- The tax rates are equivalent to 25% of the tonnage tax rate or 4.25% corporate tax.
- No withholding tax on dividends paid by ship management companies.
- Crew earnings are exempt from Cyprus income tax or social security contributions.
- Cyprus offers full tax exemption for all profits and dividends at all distribution levels arising from qualifying shipping operations.
The combination of tax incentives with infrastructure and reputation makes Cyprus an ideal choice for ship owners and ship managers. In addition, the shipping industry is one of the few industries that remains untouched by international tax initiatives.
The following features make Cyprus not only attractive but also unique for shipping activities:
- The only EU country with an EU-approved tonnage taxation system – a guarantee until 12/31/2019 (and revised every 10 years).
- Very low TT, which complements the lowest corporate tax in the EU – 12.5%.
- Competitive ship registration fees.
- Recognition of certificates of competence from many countries.
- Bilateral agreements on cooperation in the field of merchant shipping with 23 countries.
- Protection of beneficial owners through nominee or trustee shareholders.
- The Cypriot flag, white-listed on the Paris Memorandum of Understanding, is respected by port authorities, classification societies and insurers around the world.
- Parallel I / O registration is allowed.
- Access to EU directives.
- There are no thin capitalization rules.
The above is for informative purposes only. Further professional advice should be sought for each particular case. Our firm does not accept any responsibility for any loss or damage occurring by acting on the basis of this information.