The shipping industry in Cyprus

Development of the shipping industry

Cyprus’s development into an international maritime centre
began in 1963 when the government offered the first
incentives aimed at the encouragement of ship ownership and
the registration of vessels under the Cyprus flag.
In the early 80’s the Cypriot merchant fleet ranked 32nd on the
list of maritime nations. Today it ranks 9th with nearly 1100
ships exceeding 21 million gross tonnage. Besides the
country’s excellent geographical position, this achievement is
also due to the cost competitiveness of the Cypriot Ship
Registry, the island’s well-developed maritime infrastructure, its
good international relations as well as the high standard of
services offered to international shipping. The accession of
Cyprus to the European Union (EU) is expected to boost further
the registration of vessels in the Cyprus Registry as Cyprus is
one of the two countries with “Open Registry” in the EU.

A substantial percentage of the vessels in the Cyprus registry is
currently managed from specialised shipmanagement
companies. We are proud that some of the world’s largest
international shipmanagement companies have their
headquarters in Cyprus.
The Future of Cyprus Shipping following the accession to
the European Union
The shipping industry in Cyprus has a promising future with
more high-quality ships expected to register under the Cyprus
flag and more shipping companies expected to establish in the
country and thus enhance the reputation of Cyprus as a
maritime nation and a shipping power with high quality
standards.
The island’s accession to the European Union will have
significant benefits for the existing EU member states. The
acquisition of the island’s mercantile fleet, which ranks 9th in
the world in terms of gross tonnage, will make the EU the
world’s largest shipping power.
One of the main factors that is expected to drive forward the
shipping industry in Cyprus is the country’s favourable taxation
regime which has been maintained even after the accession to
the European Union. In page 6 we highlight the tax regime
currently in place.
Registration fees in Cyprus are low, and compare favourably
with those in other registries. In summary, other advantages of
the Cyprus shipping legislation include: no income tax, estate
duty or capital gains tax for Cyprus-registered ships; no income
tax in Cyprus for foreign crew; no stamp duty on documents or
mortgage deeds, anonymity of beneficial owners through
nominee or trustee shareholders; recognition of Competence
Certificates from many countries; and easy deletion from the
Register.
Cyprus adopted recently a new maritime safety policy, which
focuses on the effective control of ships and the improvement
of the quality of the island’s merchant shipping fleet including
the safety standards and living and employment conditions of
seamen on board Cyprus ships.
About Cyprus

General Information about Cyprus
Cyprus is situated in a unique location at the cross-roads of
Europe, Asia and Africa. The island’s strategic location has
contributed to Cyprus’s development into an attractive centre
through which to conduct international business. The island
enjoys an excellent infrastructure, English based legal system,
high quality of life, low cost of living and a highly skilled labour
force.
Cyprus is now part of the EU. A new economic era is
beginning, offering an impressive number of additional
economic advantages to investors and entrepreneurs who are
interested in doing business worldwide using Cyprus as their
business base. The Cyprus economy is exhibiting dynamism
and flexibility; these characteristics coupled with new
advantages offered by the EU membership, rightly justify the
World Bank in characterising Cyprus as the region’s “Miracle”.
Strategic location
The island of Cyprus is situated in the eastern Mediterranean at
the hub of three continents, linking Europe with the Arab
World, Aftica and the Far East.
Cyprus is approximately one hour by air from Athens, Egypt
and Israel, two hours from Kuwait, three hours from Moscow
and four hours from London and most European destinations.
The island’s two main ports contributed to the development of
transit trade and to the promotion of the shipping industry in
Cyprus.
Cyprus is two hours ahead of Greenwich Mean Time (GMT).
Business environment
Economy
The economy is based on a free enterprise system, with the
private sector being the backbone of economic activity.
Promotion of private investment is highly supported by
government policies.
Cyprus ranks amongst the top 12 performers worldwide in terms
of average annual growth rate of GDP per capita (currently
C’9.000). In recent years the economy has been growing at an
average rate of 4% and the unemployment rate is in the region
of 3%. In addition, inflation has been relatively modest with
increases in the retail price index in the region of 3%.
Legal system
The legal system in Cyprus is based on the English common
Law. This attracts foreign entrepreneurs who find it very easy
to do business in Cyprus.
The Continental System of administrative Law has been
introduced and applies by virtue of the constitution.
Banking
Commercial banking follows the British model and is of a very
high standard. All commercial banks have very strong
correspondent networks throughout the world and are able to
carry out any type of international financial transaction.
Telecommunications
Cyprus has one of the most advanced telecommunication
systems in the world with automatic telephone connections to
more than 230 countries and a variety of advanced
telecommunication services.
Air transport
The two airports in Cyprus handle almost 1,100 scheduled
flights weekly served by 36 international airlines. There are
frequent direct connections with Central and Western
European countries, Russia and the Arab world.
Human resources
Cyprus has a well-educated, experienced and versatile work
force. The island ranks among the leading countries in the
world in terms of university graduates, in relation to its
population.
Respectability
Cyprus has excellent diplomatic and economic relations with
Europe, North America and the Arab World; as a result, its
entities enjoy great respectability all over the world.
Low operational costs/standard of living
Economic indicators place Cyprus amongst the few
international financial centres with low operational costs. The
island offers, at the same time, a high standard of living
making it an ideal place to live and conduct your business
from.
Growing with Europe
Cyprus, as a full member state of the EU, is entering a new
economic era leading into a vast number of economic
advantages. In a common European space, businessmen will
be faced with new business challenges and will have the
opportunity to develop their activities in a large and dynamic
market.
European citizens will be able to conduct business and live in
Cyprus with no legal restrictions, thus making the setting up of
a business in Cyprus simple and quick. Cyprus will attract investment from the EU in activities in which it possesses
comparative advantages, thus accelerating the transformation
of the island into a regional business centre.
Cyprus will have a share in the growth and development of the
EU economy. Cyprus will participate in the Union’s internal
market, an area where free movement of goods, services,
persons and goods is ensured, and this will lead in the medium
and long term to a more efficient allocation of factors of
production towards activities in which Cyprus possesses comparative advantages. This will have positive repercussions
on growth and employment.
Cyprus will adopt the Euro and participate in the Economic and
Monetary Union (EMU), an area where conditions of macroeconomic
stability prevail. This is expected to lead to lower
inflation and lower interest rates resulting in stronger
confidence of the economic factors, increased investment and
higher growth rate.
Tax and other incentives for the shipping industry
Cyprus is without a doubt one of the most attractive shipping
and shipmanagement centres in the world.
The main reasons which have contributed to the development
and recognition of Cyprus as one of the biggest international
shipping centres of the world is the wide range of services
provided by competent and experienced professionals, the
modern telecommunication network, the excellent banking
system and the well organised transportation network.
The most important reason, though, for the Cyprus success are
the tax and other incentives offered to shipowners and crew
members and as from July 1999 to shipmanagers.
The tax incentives offered to the shipping industry are analysed
herebelow:
Shipowners
• Exemption from any Cyprus income/corporation tax on:
a) the income of a shipowner of a Cyprus ship from the
operation of such ship in any shipping enterprise between
Cyprus and ports abroad or between foreign ports (the
operation of a ship includes the chartering of a ship).
b) dividends that are paid directly or indirectly from profits of
ships as per a) above.
• No Defence Fund Contribution is levied on dividends paid by
shipowning companies.
• No capital gains tax is imposed on the sale of the ship or on
the sale or transfer of the shares of a shipowning company.
• Reduction on tonnage tax where a Cyprus shipmanagement
company manages the ship.
Shipmanagers
• Subject to a special shipmanagement tax calculated at 1/4 of
the rates applicable for tonnage tax.
• May elect to be taxed under the Income Tax Law instead, at
the rate of 4.25% on the taxable profit determined in
accordance with international accounting standards.
• No Defence Fund Contribution is levied on dividends paid by
ship management companies.
• No capital gains tax is imposed on the sale of shares of a
shipmanagement company.
Crew earnings
The earnings of the crew of Cyprus ships are exempt from
Cyprus income tax and social security contributions. In
addition, non-Cypriot crew members may enjoy total tax
exemption, if provided for by the Double Taxation Treaties of
Cyprus and the domestic legislation in their home countries.
About the Cyprus ship registry

The size of the Cyprus registry
Cyprus administers a major international registry within the
European Union and controls one of the world’s largest
merchant fleets. This presently comprises 1,084 ocean going
ships of total gross tonnage 21,283,373 G.T..
The Cyprus merchant Shipping laws
The Cypriot registry is governed by the Merchant Shipping
Laws, 1963-2005 (Registration of Ships, Sales, and Mortgages);
the Merchant Shipping Laws, 1992-2004 (Fees and Taxes); and
the Merchant Shipping Laws, 1963-2002 (Masters and Seamen).

Ownership Requirements
a) More than half of the shares of the ship must be owned by
Cypriot citizens or by citizens of Member States of the EU or
the European Economic Area who in the instance of not
being permanent residents of the Republic will have
appointed an authorised representative in the Republic of
Cyprus, or
b) The total (100%) of the shares of the ship must be owned
by corporations established and having their registered
office in the Republic of Cyprus, or in Member States of the
EU having their registered office in the EU or the European
Economic Area, or by corporations registered outside
Cyprus but controlled by Cypriot citizens or citizens of
Member State and in both the latter cases they must have
either appointed an authorised representative in Cyprus or
the management of the ship must be entrusted in full to a
Cypriot or a Community shipmanagement company in
Cyprus.
Applications for registration of ships must be made through
local lawyers.
At the time of its registration, the ship must be surveyed by an
approved classification society.
Types of registration
• Provisional registration of a ship may be effected at any
place abroad where Cyprus has a Diplomatic Mission or an
Honorary consulate. The provisional registration may
remain in force for six months. Thereafter, it may be
renewed once, for a further three months.
• Permanent registration of a provisionally registered vessel
must be effected within 9 months from the date on which
she was provisionally registered.
• Parallel (Bareboat) Registration: The Cyprus legislation
provides for the two forms or bareboat registration
internationally accepted e.g. the “Parallel-in” registration
and the “Parallel-out” registration of vessels, provided
certain prerequisites are fulfilled.
The 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
of 2 years.
The Parallel-out registration offers the possibility to owners of
Cyprus ships to bareboat charter them to a foreign person or
company and to effect a “Parallel” registration in a foreign
register for the duration of the charter party.
Crew Nationality
Crew members may be of any nationality provided they are
holders of certificates of competency issued by one of the
countries, whose certificate of competency Cyprus has recognised. Officers have to apply for endorsement of their
certificates of competency in accordance with the STCW 1978
Convention as amended.
Age Limit
Vessels of any size and type having an age not exceeding 15
years, except fishing vessels, may be registered in the Cyprus
Register of ships as long as they comply with the provisions
contained in the Merchant Shipping legislation and the circulars
of the Department of Merchant Shipping.

Mortgages
A mortgage once created must be deposited with the Registrar
of Cyprus Ships or with a consular officer on the instructions of
the Registrar. Whether deposited with the Registrar or with a
consular officer, the mortgage is recorded thereafter in the
Register as from the date and hour of its deposit and remains an
encumbrance on the vessel until discharged by the mortgagees.
A mortgage may be created independently of whether the ship
is provisionally or permanently registered.
If the ship on which a mortgage was created belongs to a
Cypriot company, the mortgage will also have to be registered
with the Registrar of Companies within a maximum period of 42
days after its creation. The mortgagee’s security is protected in
the case of liquidation of the shipowning company.

Fees & Taxes
1. Provisional Registration Fees
a) For vessels except passenger vessels
The fee per gross ton
Up to 5,000 GRT 10 cents
5,001 – 10,000 GRT 8 cents
For each additional gross ton
Over 10,000 4 cents
– The minimum fee is C’125
– The maximum fee is C’3,000
b) For passenger vessels
For each gross ton 15 cents
– The minimum fee is C’250

2. Permanent Registration Fees
No other fees and taxes are levied for the permanent
registration of a vessel if the relevant registration fees have
been paid at the time of the provisional registration of the
vessel and the period of provisional registration has not
expired.

3. Parallel Registration fees
The fees for the parallel registration of a ship are 20 percent
higher than those applicable to the provisional or permanent
registration of a vessel.

4. Fees for registration, transfer or discharge of
mortgages
For registration or transfer of a mortgage with the registrar of
ships the fees payable are as follows:
2 cents per gross ton up-to 10,000 tons
1 cent per gross ton for each additional ton
The minimum fee is C’30
No fee is payable for the discharge of mortgages.

5. Fees for the transfer and deletion of ships
For the transfer of a ship to the ownership of another Cypriot
Company the fees payable are as follows:
2 cents per gross ton up-to 10,000 tons
1 cent per gross ton for each additional ton
The minimum fee is C’30
No fee is payable for deletion of ships.

6. Radio Station Fee
The Radio station installation licence fee is paid at the
provisional registration of the ship and is C’10.
The radio licence renewal fee is C’10 per year.
7. Annual tonnage tax
The annual tonnage tax is calculated as follows:
A fixed amount of C’100 plus:
Gross Tons Cents
For each gross ton up to 1,600 26
For each additional ton between 1,601 – 10,000 16
For each additional ton between 10,001 – 50,000 6
For each additional ton over 50,000 4
The resulting figure from the above calculation is then
multiplied by the corresponding rate shown below:
Age of Ship Rate
Up to 10 years 0,75
11 – 20 years 1,00
Over 20 years 1,30
For passenger ships the annual tonnage tax is double the
amount resulting from the above calculations.
There is a 30% discount on the tonnage tax when the vessel’s
crew and technical management is carried out by a Cypriot or
Community Shipmanagement Company, which has an office in
the Republic of Cyprus stuffed with sufficient in number and
qualifications personnel.
If a ship is laid up for a period of more than three consecutive
months in any one year only 25% of her tonnage tax is
payable for that period.
Vessels, which are less than 10 years old, enjoy a 30% discount on tonnage tax.
©2005 Deloitte & Touche Limited. All rights reserved.
 

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