SHIPPING COMPANIES

As from 24th March 2010, the Tonnage Tax System (TTS) was introduced with the Merchant Shipping (Fees & Taxing Provisions) Law 44(I) of 2010 with effect as from 1 January 2010.
The new TTS covers Maritime Transport activities offered in international shipping, namely Ship owning, Ship management (including Crew Management and/or Technical Management) and Chartering.

The legislation allows non community vessels to enter the tonnage tax regime provided the fleet is composed by at least 60% community vessels. If this requirement is not met, then non community vessels can still qualify if certain criteria are met. The legislation includes an “all or nothing” rule, meaning that if a shipowner/ charterer/ shipmanager of a group elects to be taxed under the Tonnage Tax regime, all shipowners/ charterers/ shipmanagers of the group should elect the same.

Exemption is also given in relation to the salaries of officers and crew aboard a Cyprus ship.

The tonnage tax for a qualifying ship owner and charterer is calculated on the net tonnage of a ship in accordance with the rates outlined in the table:

Notes:

1. The exemption also applies to bare boat charterer of a vessel flying the Cyprus flag under parallel registration.
2. The law grants the exemption provided that the option to register for Tonnage Tax is exercised for all vessels and provided a composition requirement is met: at least 25% (reduced to 10% under conditions) of the net tonnage of the vessels owned or bare boat chartered in.
3. In order to qualify shipmanagers must satisfy the below additional requirements:

• Maintain a fully-fledged office In Cyprus with personnel sufficient in number and qualification
• At least 51% of all onshore personnel must be community citizens
• At least 2/3 pf the total tonnage under management must be managed within the community (any excess of 1/3 is taxed under the corporation tax).