Cyprus is one of the most important shipping centres, providing EU-approved tonnage taxation
Cyprus home to many renown maritime names, such as, to name a few, the Italian MSC Mediterranean Shipping Company, the German-owned Colombia Lines, the Russian Unicom Management Services, the Polish Euro-Africa Line, the German Intership Navigation, or the Swedish Stena Line. Cyprus offers a strong maritime supply industry, mainly based in Limassol.
Currently, beginning of 2017, the Cyprus Tonnage Tax System bundles most of the favourable features found in tonnage tax systems of all EU countries, and of many other countries.
The Cyprus Tonnage Tax System is granted to ship owners, ship charterers and ship managers who own, charter of manage one or more qualifying ships in qualifying shipping activities. The Cyprus Tonnage Tax is calculated based on the net tonnage of vessels. The Cyprus Tonnage Tax rates applying for ship managers are 25 % of the general Cyprus Tonnage Tax System applying for ship owners, regardless the flag of the ship, as long as it is managed or chartered by a Cyprus Shipping Company registered in Cyprus and with its physical office and staff in Cyprus.
Any sea-going vessel certified under international rules and regulations and registered with a ship register of any member of the International Maritime Organisation and the International Labour Organisation, recognised by Cyprus.
Fishing vessels, ships primarily used for recreation or sport, river vessels, floating cranes without own drive and non-ocean-going tugs etc. are excluded from the benefits of the Cyprus Tonnage Tax System.
Qualifying shipping activities are any commercial maritime activities that constitute maritime transport, crew management, or technical maritime management.
Maritime transport includes carriage of goods and passengers as well as all retailing, hotel and entertainment activities on board of a qualifying ship. It furthermore includes the loading and dispatch of cargo, ticketing facilities and passenger terminals as well as towing, dredging and cable laying ships.
Ship owners of qualifying Cyprus flag ships automatically benefit from the Cyprus Tonnage Tax System.
Cyprus Ship Owner Companies of vessels with a flag of an EU member state or any other state may opt whether they wish to be taxed by the Cyprus Tonnage Tax System, or by corporate tax, under certain conditions. The main conditions are that the commercial and strategical management of the ships is carried out from the EU/EEA, and that a certain percentage of ships flies an EU flag for minimum three years from the date of opting for the Cyprus Tonnage Tax System.
Cyprus Ship Owner Companies that opted for the Cyprus Tonnage Tax System must remain in the system for at least 10 years; early withdrawal will lead to fines compensating to the level of the corporate tax rate.
The Cyprus Tonnage Tax System covers the following classes and types of profit: profit from shipping operations, dividends paid out of such profits (there is no withholding tax in Cyprus anyway), profits from the sale of ships and interest gained on funds used as working capital or for the financing, operation and/or maintenance of the ships.
Cyprus Ship Charter Companies that charter one or more ships under bareboat, demise, time or voyage charter are entitled to benefit from the Cyprus Tonnage Tax System by option, under the condition that the tonnage under time and/or voyage charter does not exceed 75% of ships chartered and owned, for more than three consecutive years. If the ships chartered are flying an EU/EEA flag or their crew and technical management is carried out in the EU/EEA, the aforementioned threshold raises to 90%.
Once opted for the Cyprus Tonnage Tax System, a Cyprus Ship Charter Companies must remain in the system for at least 10 years; early withdrawal will again lead to fines compensating to the level of the corporate tax rate.
The Cyprus Tonnage Tax System covers the following classes and types of profit: profit from shipping operations, dividends paid out of such profits (there is no withholding tax in Cyprus anyway), profits from interest gained on funds used as working capital or for the payment of expenses arising from chartering.
Cyprus Ship Management Companies providing crew and/or technical ship management are entitled to benefit from the Cyprus Tonnage Tax under the following conditions:
Once opted for the Cyprus Tonnage Tax System, a Cyprus Ship Management Company must remain in the system for at least 10 years; early withdrawal will again lead to fines compensating to the level of the corporate tax rate.
The Cyprus Tonnage Tax covers the following classes and types of profit: profit from the provision of crew and/or technical management, dividends paid out of such profits (there is no withholding tax in Cyprus anyway), and profits from interest gained on funds used as working capital or for the payment of expenses arising from the management of vessels.