Advantages of Cypriot Shipping Companies

Advantages of Cypriot Shipping Companies

Despite the gradual globalization of trade, complex economic conditions worldwide have put significant pressure on the shipping industry.Cyprus has established itself as a shipping center since 1963. With its reliable infrastructure, Cyprus is capable of meeting the needs of the global shipping business. The island ranks among the top ten largest ship registries, offering a business-friendly tax regime and numerous other advantages. Additionally, Cyprus is the second-largest center for ship management in the world. The Cypriot fleet consists of 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 approved tonnage tax (TT) system that fully complies with EU and OECD requirements.

Advantages of Cypriot Legislation for Shipowning Companies:

• No tax on income from shipping activities for vessel owners in Cyprus.
• No taxes or withholding tax on dividends from profits arising from the operation of Cypriot ships.
• No capital gains tax on the sale of vessels or shares in a shipping company.
• Legislation allows non-EU/EEA vessels to enter the TT regime if the fleet consists of 60% or more EU/EEA vessels.
• No inheritance tax on the inheritance of shares in a shipowning company.
• No stamp duty on mortgage documents for vessels or security documents, while providing full protection for mortgage holders.
• Competitive costs for ship registration and annual tonnage taxes.
• Tax rates equivalent to 25% of the tonnage tax rate or 4.25% corporate tax, provided the composition requirements (60% EU/EEA vessels) are met.
• TT is reduced to 10% if all charterers’ vessels fly EU/EEA flags or are managed in the EU/EEA.
• No tax on profits from the use of qualifying vessels.
• No tax on dividends paid at all levels.
• No tax on interest income from qualifying activities of ship management companies.

Ship management companies also benefit from Cypriot legislation:

• Tax rates 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 Cypriot income tax or social security contributions.
• Cyprus offers full tax exemption for all profits and dividends at all levels of distribution arising from qualifying shipping operations.

The combination of tax benefits, infrastructure, and reputation makes Cyprus an ideal choice for shipowners and ship managers. Furthermore, the shipping industry is one of the few sectors that remain untouched by international tax initiatives.

Unique Features of Cyprus for Shipping Activities:

• The only EU country with an approved tonnage tax system — guaranteed until 31.12.2019 (and reviewed every 10 years).
• Very low TT, which complements the lowest corporate tax in the EU — 12.5%.
• Competitive ship registration fees.
• Recognition of competency certificates from many countries.
• Bilateral cooperation agreements in maritime trade with 23 countries.
• The Cypriot flag, included in the Paris Memorandum of Understanding whitelist, is respected by port state control authorities, classification societies, and insurers worldwide.
• Parallel entry/exit registration is permitted.
• Access to EU directives.
• No thin capitalization rules.

Please note that this article is for informational purposes only. For further consultations, please contact us using the details provided on our website. If you need any further adjustments or additions, feel free to let me know!

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.