Despite trade becoming progressively globalized, the challenging economic conditions worldwide has led the shipping industry to experience considerable pressures, leading shipping companies to seek more adaptable and efficient structures.
Cyprus, being a well-established maritime center since 1963, stands as a very attractive solution with a sound infrastructure, able to accommodate the demands of the globalized shipping business. It ranks among the top 10 largest ship registries, with a business friendly tax regime and numerous other incentives. Additionally, Cyprus is the world’s second largest Ship Management Center. Its fleet numbers 2,200 vessels, with 50 million gross tonnage.
Cyprus is the most appealing center since it is the only EU country with an EU approved Tonnage Tax (TT) system which fully complies with EU and OECD requirements against harmful tax practices.
Tonnage Tax System briefly
Ship Owning Companies
Among the advantages that Cyprus legislation offers ship owning companies are:
- No tax on income from shipping activity by an owner of a Cyprus ship
- No tax or withholding tax on dividends from proﬁts arising out of the operation of a Cyprus ship
- No capital gains tax on the sale of the ship or shares of the ship owning company
- The legislation allows non EU/EEA vessels to enter TT regime if the fleet is composed of 60% or more EU/EEA vessels
- No estate duty on inheritance of shares of the ship owning company
- No stamp duty on ship mortgage deeds or security documents, whilst affording full protection to mortgagees
- Competitive ship registration costs and annual tonnage taxes
- Tax rates equivalent to 25% of the tonnage tax rates or 4.25% corporate tax, if the composition requirement is met (60% EU/EEA vessels)
- TT reduced to 10% if all vessels of the charterers carry 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 out at all levels
- No tax on interest income from qualifying activities
Ship Management Companies
Ship management companies also beneﬁt from Cyprus legislation:
- Tax rates equivalent to 25% of the tonnage tax rates 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 complete tax exemption of all profits and dividends at all levels of distribution arising from qualifying shipping operations.
Unique benefits of using Cyprus
The combination of tax benefits with infrastructure and reputation make Cyprus the ideal choice for ship-owners and ship managers. Additionally, the shipping industry is one of the few industries which remains untouched by international taxation initiatives. The following features contribute to making Cyprus not only attractive, but unique for shipping activities:
- Only EU country with an EU Approved tonnage tax system – guaranteed until 31/12/2019 (and reviewed every 10 years).
- Very low TT which complements the lowest corporate tax in EU – 12.5%.
- Competitive ship registration fees
- Recognition of Competence Certificates from many countries
- Bilateral agreements of cooperation in merchant shipping with 23 countries
- Beneficial owners’ protection through nominee or trustee shareholders
- The Cypriot flag, being on the Paris Memorandum of Understanding White List, enjoys the respect of Port State Control Authorities, Classification Societies and Insurers, worldwide
- Parallel-in / Parallel-out registration allowed
- Access to EU Directives
- No thin capitalization rules
- No CFC legislation
How Can Amicorp assist?
At Amicorp our services include:
- Structuring and restructuring of corporate ownership entities;
- Register and administer shipping and ship management companies;
- Register ships and other types of vessels under the Cyprus ﬂag or under parallel registration;
- Registration of mortgages, and
- Register and maintain ship holding and group financing companies.