The
New Cyprus Tonnage Tax System
By Andreas Chrysostomou, Head of
Maritime Policy and Standards Division, Department
of Merchant Shipping
Significance
of New Tonnage Tax System (TTS)
- Enhances
competitiveness of ship owners, charterers and
ship managers.
- Encourages
the employment of European personnel.
- Maintains
shipping know-how.
- The
EC recognises that shipping activities in Cyprus
ensure the implementation of Community Acquis
on maritime safety on vessels irrespective of
flag.
Importance
for Cyprus Shipping
-
Simplified tonnage tax system approved by EC
as compatible with the requirements of the EU
acquis.
- Cyprus
is the only open EU Registry achieving the approval
of such a tax system and thus a competitive
advantage.
- It
secures a stable fiscal environment for Cyprus
Shipping.
Beneficiaries
The
tonnage tax system is available to:
-
Ship owners
- Charterers
- Ship
managers
who
own, charter or manage qualifying ships engaged
in qualifying shipping activities.
Those
who participate in the TTS are exempted from income
tax and pay tonnage tax, calculated on the basis
of the net tonnage of the ship.
Qualifying
ship
A
qualifying ship is any seagoing vessel certified
under applicable international or national rules
and regulations and registered in the ship register
of any member of the International Maritime Organization
and the International Labour Organization, which
is also recognised by Cyprus.
The regime specifically excludes fishing vessels,
ships used primarily for sports or recreation,
river vessels, non-self propelled floating cranes,
non-ocean going tug boats, floating hotels, restaurants
and casinos.
Qualifying
shipping activity
Any
commercial activity that constitutes maritime
transport, crew management and/or technical management.
The
definition of maritime transport includes:
- the
traditional carriage of goods and passengers
between ports and/or offshore facilities,
- towage,
dredging and cable-laying activities.
- ancillary
activities, such as:
- hotel,
catering, entertainment and retailing activities
on board of a qualifying ship,
- the
provision of loading and unloading of cargo
within a port area.
Income
tax exemptions
Total
exemption from income tax on:
- Income
from the operation of a qualifying ship engaged
in a qualifying shipping activity or from rendering
crewing and/or technical management services
to a qualifying ship,
- Dividends
paid directly or indirectly out of such income,
- Interest
earned on working capital or from the financing,
operation and maintenance of a ship or for the
payment of expenses arising out of the charter
party or for the payment of expenses relating
to the management of a ship,
- Income
from the sale of a qualifying ship.
- Salaries
and other benefits of seafarers of a qualifying
Cyprus ship engaged in a qualifying shipping
activity.
Participation
in the TTS
-
Ship owners of Cyprus ships by default are within
the scope of the TTS.
- Ship
owners of foreign ships, Charterers and Ship
managers have the option to be taxed under the
TTS or under income tax (10%). Those opting
for the TTS must remain in the system for 10
years. Early withdrawal will result in penalties.
General
Requirements
-
Tax resident in Cyprus.
-
Option “All or Nothing”: all qualifying
ships and all qualifying companies belonging
to a group must enter the TTS.
-
A share of the fleet must comprise EU flag ships.
This share must not be reduced in the three-year
period following the entrance to the TTS.
General
Requirements
-
All non-community ships must comply with relevant
international standards and fulfil Community
law requirements relating to maritime security,
safety, training and certification of seafarers,
environmental performance and on-board working
conditions.
Specific
Requirements for Charterers
The
tonnage of the ships under time or voyage charters
should not exceed 75% of the total tonnage of
ships chartered and owned, for more than three
consecutive years. This eligibility percentage
increases to 90% if the ships chartered are EU/EEA
ships or their crew and technical management are
carried out entirely from the EU/EEA.
Specific
Requirements for Ship managers
-
Employment of sufficient in number and qualifications
personnel (51% of whom must be EU/EEA citizens):
| |
Ships
|
Employees |
Skilled
Crew Managers
|
Qualified
Marine Engineers |
|
Crewing
& Technical
|
1-10 |
3 |
1 |
1 |
|
Over
10
|
7 |
1 |
2 |
| Crewing |
1-10 |
4 |
1 |
N/A |
| Over
10
|
8 |
2 |
N/A |
| Technical |
1-10 |
4 |
N/A
|
1 |
| Over
10
|
8 |
N/A
|
2 |
Specific
Requirements for Ship managers
-
The full management of at least 2/3 of the total
tonnage under their crew or technical management,
is carried out from the territory of the EU/EEA.
- Full
implementation of the provisions of the Maritime
Labour Convention 2006 by crew managers.
- Ship
managers who perform technical management services
must be certified under the ISM Code.
 Further
information
Visit
the DMS website at www.shipping.gov.cy
for:
-
The full text of the Law in Greek.
- Unofficial
translation of the Law in English.
- An
overview of the new TTS, available in Greek,
English, German and Russian.
- Tonnage
tax calculator.
Download
'The New Cyprus Tonnage Tax System - London Nov
2010' Powerpoint presentation.
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