The Shipping Industry in Cyprus A Leading Maritime Centre

An international maritime centre since antiquity, the strength, breadth and experience of Cyprus’ shipping sector is attracting quality tonnage and increasing numbers of first-rate shipping companies from around the world.

Deputy Minister Natasa Pileidou stated in a recent interview “Cyprus has not only succeeded in coping successfully with global competition but it also achieved the continued growth of its shipping industry. All of the above demonstrate the great prospects of shipping and maritime industry in Cyprus has for further growth and development ”

Cyprus has a unique location in the Eastern Mediterranean and is conveniently located in the hub of three continents: Europe, Asia and Africa. The ideal location of the island has played a prominent role in its development into a thriving international business and shipping center.

The maritime industry is one of Cyprus’ most successful export services, and with over 160 shipping companies, the island is considered one of the top global hubs for ship owning and shipmanagement services. The country’s maritime capital, Limassol, is home to some of the world’s most influential names in shipping. Today, Cyprus is the third largest ship management centre worldwide and represents one fifth of the worlds fleet.

The privileged position and tax system of Cyprus has turned the country into a shipping magnet deriving shipping companies from Norway, Greece, Dubai and South Korea creating the need to establish a Deputy Ministry of Shipping which will substantially assist towards the further development of Cyprus shipping and the economy.

Cyprus is the only EU state member that has an approved tax framework (Tonnage Tax basis) for purposes of merchant shipping. The Merchant shipping Act that was approved from the parliament and came into effect in January 2010 places Cyprus in a prominent position and offers many advantages towards the shipping companies that choose to operate in Cyprus.

The number of shipping companies opening offices in Cyprus has increased in recent years, many of which have been attracted by the tax system according to which shipowners, ship managers and charterers pay tax according to the net tonnage of a ship and not according to the income that derives.

Cyprus plays a prominent role as an important maritime and management center and will continue to strengthen this position in the global economy by maintaining the maritime infrastructure, the favorable tax system, the competitive registration scheme and maintenance of the tonnage tax.
The tax incentives accompanied with the financial benefits provided, together with the excellent infrastructure, make Cyprus ideal choice for ship owners, charterers and managers.

Some of the advantages base on the tax system are the following:
  • The ship owner companies and management companies are taxed according to the net tonnage of the ship and not on the basis of the local corporate tax (12.5%)
  • The tax obligations of the company are controlled by the Department of merchant shipping and not the Tax registrar
  • Ensures the total exemption of the profits from the corporate tax and the tax arising from the sharing of the profits (dividends)
  • Allows the operation of a variety of activities to a company/group of companies, as well as the taxation of the shipping activities on the tonnage tax law and any further activities based on the corporate tax at 12.5%
  • Provides the transparency of the registered corporations and vessels list

The content of this article intends to provide a general guide to the subject matter. Specialist advice and should be sought on each particular case. For any further information, please contact Mr Panikos Onoufriou at onopan@cytanet.com.cy