International Shipping Companies Choose Limassol

International Shipping Companies Choose Limassol

Cyprus is a leading market in ship management. Tax incentives and well-developed business infrastructures attract ship owners and shipping companies from all over the world to register and launch their services in Cyprus. Shipping is an important sector of the Cyprus economy. Ship management activities account almost 6% of Cyprus GDP. Precisely, Cyprus is the largest third party ship management centre in Europe and the largest crew management centre in the world. Furthermore, Cyprus’ international ship register is the third largest in Europe and the tenth largest in the world.  As a result, many international shipping companies choose to relocate their operations to Cyprus and particularly to Limassol.

The city of Limassol is the ship management centre of the island. The Department of Merchant Shipping is based in Limassol. Approximately 130 shipping related companies launched their operations in Limassol and offer their international services from Limassol. Moreover, some of the most important international ship management companies have their headquarters and operate from Limassol.  In addition, almost 4% of the world’s fleet is administered from Cyprus. The European Union regulates the 87% of ship related companies in Cyprus.

During the last year, 42 Greek shipping companies relocated to Cyprus due to attractive taxation and other considerable advantages. The economic crisis in Greece together with the high taxation imposed on shipping companies in Greece urged Greek shipping companies to relocate to Cyprus. In other words, low taxation and simple bureaucratic procedures attract shipping companies from Greece and other countries to register in Cyprus. In addition to this, the Department of Merchant Shipping establishes a maritime safety framework for ships flying the Cyprus flag. For more information about maritime security read the article Maritime security for ships flying the Cyprus flag.

Ownership Requirements:

  1. 50% or more of the shares of the ship must be owned by Cypriot or EU/EEA citizens who in case they are not permanent residents of the Republic of Cyprus, will have to appoint an authorised representative in the Republic, or
  2. The 100% of the shares of the ship must be owned by companies, that operate according to the laws of the Republic of Cyprus and have their registered office in Cyprus or they follow the regulations of other EU/EEA country and have their registered office, central administration or principal place of business activities within the EU/EEA, or companies registered outside EU/EEA area but controlled by Cypriot or EU/EEA citizens. In the latter two cases, an authorised representative in Cyprus must have been appointed, or the management of the ship must be fully entrusted to a Cypriot or Community ship management company in Cyprus.

Ship Registration:

There are three types of registration: Provisional, Permanent, Parallel (Parallel in, Parallel out). Vessels of any size and type could be registered in the Cyprus Register of Ships or the Special Book of Parallel Registration, given that they follow the provisions of the merchant shipping legislation and the circulars of the Department of Merchant Shipping. Moreover, they should satisfy some conditions regarding vessel’s age and type. The application must be accompanied by certain documentation that validates ownership and compliance with certain provisions that need to be fulfilled at the time of registration.

Applications for ship registration must be made through Cypriot lawyers. At the time of ship’s registration, the ship must be surveyed by an approved classification society. The approved classification societies are ABS, LRS, DNV, BV, GL, RINA, NKK, KRS, CCS, RS and PRS.

Fees for vessels other than passenger ships:

GROSS TONNAGE FEES (EURO)
For each gross unit up to 5.000 0,170860
For each gross unit between 5.001-10.000 0,136688
For each gross unit over 10.000 0,068344
The minimum fee is €213,58 and the maximum fee is €5.125,80.

Fees for passenger ships:

GROSS TONNAGE FEES (EURO)
For each gross unit 0,256290
Minimum fee 427,15

 Taxation:

Cyprus is an attractive taxation destination. Specifically, the Cyprus tax regime provides ship owner (including a bareboat charterer) a total tax exemption on all profits and dividends coming from the operation of ships flying the Cyprus flag. In addition, no corporation tax is imposed on the income of a ship owner of a Cyprus flag vessel from the operation of such vessels in any shipping activity across Cyprus and ports abroad or between foreign ports. Furthermore, no capital gains tax is imposed on the sale or transfer of a ship or shares in a shipping company.

Income generated from the offer of ship management services is subject to a particular ship management tax calculated at 25% of the tonnage tax rates. However, ship managers, may choose to be taxed under the corporation tax at 4.25%. Dividends allocated out of profits arose from ship management operations are wholly tax exempt and are not subject to the 15% special contribution for defense.

The Merchant Shipping Law 44 (I) of 2010 (Fees and Taxing Provisions) includes the provisions of the tonnage tax. This legislation establishes Cyprus as an attractive ship management destination.  The tonnage tax is available to any owner, charterer or ship manager who owns, charters or manages a qualifying vessel in a qualifying shipping activity.  The term qualifying activity for ship owners and charterers corresponds to maritime transport of goods or humans among Cyprus ports and foreign ports/ offshores installations, or among foreign ports or offshore facilities. In the case of ship managers, qualifying activity refers to services offered to a ship owner or bareboat charterer based on a written agreement in relation to crew and/or technical management.

The tonnage tax system constitutes Cyprus an attractive ship management centre since it replaces taxes based on profit with a tax estimated on the net tonnage of the ships. Tonnage tax can be calculated online.

The following table presents the tonnage tax rates.

NET TONNAGE

0-1.000 1.001-10.000 10.001-25.000 25.001-40.000 >40.000
36,50 (Euro) per 100 NT 31,03 (Euro) per 100 NT 20,08 (Euro) per 100 NT 12,78 (Euro) per 100 NT 7,30 (Euro) per 100 NT

 

 

 

Note: The rates applied to ship managers are 25% of the above.

Transfer of Ownership:

It should be underlined that transfer of ownership and any other transactions influencing mortgages (for example creation, registration, transfer and discharge) on Cyprus ships registered parallel-out, are exclusively regulated by Cyprus jurisdiction. In other words, no action related to these issues could be taken by a foreign registry. By the time a vessel has been registered under the Cyprus flag, a mortgage can be created. A mortgage secures a loan or other financial obligations on conditions agreed to by the parties. Nonetheless, the creation of a mortgage under Cyprus law is not permitted on ships registered parallel-in in the Register of Cyprus Ships.

A mortgage once created has to be deposited with the Registrar of Cyprus Ships or with a consular officer following the instructions of the Registrar. Afterwards, the mortgage is filled in the Register from the date and time of its creation and remains an encumbrance on the vessel until discharged by the mortgagees. The provisional or permanent ship registration do not affect the creation of a mortgage. If the vessel on which a mortgage was created belongs to a Cyprus company, then the mortgage will also have to be registered with the Registrar of Companies within 42 days after its creation.

The mortgagee’s security is assured in the case of liquidation of the ship owning company. Transfer of a mortgage may be proceeded by completing the statutory form of transfer and submitting it to the Registrar of Cyprus Ship or to a consular officer. A memorandum of discharge will need to be duly executed by the mortgagee so that to discharge a mortgage. Afterwards, it will need to be attested and delivered to the Registrar of Cyprus Ships or a consular officer following the instructions of the Registrar.

Fees for the registration or transfer of a mortgage or transfer of interest in a mortgage with the Registrar of Ships:

Gross Tonnage Fees in Euro
For each gross unit up to 10.000 0,034172
For each gross unit over 10.000 0,017086
Minimum Fee 51,26

Fees for the Transmission of a mortgage: 85,43 Euro.

Other Advantages:

Apart from taxation and well-developed bureaucratic infrastructures Cyprus offers some other equally considerable advantages such as:

  • EU flag
  • Maritime offices in New York, London, Rotterdam, Piraeus, Brussels and Hamburg offering services to Cyprus ships.
  • A network of local inspectors of Cyprus ships, covering important ports around the world so that to ensure efficient and effective control of Cypriot vessels and avoid detentions by port state control.
  • Signatory to all international maritime conventions on safety and pollution prevention.
  • Bilateral agreements with 23 countries. Ships flying the Cyprus flag receive either national or favoured nation treatment in the ports of other countries.
  • Efficient and qualitative provision of services by the Department of Merchant Shipping.

Michael Chambers & Co is able to advise and guide you on all aspects related to ship management, ship registration and transfer of ownership. If you wish to speak to one of our lawyers then please contact us: info@cypruslawfirm.com