Shipping Company in Cyprus

Cyprus is the only Member State of the European Union with an approved Tonnage Tax system for commercial shipping purposes. The Merchant Shipping Law, Law 44(I)/2010, was enacted by the House of Representatives and came into force on 1 January 2010.

This constitutes a key competitive advantage for Cyprus on the global maritime map, as the country has managed to play a prominent and leading role as a shipping and ship management center. This has been achieved through the strengthening of maritime infrastructure, the favorable tax regime, and the highly attractive and competitive regulatory framework for vessel registration, as well as the maintenance of the tonnage tax system.

At the same time, Cyprus’ shipping tax system has been designed in accordance with European Union requirements, as well as the guidelines of the Organisation for Economic Co-operation and Development (OECD) against harmful tax practices.

The Cyprus Ship Registry is today one of the largest in the EU and the tenth largest worldwide. In addition, Cyprus is the third largest ship management center in the EU.

Cyprus’ accession to the European Union in 2004 created new prospects for further growth in the shipping sector. The Cyprus Merchant Shipping Register is one of the two “Open Registries” within the EU and is estimated to represent approximately 15% of the EU’s commercial fleet.

Cyprus has a well-established maritime infrastructure, including a maritime court, a shipping chamber of commerce, and classification societies. It also has a specialized authority, the Department of Merchant Shipping, operating under the Ministry of Transport, Communications and Works, which provides high-value services to the maritime industry.

Cyprus tax legislation provides full tax exemption on all profits and dividends at all levels of distribution arising from qualifying shipping activities.

On 29 April 2010, the Cyprus Parliament enacted new shipping legislation. The new Merchant Shipping Law, applicable from 1 January 2010, significantly expanded the scope of the Tonnage Tax regime.

Under the new legislation, qualifying shipping activities are exempt from income tax. Tonnage tax, calculated on the basis of the net tonnage of vessels, is imposed instead of corporate income tax on actual profits. Companies engaged in qualifying activities comply with their obligations through the Department of Merchant Shipping rather than the Tax Authorities.

It is both possible and often customary for shipowners, charterers, and ship managers to invest surplus funds and generate income from non-shipping activities. Such income is not subject to tonnage tax but is subject to corporate income tax at the standard rate of 12.5%, the lowest corporate tax rate in the EU.

In cases where there is mixed income from shipping and non-shipping activities (tonnage tax and corporate tax), separate accounting records must be maintained.