Cyprus has historically been of strategic importance as a commercial centre lying at the crossroads of three continents and through a combination of favourable taxation schemes and non-fiscal advantages since 1963, Cyprus has developed into one of the world’s largest shipping centres. The shipping industry in Cyprus has also emerged relatively unscathed from the financial crisis that has burdened other sectors of the Cyprus economy since 2007 and continues to grow with estimates of revenue to Cyprus from Maritime Transport in 2012 surpassing €1 billion or approximately 7% of Cyprus’s GDP.
At the end of 2012 the Register of Cyprus Ships also ranked as the 10th largest in the world with a merchant fleet exceeding 22million gross tonnage and as the 3rd largest in the European Union (EU). Approximately 60 ship management companies operate from Cyprus and the Department of Merchant Shipping (“DMS”) estimates that these companies manage over 2,000 vessels or about 20% of the worldwide third-party ship management market.
The Cyprus shipping industry is likely to continue to grow with developments such as the upgrading of the Maritime Administration Structure, the appointment of an under-secretary for shipping along with talks in relation to the lifting of the Turkish embargo on Cyprus ships and the discovery of Natural Gas in Cyprus’s Exclusive Economic Zone. With such positive developments ship owners trust in the Cyprus flag remains strong. The Cyprus flag offers a number of advantages both to commercial vessels and pleasure craft, including:
- Competitive ship registration costs.
- Favourable Tonnage Tax (TT) scheme approved by the EU. This scheme provides for TT on the net tonnage of the vessels rather than Corporation Tax on the actual profits, and is regulated by the DMS rather than the Tax Authorities.
- No tax on income derived from the operation of the vessel or on dividends paid to the shareholders out of profits from the operation of the vessel.
- No tax on interest earned on the working capital of the vessel.
- No tax on the salary or other benefits of the master, the officers and crew members of the vessel.
- Double tax treaties with over 40 countries.
- Modern and efficient legal, accounting and banking services based on English practices.
- Favourable tax regime for ship management companies.
- High standards of maritime safety and security.
- Harmonisation with international instruments as well as the regulations and directives of the EU currently in force.
- Ground-braking legislation in force on the protection of Cyprus ships from acts of piracy and other unlawful acts, which includes provision for the use of armed guards on board Cyprus flagged vessels transiting through High Risk Areas.
In addition, the Cyprus flag is listed on the ‘White List’ of the Paris and Tokyo MOUs on port State control resulting in fewer inspections of vessels and fewer delays at the ports of both MOUs.