The  Cyprus  Flag  –  Registration  &  Taxation Regime

The Cyprus Registry

Cyprus is an internationally renowned shipping centre, home to some of the world’s leading names of the global shipping industry. The country’s accession to the European Union, in 2004, further boosted the reputation and overall image of the Cyprus flag and Cyprus' shipping infrastructure . The Cyprus Registry today, ranking tenth among international merchant fleets is continuously upgrading its services in order to offer high standard of support to international shipping and a reputation of a “Flag of Progress”. With more than 140 ship owning, ship management, and shipping related companies, the Cyprus Registry controls a merchant fleet of 2,220 vessels of a gross tonnage exceeding 50 million, while it is the third largest merchant fleet within the EU and the second largest Ship Management Centre in the world.

The country’s simplified registration procedures, the well-developed infrastructure and the advanced safety policies, have established the Cyprus flag as one of the most prominent in the world. A number of fiscal and economic advantages are provided such as the competitive ship registration costs and annual tonnage taxes, the favourable tax regime, the availability of competent local employees, and the generally low operation and construction costs.  Cyprus has the only EU-approved “Open Registry” Regime with a very wide and legally endorsed Tonnage Tax System (TTS), which was introduced with the Merchant Shipping Law in 2010 and covers the three main maritime transport activities: ship owning, ship management (crew and technical management), and chartering. 

Cyprus is signatory to numerous international maritime conventions. Cyprus participates actively in the International Maritime Organization (IMO), the International Labour Organization (ILO) and the European Maritime Safety Agency (EMSA). Cyprus has concluded a number of treaties whose main purpose is the avoidance of double taxation of income earned in any of the countries concerned. The aim of these agreements is to promote friendly relations between Cyprus and other countries, explore areas of cooperation related to shipping which could benefit the economic development of both countries, and facilitate seaborne trade and employment of seamen. The shipboard personnel of Cyprus ships may be of any nationality provided they are holders of the required valid certificates which must be issued or recognized by the Government of the Cyprus Republic.

 

Shipping Registration

Ships of any type or size may be registered in the Register of Cyprus Ships or the Special Book of Parallel Registration, provided the applicable age-related requirements and the applicable type-related requirements are complied with. For the purpose of the Policy “age” means the age of the ship which is calculated by deducting the year in which the keel of the ship was laid from the year in which the application for its registration was filed with the Registrar of Cyprus Ships, provided its provisional, permanent or parallel-in registration is to take place during the same year. Otherwise, the age of the ship will be calculated from the year in which the provisional, permanent or parallel-in registration is to take place.

The registration in the Register of Cyprus Ships or the Special Book of Parallel Registration of the ships may be allowed provided the requirements set out in this section which relate to the type and the age of the ship are complied with.

 

Type of ship

Maximum age limit

Entry inspection required

Additional inspection required

Cargo ships and Cargo High Speed Craft

Yes

≤ 25 years

Yes

if ≥ 15 years

No

Passenger ships and Passenger High Speed Craft engaged on international or short international voyages

No

Yes

If ≥ 30 years

Yes

If 2 ≤ Age ≤ 10 Biennial

If Age > 10 Annual

Passenger ships and Passenger High Speed Craft engaged on domestic voyages within the territory of a State, other than Cyprus

No

Yes

If ≥ 25 years

Yes

If 2 ≤ Age ≤ 10 Biennial

If Age > 10 Annual

Passenger ships and Passenger High Speed Craft engaged on domestic voyages within the territory of Cyprus

No

Yes

If ≥ 20 years

No

In order to operate they are required to be inspected and certified annually

Fishing vessels

Yes

≤ 25 years

Yes

If ≥ 20 years

No

Floating Production Storage Offloading Units; Floating Storage Offloading Vessels and Mobile Offshore Drilling Units

Yes

≤ 25 years

Yes

If ≥ 15 years

No

Ships of types other than those listed above

Yes

≤ 35 years

Yes

If ≥ 20 years

Yes

If the ship is carrying industrial or special purpose personnel and

2 ≤ Age ≤ 10 Biennial

Age > 10 Annual

 

A vessel may only be registered in the Register of Cyprus Ships if:

  1. More than 50% of the shares of the ship are owned by:
    1. Cypriot citizens or
    2. Citizens of other EU Member States who in the instance of not being permanent residents of the Cyprus Republic will have appointed an authorized representative in the Republic, or
  2. The total (100%) of the shares of the ship are owned by one or more corporations which have been established and operate:
    1. In accordance with the laws of the Republic of Cyprus and have their registered office in Cyprus, or,
    2. In accordance with the laws of any other Member State and have their registered office, central administration or principal place of business within the European Economic Area (EEA) and which will have either appointed an authorized representative in Cyprus or the management of the ship is entrusted in full to a Cypriot or a Community ship-management company having its place of business in Cyprus, or,
    3. Outside Cyprus or outside any other Member State but controlled by Cypriot citizens or citizens of Member States and have either appointed an authorized representative in Cyprus or the management of the ship is entrusted in full to a Cypriot or a Community ship-management company having its place of business in Cyprus.

The corporation is deemed to be controlled by Cypriots or citizens of any other Member States when more than fifty percent of its shares are owned by Cypriots or citizens of any other Member States or when the majority of the Directors of the corporation are Cypriot citizens or citizens of any other Member State.

An authorized representative may be a Cypriot citizen or a citizen of any other Member State, who is resident in the Republic, or a partnership / corporation / branch established in accordance with the laws of Cyprus, which has its place of business in the Republic and which employs permanent staff in the Republic. In view of the above requirements, all non-European owners who wish to register their ships under the Cyprus flag may incorporate a company in Cyprus, which will either acquire the ship in its name, or bareboat charter the ship.

Practice and custom have created a special type of Cyprus shipowning company (hereinafter referred to as "the company"), which is limited by shares and has a nominal capital, usually €1.000 divided into 1.000 shares of €1 each. In accordance with the Advocates Laws of Cyprus, only lawyers registered as practicing advocates in Cyprus are entitled to draft the necessary documents for the incorporation of Cypriot companies as well as to carry out all registry transactions.

The main types of vessel registration in Cyprus are:

  • Provisional,
  • Permanent and
  • Parallel registration.

Cypriot merchant shipping legislation allows for the provisional registration of a vessel and most owners usually opt to have their ship provisionally registered first. This will allow them time during which they will be able to complete the administrative formalities for permanent registration. The application for registration of a ship under the Cyprus flag must be made by a local lawyer to the Minister of Communications and Works through the Registrar of Cyprus Ships. In practice, the Registrar will also accept the submission of applications for registration of ships on behalf of companies under formation, so that the incorporation of the company and registration of the ship can progress simultaneously. However the company must be duly incorporated prior to the registration of the vessel. A ship may be provisionally registered under the Cyprus flag either in Limassol, by the Registrar of Cyprus Ships or at any diplomatic mission or consular post of the Republic of Cyprus abroad who will act on instructions issued by the Registrar of Cyprus Ships. At the time of the provisional registration under the Cyprus flag a ship must be at a port so that she can be surveyed and certified on behalf of the Cypriot government. The presence of the ship at the port or place where the provisional registration will be effected is not necessary.

An entry inspection of the ship should be carried out no later than three months from the date of the provisional or the parallel-in registration, or within one month from the date of permanent registration if effected directly. The entry inspection and the additional inspections are carried out by the Surveyors of the Department of Merchant Shipping at the expense of the registered owner or registered bareboat charterer, as the case may be.

 

Provisional Registration

In order to enable the Registrar of Cyprus Ships to initiate the procedure for the provisional registration of a ship, the following information is needed:

  • Name of the vessel and her flag at the time of the application;
  • Name of the person (legal or natural) applying for the registration of the vessel;
  • Name of the vessel under which she will be registered;
  • Particulars of the vessel (type, year of construction, date keel of the vessel was laid, gross and net tonnage);
  • Name of the Classification Society with which the ship is entered;
  • Declaration of Particulars of the company for ISM Code;
  • Intended trading area of the vessel;
  • Place where the vessel will be at the time of her provisional registration of the vessel;
  • The consular office where the owners wish to effect the provisional registration of the vessel;
  • Name and address of the shareholders and directors of the company in whose ownership the vessel will be registered.

The following documents must be forwarded to the Registrar of Cyprus Ships together with the application for the provisional registration:

  • Memorandum and Articles of Association of the Cypriot company;
  • Certificate of Incorporation, Directors and Secretary, Shareholders and Registered Office of the Cypriot company;
  • Resolutions of the Directors of the Company for the purchase of the vessel and its registration in the Cyprus Registry;
  • Power of Attorney authorizing the person who will sign all the necessary documents on behalf of the Company;
  • Bill of Sale;
  • Certificate of Deletion of the vessel / Certificate of Ownership and freedom of encumbrances from the previous registry;
  • Confirmation of Radio Traffic Accounting Authority;
  • Confirmation of Vessel’s Classification Society;
  • Continuous Synopsis Record;
  • Declaration of ownership;
  • Appointment of Authorized Representative;
  • Registration of a Mobile Maritime Radio Station and copy of Shore Based Maintenance Agreement;
  • Registration of SAR Particulars;
  • ISM forms;
  • Certificate of Parallel Registration from the foreign registry, in the case of Parallel Registration in a foreign register.

Fees and taxes payable on provisional registration

The following fees and taxes are payable at the time of the provisional registration of a vessel and should be paid not later than the date on which the provisional registration of the vessel will be effected:

  • Registration fees;
  • Tonnage tax for 6 months;
  • Fees for obtaining a license to install and operate a wireless telegraphy and/or telephony station;
  • Fee for the issue of the provisional certificate of Cyprus Registry.

Fees and taxes payable for the extension of the period of provisional registration

For extending the period of the provisional registration of a vessel under the Cyprus flag for a maximum period of 3 months, the following fees and taxes are payable and should be paid prior to the expiry date of the period of provisional registration:

  • One half of the registration fees;
  • Tonnage tax for 3 months.

 

Permanent Registration

The permanent registration of a provisionally registered vessel must be effected within 6 months from the date on which she was provisionally registered. For the purposes of permanent registration the following documentation must be submitted to the Registrar of Cyprus Ships in addition to the documents required for the provisional registration:

  • Certificate of Survey and Tonnage Certificate from a recognized Classification Society;
  • Ship’s Carving and Making Note;
  • The International Certificates from a recognized Classification Society in accordance with the relevant international maritime convention in force;
  • Safety Management Certificate;
  • Confirmation of the Customs Department on the payment of VAT for pleasure crafts.

If the vessel falls within the ambit of the Government Policy for the Registration of vessels under the Cyprus flag then the applicable requirements or conditions under which her registration has been approved should be complied with. After receipt of all the documents and provided the appropriate fees have been paid, the Registrar of Cyprus Ships will proceed with the permanent registration of the vessel and the issue of the Certificate of Cyprus Registry.

Fees and taxes payable on permanent registration

If the relevant registration fees have been paid at the time of the provisional registration of the vessel and the period of provisional registration has not expired, then no other fees and taxes are levied for the permanent registration of a vessel apart from:

  • Fee for the issue of the certificate of Cyprus Registry;
  • Payment of any other statutory fees and taxes due or in arrears at the time of the permanent registration of the vessel.

No other fee is payable if the permanent registration takes place before the expiry of the provisional registration period.

 

Parallel Registration

Under Cypriot legislation parallel (bareboat) registration of vessels is possible. The legislation provides for the two forms of internationally accepted bareboat registration, ‘Parallel-In’ and ‘Parallel-Out’ registration. These two options offer some very interesting opportunities for leaseback, hire purchase and finance agreements. The administrative practice of the Department of Merchant Shipping has confirmed that the parallel registration of vessels under the Cyprus regime may be effected with more than 20 states whose legislation is compatible with Cypriot legislation.

Fees and taxes payable on parallel (bareboat) registration

The initial registration fees for the parallel registration of a foreign vessel under the Cyprus flag (parallel-in registration) are 20 percent higher than those applicable to the provisional or permanent registration of the vessel. If the foreign vessel under the Cyprus flag is deleted and thereafter re-registered and the chartering is effected to the benefit of the same charterer prior to the deletion, the re-registration fees are reduced by 50 percent. There is no increase in the tonnage tax or other dues payable and the vessel is subject to the same financial obligations as other Cyprus ships.

A Cyprus ship registered in parallel in a foreign register (parallel-out registration) has the same financial obligations as all other Cyprus ships, with the exception of the fees for the issue or renewal of the radio licence. If the vessel is deleted from the Cyprus Registry prior to the termination of her status of parallel-out registration, that part of the tonnage tax which is proportional to the period from her deletion until the termination of her status of parallel registration is reimbursed upon application.

The financial obligations of vessels (Cypriot and foreign) registered in parallel are payable in advance for the entire period of the parallel (bareboat) registration.

 

Registration Fees

For vessels other than passenger ships:

GROSS TONNAGE

FEES (€)

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.

 

For passenger ships:

GROSS TONNAGE

FEES (€)

For each gross unit

0,256290

Minimum fee

427,15

 

Other Fees

 

FEES (€)

Cyprus Registry Maintenance Annual Fee

300,00

Examination of an application for the registration of a vessel in the Register of Cyprus Ships

34,17

Examination of an application for change of the vessel’s name

34,17

Approval and change of the vessel’s name

136,69

Issue of a provisional, permanent or parallel certificate of registration

17,09

Granting of ship’s carving and marking note

17,09

Issue of transcript of register

25,63

Radio license installation

17,09

Radio license renewal

17,09

Issue of Continuous Synopsis Record

34,17

 

Taxation

The Merchant Shipping Legislation, Merchant Shipping (Fees and Taxing Provisions) Law, enacted in 2010, is fully approved by the EU and provides for exemption from all direct taxes and taxation under tonnage tax regime of qualifying shipowners, charterers and ship-managers, from the operation of qualifying community ships (ships flying a flag of an EU member state or of a country in the European Economic Area) and foreign (non-community) ships (under conditions), in qualifying activities.

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 recognized by Cyprus. The new tonnage tax system excludes certain types of ships such as fishing vessels, ships used primarily for sports or recreation, river-vessels, non-self-propelled floating cranes and non-ocean going tug boats, among others.

Any commercial activity that constitutes maritime transport (traditional carriage of goods and passengers, ancillary services such as hotel, catering, entertainment and retailing activities on board of a qualifying vessel, the loading and unloading of cargo, the operation of ticketing facilities and passenger terminals), crew management and/or technical management is considered a qualifying activity. Towage, dredging and cable laying are also eligible for tonnage tax.

Shipowners, charters and ship managers participating in the Cyprus tonnage tax system (TTS) enjoy many advantages:

  • Exemption from income tax and any other tax or levy on dividends paid to shareholders, on interest earned on working capital and on any profit made from the sale of a qualifying ship;
  • No estate duty on the inheritance of shares in a shipowning company;
  • No income tax on the emoluments of officers and crew on board of a Cyprus ship;
  • No stamp duty on ship mortgage deeds or other security documents;
  • Any income arising from the provision of ship-management services is subject to a special ship management tax calculated at 25% of the tonnage tax rates. Ship managers, at their option, may elect to be taxed under corporation tax at a special tax rate of 4,25%.

 

Shipowners

Shipowners of Cyprus flag ships automatically fall within the scope of the tonnage tax system. Shipowners of community flag ships and foreign flag ships may opt to be taxed under the tonnage system. However, any shipowner opting for the tonnage tax system must remain in the system for 10 years. The exemption from the income tax and other taxes applies to:

  • Profits derived from the use/chartering out of the ships;
  • Interest income relating to the working capital of the company;
  • Profits from the disposal of qualifying ships;
  • Dividends received from the above profits at all distribution levels;
  • Profit from the disposal of shipowning companies and its distribution.

The exemption also applies to the bareboat charterer of a vessel flying the Cyprus flag under parallel registration.

 

Charterers

Any charterer who charters a ship under bareboat, demise, time or voyage charter is eligible for the tonnage tax system provided the tonnage of the ships under time and/or voyage charters do not exceed 75% on the total tonnage of ships chartered and owned, for more than 3 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 from the EU/EEA. An eligible charterer may opt to be taxed under the tonnage tax system but once the option is made, it must remain in the system for 10 years. The exemption from the income tax and other taxes is given to:

  • Profits derived from the operation of chartered in ships;
  • Interest income relating to the working capital of the company;
  • Dividends received from the above profits at all distribution levels.

 

Ship-managers

A ship manager who provides crew and/or technical ship management services is eligible for the tonnage tax system provided it satisfies certain criteria: the maintenance of a fully-fledged office in Cyprus, the employment of a sufficient number of qualified personnel (51% of whom should be EU/EEA citizens) and at least 2/3 of the management in entirely carried out from the territory of the EU/EEA. Further, a share of his fleet must be comprised of EU flag ships, which share must not be reduced in the three-year period following the exercise of the option. All ships and crews under management must comply with relevant international standards and EU law requirements must be fulfilled, in particular those relating to maritime security, safety, training and certification of seafarers, environmental performance and on-board working conditions. The 10-year option rule also applies to eligible ship managers. The tax exemption covers:

  • Profits from technical and/or crew management;
  • Dividends paid out of these profits at all levels of distribution;
  • Interest income relating to the working capital of the company.

 

Tonnage Tax Rates

Net Tonnage

0 – 1.000

1.001- 10.000

10.001- 25.000

25.001- 40.000

> 40.000

€36,50 per 100 NT

€31,03 per 100 NT

€20,08 per 100 NT

€12,78 per 100 NT

€7,30 per 100 NT