Cyprus taxation on the shipping industry and on Cyprus shipping enterprises 

The Cyprus tax system for merchant shipping was approved by the European Commission on 24th March 2010 and has been renewed for another 10 years from 1 January 2020 until 31 December 2029 and provides that profits from qualifying shipping operations, from the provision of qualifying crew or technical ship management services, dividends paid directly or indirectly out of such profits and interest earned on funds used as working capital or for the payment of expenses relating to the management of ships and profits from the disposal of qualifying ships and profit from the disposal of shipowning companies and its distribution are covered by tonnage tax.

1.  Ship Owners of Cyprus flagships

Shipowners of Cyprus flag ships automatically fall within the scope of tonnage tax. Shipowners of EU community flagships and foreign flagships may opt to be taxed under Cyprus tonnage tax (certain circumstances must apply for foreign flagships).

Any ship owner opting for the Cyprus tonnage tax must remain in the system for 10 years at least.

2.  Ship Charterers

Α Charterer who charters a ship under bareboat, demise, time or voyage charter flying the Cyprus flag under parallel registration is eligible to opt for the Cyprus tonnage tax system subject to conditions.

3.  Ship Managers

A ship manager providing crew and/or technical ship management services is eligible for the Cyprus tonnage tax system under certain circumstances provided the following criteria are satisfied.

  • Maintain a fully fledged office in Cyprus with personnel sufficient in number and qualification
  • At least 51% of all onshore personnel must be community citizens
  • At least 2/3 of total tonnage under management must be managed within the community (any excess of 1/3 taxed under corporation tax)

The application of the tonnage tax system is compulsory for owners of Cyprus flag ships and optional for owners of non Cyprus flag ships, charterers and shipmanagers. Those who choose to enter the Tonnage Tax regime must remain in the system for at least 10 years unless they had a valid reason to exit such as disposal of their vessels and cessation their of activities.

4.  Tax exemption for crew members (sailors) of Community ships

The Cyprus tonnage tax system excludes from Cyprus taxation the incomes of eligible crew members of both Cyprus and Community vessels.

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