Cyprus International Maritime Transport : It has long being acknowledged by the European Commission that the Cypriot Shipping Industry is very important, being one of the largest in the EU ranking among the ten largest in the world. Following the importance of the Cypriot Shipping Industry, in 2010 after obtaining the approval of the EU Commission, the parliament has passed the Merchant Shipping (Fees & Taxing provisions) Law of 2010.
Cyprus International Maritime Transport – The Tonnage Tax System in Cyprus
Cyprus International Maritime Transport : It has long being acknowledged by the European Commission that the Cypriot Shipping Industry is very important, being one of the largest in the EU ranking among the ten largest in the world. Following the importance of the Cypriot Shipping Industry, in 2010 after obtaining the approval of the EU Commission, the parliament has passed the Merchant Shipping (Fees & Taxing provisions) Law of 2010. This had introduced a new tonnage tax system in Cyprus. This tonnage regime has been applied ever since and will continue to do so until end of year 2019. It applies to companies that have engaged and will be doing so with International Maritime Transport, and are liable to pay Corporation Tax in CyprusThis regime provides the option of companies instead of being taxed on net profits of their activities, to be taxed based on the net tonnage of the fleet that they operate.
Applicable Income, Vessels and Owners
This regime is available to any Ship owner of a Cyprus flag vessel and/or foreign flag vessel and charterer as well as ship managers that own manage or charter a qualified ship operating for qualified activities. EU flag and/or third country flag ship owners do not automatically fall under this regime as it is the case with Cyprus flag vessel but are given the option and may elect to be taxed under the Cypriot tonnage tax system. In respect to third country flag ships, the fleet management must be carried out from the EU, and part of that fleet must include EU flag ships. In respect to income, tax benefits also cover dividends from profits derived from shipping activities as well as profits on disposal of vessels.
Ships and Activities
In order to benefit from this regime, a shipping activity must be qualified for maritime transport and technical as well as crew management. It applies for ships certified and registered under the International Labor Organisation, excluding fishing vessels, tug boats, ferries and some other types.
Requirements for Ship Owners, Charterers and Managers
A ship owner to fall under this regime must continue to do so for ten years and early withdrawal from this system will result in penalties, the same applying for eligible charterers and eligible ship managers.
The Tonnage Tax System in Cyprus covers profits made from shipping operations, interest which is earned on funds used for ship maintenance as well as its funding, operation and working capital, payment for charter expenses, and ship management related expenses. It also covers dividends derived from profits made from shipping operations paid either directly or indirectly, These benefits apply for all three categories of Vessel operators, namely Ship Owners, Charterers and Ship Managers. The only exception applies for the Ship Owners, with the tonnage regime covering also the profits derived from the disposal of a ship. The Tonnage Tax System in Cyprus, has been in effect since 2010, and will continue to be so for at least 4 years from now, increasing competitiveness in the shipping industry and acting as an incentive for foreign investments.
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