Cyprus Tonnage Tax System

Cyprus is considered as one of the most appealing and developed shipping hubs in the world. A great number of ship management companies running in Cyprus are regarded amongst the largest of their type. Cyprus is a member of international maritime organizations such as the International Maritime Organization (IMO), the International Labor Organization (ILO) and the European Maritime Safety Agency (EMSA). Services provided in Cyprus hold the highest level of quality and are tracked by the Maritime Administration, which includes the Ministry of Communications and Works, the Department of Merchant Shipping and Ports Authority.

The growth of Cyprus shipping industry directly relates to its tax legislation. In Cyprus operates the Tonnage Tax System (TTS). It was introduced and approved by EU in 2010 under Merchant Shipping Law.

Tonnage Tax System suggests assorted activities between a company/group. It provides an opportunity for all shipping activity to be taxed under Tonnage Tax while all the other activities are taxed under corporation tax.

There are several of the most important advantages of this tax system 

  • Registration process is fast and not expensive 
  • No tax on qualifying shipping activities other than Tonnage Tax 
  • Full protection of financiers and mortgagees 
  • 28 Merchant Shipping Bilateral Agreements 
  • No tax on wages of seafarers on qualifying Cyprus flag ships 
  • No wealth/inheritance tax 
  • No capital gains tax 
  • Access to all European directives 
  • No tax on dividends paid out of the profits made from qualifying shipping activities 

The regime covers qualifying persons, performing qualifying activities in relation to qualifying ships. 

Qualifying person can be any ship-owner, charterer and ship manager. 

Qualifying activity for ship-owners and charterers is determined as transport of goods or passengers between Cyprus ports and foreign ports/offshore facilities or between foreign ports or offshore establishments. For ship-managers a qualifying activity is determined as the provision of technical and/or crewing services to a qualifying ship. 

Qualifying ship: A qualifying ship is determined as a seagoing vessel that: 

  • Is certified according to the international or national principles and regulations. 
  • Is registered in the ship register of any member of the International Maritime Organization (IMO) or the International Labor Organization (ILO), which is accepted by Cyprus. 

The below-mentioned vessels are ruled out from the above determination and are not considered as qualifying vessels: 

  1. Fishing boats 
  2. Boats used for sporting activities and entertainment purposes 
  3. Ferries and trailer boats 
  4. Floating hotels, restaurants and casinos 
  5. Non self-propelled floating cranes 
  6. Non sea-going trailers 
  7. Private yachts 
  8. Non-ocean going tug boats and non-ocean going dredgers 

The Cypriot Tonnage Tax System covers three main types of maritime activities:

  1. Ship ownership,
  2. Ship management, and
  3. Ship chartering.

Beneficiaries can be ship owners, ship charterers or ship managers that own, charter or manage a qualifying vessel that is engaged in a qualifying shipping activity. 

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