Fees and Taxes

Cyprus is considered one of the most competitive shipping centers in the world in terms of costs.

The following fees are correct as at April 2004 and are expressed in Cyprus Pounds (CY£1 = 100 cents).

9.1 Registration Fees

The registration fees are as follows:

(a) For vessels other than passenger vessels:

GROSS TONNAGE	CENTS
For each unit up to 5.000	10
For each additional unit between 5.001-10.000	8
For each additional unit over 10.000	4
The minimum fee is CY£125 and the maximum fee is CY£3.000

(b) For passenger ships:

GROSS TONNAGE	CENTS
For each unit	15
The minimum fee is CY£250

No fee is payable for deletion of ships. However, all other statutory fees and taxes due or in arrears at the time of the vessel’s deletion must be paid.

9.2 Corporation Tax

(a) Cyprus companies. Cyprus offers complete tax exemption on all profits and dividends arising from shipping operations. This particular tax relief will be available until 31 December, 2020. In effect, this means that:

(i) no income tax is payable on the profits derived from shipping activities by a Cyprus shipping company which own or bareboat charters ships under the Cyprus flag;

(ii) no capital gains tax is payable on the sale or transfer of a ship or shares in a shipping company;

(iii) no income tax is payable on the salaries of officers and crew of Cyprus ships which operate in international waters; and

(iv) No stamp duty is payable on bills of sale and mortgages on ships and related documents.

(b) Foreign companies. Foreign companies that generate profits from shipping activities of vessels under foreign flags are liable to corporation tax at the preferential rate of 4,25%. This rate will apply until the end of 2005. From 1 January, 2006 the normal rate will be applicable which is currently 10%.

9.3 Tonnage Tax

(a) For vessels other than passenger ships. Tonnage tax is calculated as follows:

Tonnage tax =	(Basic charge + Gross tonnage increment) x Age multiplier
The basic charge is CY£100 and the gross tonnage increment is calculated as follows:
GROSS TONNAGE			CENTS
For each unit up to 1.600			26
For each additional unit between 1.601-10.000			16
For each additional unit between 10.001-50.000			6
For each additional unit over 50.000			4
The age multiplier is shown below:
AGE*		SHIP RATE MULTIPLIER
Up to 10 years		0,75
11-20 years		1,00
Over 20 years		1,30
*This is calculated by taking the year in which the keel was laid and then deducting it from the year of assessment of the tonnage tax.

(b) For passenger ships. The tonnage tax payable is double that payable for other vessels.

(c) Payment. Tonnage tax is payable in biannual instalments, on 1 January and 1 July each year, and in advance not later than the 31 January and 31 July each year. Late payment results in a 5% surcharge or the first month in arrears and 1% for each subsequent month. In case of deletion of a vessel from the Register of Cyprus Ships, any tonnage tax paid in advance for the remaining period up to the date on which the next instalment becomes due is refunded.

9.4 Reduction of Tonnage Tax

The Merchant Shipping Laws provide for the reduction and refund of tonnage tax in the cases listed below.

(a) Technical management and crewing by Cyprus companies. If the vessel’s technical management and crewing is carried out by a Cyprus ship management company operating in Cyprus, a 30% reduction of the tonnage tax is allowed provided the relevant documentary evidence is submitted to the Department of Merchant Shipping in advance of the period for which the reduction is claimed.

(b) Cypriot crew members. For members of the crew of the vessel who are Cypriot citizens, a percentage of the tonnage tax paid may be refunded for each month they are employed on board the vessel, as follows:

(i) for vessels other than passenger ships, 2,5% for each month of actual employment on board in respect of officers and cadet officers, and 1,5% for each month of actual employment on board in respect of ratings;

(ii) In the case of passenger ships the above rates are reduced by 50%.

Tonnage tax is refunded on the application of the owner of the vessel.

(c) Laid up ships. If the ship is laid up for a period of more than 3 consecutive months the tonnage tax payable is reduced by 75% for the period during which the vessel is laid-up. The maximum reduction or refund of tonnage tax described above cannot exceed 50% of the tonnage tax due for the financial year.

9.5 Fees for Registration, Transfers and Discharge of Mortgages

For the registration or transfer of a mortgage or transfer of interest in a mortgage with the Registrar of Ships, the fees payable are calculated as follows:

GROSS TONNAGE	CENTS
For each unit up to 10.000	2
For each additional unit over 10.000	1
The minimum fee is CY£30.

No fee is payable for the discharge of mortgages.

9.6 Other Fees

Examination of an application for the registration of a vessel in the Register of Cyprus Ships.	CY£15
Examination of an application for change of the vessel’s name.	CY£15
Approval of the change of the vessel’s name.	CY£80
Issue of a provisional certificate of registry or a certificate of registry.	CY£10
Granting of ship’s carving and marking note.	CY£10
Issue of transcript of registry.	CY£10

There are some further minor fees payable for various other services or for the issue of certain certificates.

9.7 Fees and charges payable on provisional registration

(a) On provisional registration. The following fees and taxes are payable at the time of the provisional registration of a vessel:

(i) registration fees;

(ii) tonnage tax for 6 months;

(iii) fees for obtaining a license to install and work a wireless telegraphy and/or telephony station, and;

(iv) fee for the issue of the provisional certificate of Cyprus Registry

These should be paid not later than the date on which the provisional

registration of the vessel will be effected.

(b) On extension. To extend the period of provisional registration by 3 months, the following fees and taxes are payable:

(i) one half of the registration fees, and

(ii) Tonnage tax for 3 months.

These should be paid prior to the expiry date of the period of provisional

registration.

9.8 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:

(a) Fee for the issue of the certificate of Cyprus Registry, and

(b) Payment of any other statutory fees and taxes due or in arrears at the time of the permanent registration of the vessel.

If the permanent registration takes place after the provisional registration period has expired, then the fees payable on provisional registration are payable anew.

9.9 Fees and Taxes Payable on Parallel Registration

The initial registration fees for the parallel registration of a foreign vessel under the Cyprus flag (parallel-in registration) are 20% 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%. There is no increase in the tonnage tax or other dues payable and the vessel is subject to the same financial obligations as other Cypriot vessels.

A Cypriot vessel registered in parallel in a foreign register (parallel-out registration) has the same financial obligations as all other Cypriot vessels, 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.

9.10 Fees and Taxes Payable Annually

The following fees and taxes are payable each year:

(a) Tonnage tax, and;

(b) Fees for the renewal of the licence to install and work a wireless telegraphy and/or telephony station.

9.11 Taxation of Cypriot Ship Management Companies

The main elements of the taxation regime of Cyprus ship management companies are:

(a) The taxation regime applies to companies engaged in the 3 basic types of internationally accepted ship management services, i.e. crewing, technical and commercial management of ships;

(b) Notwithstanding the provisions of the income tax laws in force, no tax is charged on the income derived by any person from the rendering of ship management services for the period ending 31 December, 2020;

(c) To counteract the above tax exemption, a special tax is charged on the basis of the tonnage of ships for which ship management services have been rendered. This special tax is applicable to any ship managed by a Cypriot ship manager (whether of Cyprus or foreign flag). It is calculated by reference to the Second Schedule of the Merchant Shipping (Fees and Taxing Provisions) Laws 1992-2003. This tax is not applicable in the case of Cypriot ships that qualify for the 30% reduction described in paragraph 9.4(a) above.

(d) For any given financial year, a ship management company may opt to be taxed either according to the special tax method or according to the rates provided by the current income tax laws in force. This option is exercised by informing in writing, the Department of Merchant Shipping with a copy to the Commissioner of Income Tax. The notice must be filed at least 30 days prior to 1 January of the relevant financial year, and will remain in force until its withdrawal by the same procedure;

(e) There is an exemption from income tax on the dividends received from the rendering of ship management services.