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Department of Merchant Shipping Circular No. 33/2015 with regards to the Calculation of the Global Share for the Owners of Foreign Ships, Charterers and Ship Managers applied for the fiscal year 2016

As per Circular No. 33/2015 published by the Department of Merchant Shipping (DMS) on the 8th of December 2015 with regards to the Calculation of the Global Share for the Owners of Foreign Ships, Charterers and Ship Managers applied for the fiscal year 2016 which has been conducted in accordance with the Cyprus Tonnage Tax System (Law 44(I)/2010 (the “Law”)), the Director of the Department has advised  that the assessment of the Community-flagged Share of each company or group of companies will be carried out by the Director of the Department upon expiry of the third year, on 31st December, as from the date of opting to be taxed under the Tonnage Tax System (TTS).   (i.e. on 31st December 2015 for the companies which entered the TTS on 01 January 2013 or during the period 02 January 2012 – 01 January 2013).  Subsequently, an additional assessment will be carried out every three years throughout the duration of validity of the Law.

With regards to  a company or group of companies whose Community-flagged Share at the time of assessment is less than its Reference Share (unless it is over 60%),  no additional non-Community ships will be allowed to enter the TTS until it raises its Community-flagged Share back to its Reference Share as minimum. Nonetheless, those companies or group of companies may take advantage of the sectoral Global Share to include additional non-Community ships in the TTS, in accordance with sections 15(3) (a), 25(3) (a) and 35(2) (a) of the Law and with paragraphs 8 and 10 of The Tonnage Tax (Special Provisions for the Calculation of the Community Flagged Share) Notification of 2010 (P.I. 536/2010- the “Notification”).  In that instance, following sections 15(4), 25(4) and 35(3) of the Law, the said owner, charterer or ship manager will be subject to an increase of ten per cent (10%) on the total amount of tonnage tax payable for all the qualifying non-Community ships in his fleet.

Additionally, the DMS relied on paragraph 10 of the Notification, and for the purposes of implementing sections 15(3) (a), 25(3) (a) and 35(2) (a) of the Law, has conducted a calculation in accordance with paragraph 11 of the Notification, on the Community-flagged Share of the relevant global tonnage eligible for tonnage tax in the Republic of Cyprus (Global Share) on a sectoral basis for 2014.  Therefore, for 2014, there has been a decrease of the Global Share in comparison to 2013 for: firstly, the Owners of foreign ships from 28.97% to 28.67%; secondly, the Charterers from 74.75% to 70.51%; and lastly, the Ship Managers from 55.62% to 54.23%.

Hence, Owners of foreign ships, Charterers and Ship Managers whose Community-flagged Share is at the time of assessment, that being on 31st December 2015, below their Reference Share (unless this is over 60%) will not be allowed to include additional non-Community ships in the TTS until they increase their Community-flagged Share back to their Reference Share as minimum. The relevant ships will not be considered as qualifying ships and will be taxed with corporate-income tax by the Department of Taxation.  In addition, following section 44 of the Law, the company has to keep separate books, records and accounts for those ships.