As per Circular No 35/2016 issued by the Department of Merchant Shipping (DMS), on the 12th of December 2016, for the purpose of assessment of the Community-flagged Share of each company or group of companies, the Director shall carry out an assessment upon expiry of the third year (on 31st December) as from the date of opting to be taxed under the Tonnage Tax System (TTS) and thereafter a further assessment every three years throughout the duration of validity of the Merchant Shipping (Fees and Taxing Provisions) Law of 2010 (Law 44(I)/2010) (“the Law”).
Moreover, it is provided that 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 can enter the TTS until it raises its Community-flagged Share back to its Reference Share as minimum. Nonetheless, further to sections 15(3) (a), 25(3) (a) and 35(2) (a) of the Law and 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”) those companies may benefit from the sectoral Global Share in order to include additional non-Community ships in the TTS. In such case, the owner, charterer or ship manager in question shall 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, by virtue of the provisions of sections 15(4), 25(4) and 35(3) of the Law respectively.
It is noted that for 2015, as per the calculations of 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 2015 conducted by the DMS:
- The Global Share for Owners of foreign ships has decreased in comparison to 2014 (from 28.67% to 27.29%),
- The Global Share for Charterers has decreased in comparison to 2014 (from 70.51% to 62.39%),
- The Global Share for Ship Managers has decreased in comparison to 2014 (from 54.23% to 51.97%).
Overall, Owners of foreign ships. Charterers and Ship managers whose Community flagged Share is at the time of assessment (i.e. on 31st December 2016) below their Reference Share (unless this is over 60%) shall not include additional non-Community ships in the TTS until they raise their Community-flagged Share back to their Reference Share as minimum. Such ships cannot be considered as qualifying and therefore would be subject to corporate-income tax by the Department of Taxation while the company shall maintain separate books, records and accounts for those ships as provided by section 44 of the Law.