Cementing Cyprus as a Global Shipping Services Center
A recent study commissioned by the Ministry of Transport, Communications and Works on the ‘Future of Cyprus Shipping’ revealed that the contribution of the shipping sector to the Cyprus Economy stands at seven percent gross domestic product (GDP).
Indeed, shipping is so important to Cyprus that the government has prepared a draft bill to create a shipping portfolio assigned to a deputy minister, who will be responsible as an independent authority to handle all issues related to shipping.
Dr Anthony A. Madella, Head of the Legal affairs and Taxation Division of the Cyprus Department of Merchant Shipping explains why the time is right to cement Cyprus as a modern global shipping services center:
An estimated 4.5 percent of the world’s fleet and around 20 percent of global third-party ship management activities are controlled from Cyprus. Ranking as the eleventh largest merchant fleet worldwide and the third largest fleet in the European Union, Cyprus flags over 1,000 oceangoing vessels with a total gross tonnage exceeding 22.8 million.
It is also the largest third-party ship management center in Europe and one of the largest in the world. A substantial number of shipowning, ship management and shipping related companies maintain fully-fledged offices and conduct their international operations and activities from Cyprus. But why is the country such a maritime hub for shipowners, ship managers and charterers?
The Cyprus flag has grown extensively over the past thirty years and continues to attract attention from many sectors and regions. Containers, tankers and gas carriers, for example, seek a well-established and quality Flag, a strong and reliable professional services infrastructure that provides a round-the-clock service, plus a package of favorable incentives.
The tonnage tax system provides one example, as it remains of significant interest for quality ships and shipping companies. Approved by the European Commission (EC) in March 2010, Cyprus’ simplified tonnage tax system extends the favorable benefits applicable to owners of Cyprus flagged vessels and ship managers to owners of foreign flagged vessels and charterers. It also extends the tax benefits that previously covered only profits from the operation of vessels to include profits on the sale of vessels, interest earned on working capital, and dividends paid directly or indirectly from shipping related profits.
The comprehensive tonnage tax system is available to any owner, charterer or ship manager who owns, charters or manages a qualifying ship in a qualifying shipping activity. The tax is calculated on the net tonnage of the ship according to a broad range of bands and rates prescribed in the legislation. The rates applicable to ship managers are 25 percent of those applied for ship owners and charterers.
Cyprus has negotiated more than 50 double tax avoidance treaties and is the only open registry in Europe to have a tonnage tax system approved by the EC, providing assurance of a stable fiscal environment for the long term.
A flag’s reputation is becoming increasingly important with quality shipping companies seeking reassurance that a Registry has the technical competence, knowledge and experience to effectively and efficiently control its vessels whilst upholding the highest standards in safety, security and asset protection.
Cyprus is on the ‘White List’ of the Paris and Tokyo Memoranda of Understanding on Port State Control, indicating that Cyprus is a quality flag with a consistently low detention record, helping shipowners to avoid unnecessary surveys and inspections, preventing delays in port and mitigating the risk of the cost implications of interruptions to commercial activities.
In today’s challenging operating environment, choosing a high quality, sustainable flag that is committed to safety, security and excellence can pay dividends. Ease of registration, low registration fees, a comprehensive tonnage tax system, strategic geographical location, and robust regulatory protection are all key considerations. As Cyprus aims to consolidate and further develop its role in world shipping, it is these benefits and more that will underpin its continued growth as a modern global shipping services center.
The products and services herein described in this press release are not endorsed by The Maritime Executive.