SHIPPING IN CYPRUS Shipping Department 2015

Transcription

1 SHIPPING IN CYPRUS Shipping Department 2015

2 contents Why Cyprus? 04 Registration of Ships under the Cyprus Flag 06 Types of registration 06 Conditions of Ownership 06 Authorised Representative 08 Eligibility of Cyprus nationality by Ships 09 Government Policy on the Registration of Ships under the Cyprus flag 09 Age Related Conditions 10 Registration Procedure 11 Provisional Registration 11 Permanent Registration 11 Documentation 12 Parallel Registration 14 Deletion from the Registry 15 Registration of Mortgages 16 Annual Tonnage Tax 18 Beneficiaries 18 General Considerations 20 Bilateral Agreements 20 Cyprus Tax Treaty Partners 21 International Treaties 24 Seafarers 25 Admiralty Law in Cyprus

3 why cyprus? Cyprus has one of the largest registered merchant fleets of the World. It is also a well-established shipping and ship management center, located close to the Suez Canal. 4 Except from her geographic location, Cyprus attracts many leading ship-owners for the following reasons: Member of the European Union. Democratic country with a free market economy, in a strategic location at the crossroads of three continents. Modern and efficient legal, accounting and banking services based on English practices, and a liberal Foreign Direct Investment regime allowing up to 100% foreign participation in most sectors of the economy. No exchange control and thus there is freedom of movement of foreign currency. Double tax treaties with 57 countries. No tax on profits from the operation or management of Cypriot registered vessels or on dividends received from a ship-owning company.(applies to tonnage tax qualified vessels). No capital gains tax on the sale or transfer of a Cypriot registered vessel or the shares of a ship-owning company. (applies to tonnage tax qualified vessels). No estate duty on the inheritance of shares in a ship-owning company. No income tax on the earnings of officers and crew. No stamp duty on ship mortgage deeds or other security documents. Cyprus is a signatory to numerous international maritime conventions. Bilateral agreements with 27 countries, through which Cypriot ships receive either national or favored nation treatment in the ports of other countries. Ship registration costs and annual tonnage taxes are competitive. Full protection for financiers and mortgagees. Favourable tax regime for ship management. Low set up and operating costs for companies. Excellent telecommunications and easy access by air and sea. Highly qualified managerial, clerical and technical staff available. Overseas Maritime Offices at Piraeus, London, New York, Rotterdam, Hamburg and Brussels. Bilateral TAX TREATIES Double tax treaties with 57 countries. Well-established shipping and ship management center Member of the European Union 5

4 Registration of Ships under the Cyprus Flag Types of registration According to the Cyprus Law, any ship can be registered under the Cyprus flag, provided she meets the ownership prerequisites of the Merchant Shipping (Registration of Ships, Sales and Mortgages) Law of 1963 ( the Law ) prescribed below. The Law allows the provisional registration of a ship for a period of six (6) months which may be extended for another three (3) plus three (3) months, under special circumstances. Before the expiration of the provisional registration, the applicant must register all the requisite documents which shall allow her permanent registration. The parallel registration of a ship is also permissible by the Law. Conditions of Ownership According to the Merchant Shipping (Registration of Ships, Sales and Mortgages) Law of 1963, which is the main statute for all matters relating to the registration of ships and related transactions, a ship is eligible for registration under the Cyprus flag if: a More than fifty percent (50%) of her shares are owned by: ii. Cypriot citizens or, iii. Citizens of any other European Union Member State or any other contracting party to the European Economic Area Agreement, who in the instance of not being permanent residents of the Republic of Cyprus, will have appointed and maintain, during the whole period of the registration of the ship in the Register of Cyprus Ships, an authorised representative in the Republic in accordance with the relevant provisions of the Law. b The total percentage (100%) of her shares are owned by one or more corporations, which have been established and operate: i. In accordance with the laws of the Republic and have their registered office in the Republic,or ii. In accordance with the laws of any Member State and have their registered office, central administration or principal place of business within the European Economic Area and which will, during the whole period of the registration of the ship in the Register, have either: Appointed and maintain an authorised representative in the Republic, in accordance with the relevant provisions of the Law or Ensured that the management of the ship in respect of her safety is entrusted in full, to a Cypriot shipmanagement company or a Community shipmanagement company, having its place of business in the Republic, or iii. Outside the territory of the Republic and outside the territory of any other Member State, but are controlled by Cypriot citizens or natural persons who are citizens of any other Member State and who will, during the whole period of the registration of the ship in the Register, have either: Appointed and maintain an authorised representative in the Republic, in accordance with the relevant provisions of the Law, or Ensured that the management of the ship in respect of her safety is entrusted in full, to a Cypriot shipmanagement company or a Community shipmanagement company, having its place of business in the Republic. It is provided that the registration of any ship may be subject to any condition the Minister may impose as he may consider appropriate for the general policy followed by the Government of the Republic of Cyprus and in particular for the adoption of more up-to-date and improved methods and standards relating to the safety of human life at sea, the welfare of the seamen on board, the protection of the sea environment and the preservation of the marine life or for the public interest in general. 6 7

5 Authorised Representative According to the relevant provisions of the Law an authorised representative may be: a A Cypriot citizen or a citizen of any other Member State who is resident in the Republic within the meaning of the Income Tax Laws of the Republic, or b A partnership which has been established and registered in accordance with the provisions of the Partnerships and Business Trade Law, having its place of business in the Republic and employs permanent staff in the Republic, or c A corporation which has been established and registered in accordance with the provisions of the Companies Law, having its place of business in the Republic and employs permanent staff in the Republic, or d A branch of any foreign company which has been established and registered in accordance with the provisions of the Companies Law, having its place of business in the Republic. In practise, the authorised representative s main responsibility is to be the contact link between the Department of Merchant Shipping and the ship-owners. Any document which is required to be served to the ship-owners, is deemed to be duly served if it is delivered to their representative. The authorised representative is then obliged to contact and inform them accordingly. On the other hand, though, authorised representatives shall not be responsible for any action or omission made by the ship-owners. Therefore, ship-owners have to select their representative with diligence. Our law firm offers this service on an annual fee basis. Our long experience in the maritime sector and evident trustworthiness is our warranty to our clients. Eligibility of Cyprus nationality by Ships Cypriot nationality is automatically acquired if a ship is successfully registered in the Cyprus Register. Subject to the Minister s statutory powers to revoke the Cypriot nationality from a registered vessel at any time after her registration, a ship is not eligible to be registered in the Cyprus Register if she: has an overall length less than thirteen (13) meters and is employed solely in navigation on the coast of the Republic or of the Sovereign Case Areas. In that case, the subject vessel may be registered in the Small Ship Registry; does not have a whole or fixed deck and is employed solely in fishing, lightering or trading coastwise on the shore of the Republic or of the Sovereign Base Areas or within such a radius therefrom as may be prescribed; does not comply with the Government Policy which has been issued in accordance with sections 14A and 14B of the Law, as amended from time to time. Government Policy on the Registration of Ships under the Cyprus flag The Government Policy for the registration of ships adds some additional requirements or conditions which are deemed necessary for the achievement of a safe, secure and efficient shipping on clean waters and for safeguarding the interests of the Cyprus ships and of their owners, bareboat charters, managers and operators. The Registrar of Cyprus Ships does not consider applications for registering ships either in the Register of Cyprus Ships or in the Special Book of Parallel Registration which: 1 at the time of the application for their registration, are banned on port State control grounds by a State member of any one of the Memoranda of Understanding on port State control, from entering the ports of the States party to that memorandum or which have been banned by a State from entering its ports; 2 have been detained on port State control grounds on three (3) or more occasions during the two (2) years period prior to the date of application for registration by States of the Paris or the Tokyo or the Mediterranean Memoranda of Understanding on port State control or by the United States Coast Guard; 3 have been constructed for exclusive use on inland navigation or to be used exclusively on inland navigation (e.g. in internal waters, rivers, inland waterways, canals, natural or artificial lakes, water reservoirs or dams); and 4 at the time of filing the application for their registration, satisfy the conditions related to their age. 8 9

6 Age Related Conditions Registration Procedure TYPE OF SHIP Cargo ships and Cargo High Speed Craft MAXIMUM AGE LIMIT 25 years Related Conditions ENTRY INSPECTION REQUIRED if 15 years ADDITIONAL INSPECTION REQUIRED No According to the Law, a ship can be registered to the Cyprus Registry provisionally first, provided at the time of her registration, she is out of the territorial waters of the Republic. Otherwise, when the ship is in the territorial waters of the Republic, there is no option other than to permanently register the ship directly. Passenger ships and Passenger High Speed Craft engaged on international or short international voyages Passenger ships and Passenger High Speed Craft engaged on domestic voyages within the territory of a State, other than Cyprus Passenger ships and Passenger High Speed Craft engaged on domestic voyages within the territory of Cyprus No No No if 30 years if 25 years if 20 years if 2 years Age 10 years Biennial if Age > 10 years Annual if 2 years Age 10years Biennial if Age > 10 years Annual No In order to operate they are required to be inspected and certified annually The benefits of the provisional registration of the ship compared to the direct permanent registration relate to the documentation that needs to be submitted, and therefore the actions that need to be taken, in the course of each type of registration. Under the Documentation section which follows, one may clearly identity those differences and benefits. The application has to be prepared, signed and submitted to the Department of Merchant Shipping only by a local lawyer, registered as practising advocate, acting on behalf of the owner(s). In fact, the appointed lawyer handles and coordinates the whole procedure on behalf of the owner(s) and is the liaison between the Registrar and the owners/managers of the Vessel during the registration procedure. He prepares all the relevant legal documents and advises the owner(s) about the Laws and Regulations of the Republic. In most cases, the same lawyer undertakes also the incorporation of the shipping company which will be the owner of the subject ship and provides legal assistance for the ship sale and purchase. Fishing vessel 25 years if 20 years No Floating Production Storage Offloading; Floating Storage Offloading Vessels and Mobile Offshore Drilling Units 25 years if 15 years No Provisional Registration Permanent Registration Ships of types other than those listed above In case a ship has undergone major conversion or reconstruction, the year in which the major conversion or reconstruction begun may be taken into account (in lieu of the year in which its keel was laid) for the calculation of the age of the ship, provided the ship, at the end of the major conversion or reconstruction, complied with all the requirements of the applicable International 35 years if 20 years if the ship is carrying industrial or special purpose personnel and 2 years Age 10 years Biennial Age > 10 years Annual It should be noted that Age means the age of the ship which is calculated by deducting the year in which the keel of the ship was laid from the year in which the application for its registration was filed with the Registrar of Cyprus Ships. Treaties to which Cyprus is a State Party, as if it was a new ship whose keel was laid in the year in which the major conversion or reconstruction begun. In such a case the application for the registration of the ship should be accompanied by documentation from the recognized organization which is surveying and certifying the ship on behalf of its flag State or from its flag State attesting so. The provisional registration allows the owners of the subject ship to settle any administrative formalities with the vessel s previous flag, to collect and submit all the relevant and applicable documentation to the Registrar and complete all the necessary surveys of the ship. The duration of the provisional registration lasts for 6 months from the date of the issuance of the Provisional Certificate of Registry with the option, on the Registrar s discretion, to be extended for three (3) months and for additional three (3) month period if dictated by special circumstances. It goes without saying that the provisional registration is as valid as the permanent registration and therefore the vessel enjoys immediately all the benefits the Cyprus flag has to offer. In cases where the Vessel is initially registered provisionally, her Permanent Registration has to be completed before the expiration of the provisional registration, i.e. within 6 (+3) months from the date of her registration. The physical presence of the ship in Cyprus is not obligatory. All the necessary inspections can take place at any port around the globe. However, all the related documentation have to be submitted either directly to the Department of Merchant Shipping or to any consulate of the Republic abroad

7 12 Documentation Subject to any additional requirement from the Department of Merchant Shipping and depending on the ship s type and tonnage, for the completion of the Vessel s registration under the Cyprus Flag, the following documents have to be lodged with the Registrar of Ships: All the certificates of the owning Company (hereunder mentioned as the Company ) or a Notarial Certificate or a Certificate of Incumbency evidencing its corporate structure, notarized and/or apostil unless in cases where the Company is a Cypriot Company whereas, the certificates need only to be certified by the company s secretary as true copy; For the purposes of the provisional registration, faxed or scanned copies of same would suffice; *Resolutions or minutes of the Company s Board of Directors whereby the Company will resolve the acquisition and/or registration and/or reflagging (as the case may be) of the Vessel under the Cyprus flag and the appointment of one or several attorneys who will handle the registration process. The Resolutions need to be original, and normally, signed by all the Company s Directors and sealed. *Power of Attorney ( PoA ) or Notarial Certificate by which the Company will appoint us, or of anyone else, as attorney(s) of the Company and empower the attorneys to sign the various documentation/forms required for the registration procedure. Normally, PoAs must be signed by one of the Company s Directors and the company s official seal must be affixed. The PoA must be duly certified, notarized or legalized by apostil, accordingly; *Appointment of Authorised Representative Form, in case the Owners will be non-cypriots. *Bill of Sale, in case the Vessel is sold to the Owner by a third party. The document needs to be duly executed and sealed by her previous owners; Deletion Certificate from the Vessel s previous Registry or a Certificate of Ownership and Freedom of Encumbrances with an undertaking to submit the Deletion Certificate in case the issuance of the latter will follow her registration under the Cyprus Flag; The Freedom of Encumbrances certificate must not be older than three (3) days from the day of the ship s registration under the Cyprus flag; Registration Form of a Mobile Maritime Radio Station; Copy of a Shore Based Maintenance Agreement; Registration Form of SAR Particulars; Confirmation of Radio Accounting Authority; Confirmation of Classification Society; In case the Vessel s keel was laid before the 1st of October 1994, confirmation from the Classification Society stating that the ship is free from any HALON quantity; ISM and ISPS C-1 forms (SMC and ISSC Codes); Safe Manning Application; IMO unique identification number of the owning company; MSTT8 form required to declare the qualification of the vessel for tonnage tax purposes; +Copy of the Conformance Test Report; Declaration of Ownership; Certificate for Insurance for Maritime Claims, i.e. Certificate of Entry; Application and Certificate of Insurance (Blue Card) for the issuing a Certificate under the 2001 Bunkers Convention in case the Vessel has a gross tonnage of 1000 and above; Application and Certificate of Insurance (Blue Card) for the issuing a Certificate under the 1992 CLC Convention for tankers with a carrying capacity of 2000 tons and above; Application and Certificate of Insurance (Blue Card) for the issuing a Certificate in accordance with Regulation (EC) No. 392/2009 on the liability of passenger carriers in the event of accidents; +Certificate of Survey; +International Tonnage Certificate; +Ship s Carving and Marking Note, duly certified; +All the International Certificates issued by the Vessel s Classification Society (if any); +Safety Management Certificate (SMC) (where applicable); +Entry Inspection Report from the Department of Merchant Shipping and satisfaction of any other conditions contained in the Government Policy on the Registration of Vessels in the Cyprus Register of Ships (where applicable); +In case of Parallel Registration in a Foreign Register, a Certificate of Parallel Registration from the foreign registry; +Application for permanent registration in accordance with the relevant Law. DOCUMENTS MARKED WITH * must be certified if executed in Cyprus. In the event they are executed abroad, they must be notarially attested and legalized by apostil (if executed in countries which are members of the Apostil Convention). Also, for the purposes of the provisional registration procedure, scanned or faxed copies of those documents would suffice, accompanied by an undertaking for the submission of the originals before the ship s permanent registration. DOCUMENTS MARKED WITH + are not required for the Provisional Registration of the Vessel. Many of the documents/forms listed above will be drafted or completed (as the case may be) and executed (if necessary) by us, pursuant to the Power of Attorney mentioned above. For registration of any mortgage(s) against the Vessel, the following additional documents will be needed: Statutory Mortgage(s) and Deed(s) of Covenants, duly legalised; Duly notarized Power of Attorney of the Mortgagee Bank, authorizing the signing of the Statutory Mortgage(s) and Deed(s). 13

8 Parallel Registration Cyprus Law allows the parallel registration of vessels in the Registry of Cyprus Ships. By parallel registration, a foreign vessel can be registered, for a certain period of time, under the Cyprus flag while at the same time she will continue to be registered, in parallel, in the foreign registry and vice versa. Parallel-in Registration Parallel-in registration is used for cases of bareboat chartering where a bareboat charterer of a foreign ship wishes to register the ship in parallel under the Cyprus flag. The relevant application has to be made by a person (legal or physical) who is eligible, under the Law, to own a Cypriot ship. Moreover, the laws and regulations of the country of the foreign registry must allow the parallel registration of ships registered in its registry and maintain its consent for all the period of the parallel registration. The application will be examined once all the required documents are submitted, and if it is approved, the parallel-in registration will be effected. Immediately after, the subject ship will be registered in the Special Book of Parallel Registration, kept by the Registrar of Cyprus Ships, and the special Certificate of Cyprus Registry will be issued. During the whole period of her parallel registration, the Vessel has to fly the Cyprus flag only and she will be subject to Cyprus Laws and Regulations. Additionally, she must be marked with her name and the Cyprus port of registry. Parallel-out Registration In contrast, Parallel-out registration is used when a bareboat charterer wishes to register in parallel a vessel, which is already registered permanently under the Cyprus flag, to a foreign Registry. Exceptionally, the Minister may approve the parallel-out registration of a vessel which is provisionally registered under the Cyprus flag at the time of filling the application. This form of registration allows the financing of a ship and her mortgaging under the Cyprus Laws and later her parallel registration in a foreign registry. Moreover, the subject foreign registry must allow the parallel-in registration from a foreign registry and the vessel has to be chartered to a foreign person (physical or legal).the relevant application has to be made by the owner of the Vessel who must submit all documents required to support the application. According to the Law, the parallel-out registration stays in force as long as the subject bareboat charter party is valid and neither the Cypriot authorities nor the authorities of the foreign flag withdraw their corresponding consents. In any case, the parallel-out registration must be for a period no more than three years. Finally, the subject vessel has to fly the flag of the foreign registry and the name of the foreign port of registry has to be marked on her stern. However, any matters relating to the ownership of the vessel or to any mortgages created against her are exclusively governed by the Cypriot legislation and handled by the Registrar of Cyprus Ships. Deletion from the Registry The Vessel s owner can request her deletion from the Cypriot Registry, at any time. The Registrar will then delete the Vessel from his records provided that her owner will return the Certificate of Registry or submit a declaration by which he will undertake the responsibility to return the same within a reasonable time period and finally submit a duly certified and executed discharge receipt for every registered mortgage (if any). However, the Vessel may also be deleted if: a More than 50% of her shares are transferred to a person non-qualified own a Cyprus ship under the Law; b The Cyprus character of the ship is revoked by order of the Minister; c The ship is totally, actually or constructively lost; d The ship is broken up; e There have been no news regarding the ship for a period of six months from the date of receipt of the last information, under such circumstances which make it highly probable that the ship has been either lost or broken up or that it has been sold to a non-qualified person. In cases (b), (d) and (e) above, the ship is deleted from the Register without prejudice to the validity of the recording in the Register of any registered mortgages. Moreover, in case (a) above, the following documents need to be returned/submitted to the Registry: i Certificate of Registry (applies to case under (c) as well); ii Bill of Sale, duly executed and certified; iii Copy of the protocol of delivery and acceptance and iv A duly certified and executed discharge receipt for every registered mortgage against the vessel (if any) (applies to case under (c) as well). Finally, the Registrar will not issue a certificate of closed transcript (Deletion Certificate) until all the required documents are submitted and all the necessary fees are paid to the Registrar or to a consular officer of the Republic

9 Registration of Mortgages A mortgage against the ship can be registered at any time after the completion of the vessel s registration under the Cyprus flag. By a registered mortgage the ship-owner can thereby secure a loan or other financial benefits, subject to the conditions agreed between the contracting parties, without the need for exchange control permission. The creation of a mortgage under Cypriot Law is not allowed on vessels registered parallel-in in the Register of Cyprus Ships. A mortgage, once created, must be submitted to the Registrar of Cyprus Ships, or to a consular officer on the instructions of the Registrar. Whether deposited with the Registrar or with a consular officer, the mortgage will be recorded thereafter in the Register, as from the date and time of its deposit, and shall remain an encumbrance on the vessel until it is discharged by the mortgagees. A mortgage can be created independently of whether the ship is provisionally or permanently registered.if the ship, against which a mortgage was created, belongs to a Cypriot company, the mortgage will also have to be registered with the Registrar of Companies within a maximum period of 42 days after its creation. In that way, mortgagee s security is protected in the case of liquidation of the ship-owning company. Transfer of a mortgage may be effected by completing the statutory form of transfer and submitting it to the Registrar of Cyprus Ships or to a consular officer, together with the relevant Deed of Covenants. Both the statutory mortgage and the deed of covenants must be duly certified or notarised. A duly certified or notarised power of attorney of both the registered owner/mortgagor and the mortgagee, authorizing the entering into the mortgage and the execution of the mortgage documents, is normally submitted to the Registrar of Cyprus Ships. For discharging a mortgage, a memorandum of discharge is needed to be duly executed by the mortgagee. The same has to be later attested and delivered to the Registrar of Cyprus Ships or a consular officer on the instructions of the Registrar 16 17

10 Annual Tonnage Tax In 2010 Cyprus introduced a new Tonnage Tax System ( TTS ) by which every qualifying owner of a Cyprus or foreign ship, charterer and/or ship manager may be subject to an annual tax referred to as tonnage tax and calculated based on the net tonnage of the qualifying ship that he owns, charters or manages. Ship managers, however, are required to pay only the 25% of the amount applicable to ship-owners or charters who own on charter a qualified ship with the same net tonnage. Beneficiaries a Owners of Cyprus Ships Any owner of a Cyprus Ship falls automatically within the scope of the TTS if: 1. Owns a Qualifying Ship, (defined further below), which is; b Owners of Foreign Ships Eligible for the TTS is an owner of a foreign ship, who: 1. Is a tax resident of the Republic of Cyprus; 2. Has opted to be taxed under the TTS; Moreover, the owner of foreign ships must also comply with the following: 1. Satisfy the Community Flagged Share Requirement, which means that the ship-owner has to have a share of his fleet, registered under one or more EU flag(s). This share has to remain invariant for a period of three years following the exercise of the option to be taxed under the TTS. c Charterers 2. Engaged in a Qualifying Shipping Activity. (also defined further below) 3. Owns a Qualifying Ship,and 4. The Ship is engaged in a Qualifying Activity. 2. In case the Community ships are less than sixty per cent (60%) of the fleet in terms of tonnage, the commercial and strategic management of the fleet must be carried out from the territory of the European Union/EEA. A Charterer is eligible for the TTS if he charters ship(s) under bareboat, demise, time or voyage charter and: Moreover, the Charterer must comply with the following requirements: 1. Minimal Share of the Fleet in Ownership 75% of chartered-in ships or 90% if the sips chartered are EU/EEA ships or their crew and technical management are carried out from the EU/EEA; 2. Community Flagged Share Requirement, (as above). d Ship Managers A Ship Manager is eligible for the TTS if he: 1. Is a tax resident of the Republic of Cyprus; 2. Has opted to be taxed under the TTS; 3. Provides ship management services (crew and/or technical) to qualifying ships and meets at any time the following requirements: Maintain a fully fledged office in Cyprus; Employ a sufficient in number andqualified personnel; At least 51% of the total number of that personnel must be EU/EEA citizens; Community Flagged Share Requirement, (as above); Economic link of managed ships with the Community The 2/3 Rule which provides that at least 2/3 of the Calculating the Tonnage Tax management activities are entirely carried out from the territory of the EU/EEA; Provision of crew management services in accordance with the MLC 2006 requirements for crew managers (Notification P.I. 511/2010) Certified under the ISM Code (DOC) by the competent authority of the flag States of the Ships under its technical management. The owner of a ship which cannot be considered as a qualifying ship and/or does not carry a qualifying shipping activity, is excluded from the provisions of Tonnage Tax System and is required to pay income tax under the provisions of the Income Tax Laws. Contrary, the owner of a qualifying ship engaged in a qualifying shipping activity is obliged to pay an annual tax calculated in the ship s net tonnage as follows: 1. Is a tax resident of the Republic of Cyprus; 2. Has opted to be taxed under the TTS; 3. The chartered ship is a qualifying ship and 4. The Ship is engaged in a qualifying shipping activity ,50 per 100NT ,03 per 100NT ,08 per 100NT ,78 per 100NT > ,30 per 100NT 18 19

11 20 General Considerations Any ship-owner or manager who exercises the option to be taxed under the TTS, must remain in the system for a minimum period of 10 years. Early withdrawal will result in penalties and he will lose the right to opt for tonnage taxation for a period of 10 years from the date the option was first exercised. The Tonnage Tax System covers, accordingly, profits from shipping operations and the provision of crew and technical management services, dividends paid directly or indirectly out of such profits, profits on the sale of the ship and interest earned on funds used as working capital or for the financing, operation and/or maintenance of the ship. definitions Qualifying Ship Any seagoing vessel certified under applicable international or national rules and registered in the ship register of any member of the International Labour Organisation, which is recognised by Cyprus. The TTS excludes certain types of vessels, such as: Fishing Vessel, Ships used primarily for sports or recreation, River vessels, Qualifying activity Bilateral Agreements Non-self-propelled floating cranes, Non0ocean going tug boats Floating Hotels, Restaurants, Casinos and others. A qualifying activity is considered as any commercial maritime activity including transport, crew management and/or technical management. By maritime transport is meant, the traditional carriage of goods and passengers, as well as ancillary services such as hotel, catering, entertainment and retailing activities on board a qualifying vessel, the loading and unloading of cargo, the operation of ticketing facilities and passenger terminals. Towage, dredging and cable lying are also eligible for tonnage tax. Cyprus has concluded a large number of bilateral agreements with third countries for the avoidance of double taxation and the co-operation in the field of merchant shipping. According to the Ministry of Finance s records, Cyprus has concluded the following bilateral agreements for the avoidance of double taxation: Cyprus Tax Treaty Partners 1 STATE Austria (new agreement) DATE OF SIGNATURE TREATY/PROTOCOL/ NOTE 20 Mar May 2012 DATE OF ENTRY INTO FORCE 10 Nov Jan 2013 DATE OF PUBLICATION IN THE OFFICIAL GAZETTE OF THE REPUBLIC (NUMBER AND DATE) Apr Oct Bulgaria 30 Oct Jan Dec Belarus 29 May Feb Oct Belgium 14 May Dec Nov Canada 2 May Sep May China 25 Oct Oct Feb Denmark Treaty Notes New Agreement 26 May Oct Aug Apr Sept Jul Sep Sept Egypt 18 Dec Mar Mar France 18 Dec April Jul Germany new Agreement 9 May Febr Oct Dec Jun Sept Greece 30 Mar Jan May Hungary 30 Nov Nov May India 13 Jun Dec Nov Ireland 24 Sep Jul May Italy Treaty Protocol (Additional Protocol) Kuwait (New Agreement) 24 April Oct Jun Dec Oct June Sep Sep Jun Jun Jan Sept Lebanon 18 Feb Apr Apr Malta 22 Oct Aug Feb

12 Cyprus Tax Treaty Partners STATE DATE OF SIGNATURE TREATY/PROTOCOL/ NOTE DATE OF ENTRY INTO FORCE DATE OF PUBLICATION IN THE OFFICIAL GAZETTE OF THE REPUBLIC (NUMBER AND DATE) STATE DATE OF SIGNATURE TREATY/PROTOCOL/ NOTE DATE OF ENTRY INTO FORCE DATE OF PUBLICATION IN THE OFFICIAL GAZETTE OF THE REPUBLIC (NUMBER AND DATE) 19 Mauritius 21 Jan Jun Jun Moldova 28 Jan Sept Aug Norway (new agreement) 2 May Feb Jan Jun Jun Tajikistan*** 29 Oct Aug Nov Poland (new agreement) 4 Jun Mar Jul Jan Sep Mar Romania 16 Nov Nov Feb Russia (Amendment Protocol) 24 South Africa 5 Dec Oct April 2015 (26 Nov 1997) 17 Aug April Dec Feb Sept May Jan Sweden 22 Oct Nov Jan Syria 15 Mar Feb Mar Singapore 24 Nov Feb Dec Thailand 27 Oct April Mar United Kingdom Treaty Protocol 20 Jun Apr Nov Jul USA 19 Mar Dec April Serbia* 29 Jun Sep Aug Montenegro* 29 Jun Sep Aug Slovenia* (New Agreement) 29 Jun Oct Sep Sept Aug Sept Slovakia** 15 April Dec May Czech Republic (new agreement) 15 April April Dec Nov May Nov Uzbekistan*** 29 Oct Aug Nov Ukraine*** (new agreement) 29 Oct Nov Aug Jan Nov March Seychelles 28 Jun Oct Oct San Marino 27 April July July Quatar 11 Nov Mar Nov United Arab Emirates 27 Febr Jan Sept Estonia ZA15 Oct Oct Febr Finland 15 Nov Apr Mar Portugal 19 Nov Jan Mar Bosnia* 29 June Sept Aug Lithuania 21 June Apr Dec Spain 14 Febr May Mar The States of Guernsey 15 Jul 2014 in Cyprus, 29 Jul 2014 in Guernsey 4 Mar Aug Swiss Confederation 25 July July Iceland 13 Nov Dec Dec Kingsdom of Bahrain 9 March Mar Georgia 13 May May Azerbaijan*** 29 Oct Aug Nov Armenia 17 Jan Sept Sept Kyrgyzstan*** 29 Oct Aug Nov 1982 Notes: * The treaty between Cyprus and the Socialist Federal Republic of Yugoslavia is still in force. ZZ ** The treaty between Cyprus and the Czechoslovak Socialist Republic is still in force. *** The treaty between Cyprus and the Union of Soviet Socialist Republics is still in force

13 International Treaties Seafarers Cyprus has also ratified the most of the international conventions related to maritime safety and security, prevention of pollution of the sea, training, certification and watchkeeping of seafarers and limitation of shipowners civil liability and conventions on maritime labour. Some of the Treaties to which the Republic is a contracting party and for which the International Maritime Organization and the International Labour Organization are the depositories, are the following: International Convention for the Safety of Life at Sea, 1974 as amended (SOLAS 74 as amended) Protocols to the International Convention for the Safety of Life at Sea, 1974, as amended (SOLAS PROT 1978 as amended SOLAS PROT 1988) International Convention on Civil Liability for Oil Pollution Damage, 1969 (CLC 1969) Protocols to the International Convention on Civil Liability for Oil Pollution Damage, 1969 (CLC PROT 1976, CLC PROT 1992) International Convention on Standards of Training, Certification and Watchkeeping for Seafarers (STCW), 1978 as amended. Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matters, 1972, as amended (LDC 1972) Convention on the International Maritime Satellite Organization (INMARSAT) as amended (INMARSAT C) Operating Agreement on the International Maritime Satellite Organization (INMARSAT) as amended (INMARSAT OA) The International Convention on Civil Liability for Bunker Oil Pollution Damage, 2001 (BUNKERS) Convention Fixing the Minimum Age for Admission of Young Persons to Employment as Trimmers or Stokers, 1921 (Convention No. 15). Convention Concerning the Compulsory Medical Examination of Children and Young Persons Employed at Sea, 1992 (Convention No. 16) Convention Fixing the Minimum Age for the Admission of Children to Employment at Sea, Revised 1936 (Convention No. 58) Convention Concerning the Repatriation of Seamen, 1926 (Convention No. 23) Convention Concerning Crew Accommodation on Board Ships, Revised 1949 (Convention No. 92) Convention Concerning Minimum Standards in Merchant Ships, 1976 (Convention No. 147) and the relevant Protocol, etc. Cyprus has legislated many issues related to maritime labour, working and living conditions, health and safety at work on board Cyprus ships. Most of the relevant domestic legislations adopt, basically, the provisions of international Conventions which the Republic is participating such as the Maritime Labour Convention of 2006 ( MLC Convention ) and the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers of 1978 ( STCW Convention ). There is no restriction on the nationality of the crew provided that they are holders of the required valid certificates which must be issued or recognised by the Republic. In case their certificates are not issued by the Republic, the same have to be endorsed by the Department of Merchant Shipping. Moreover, all seafarers serving on board Cyprus ships, must be holders of a Seafarer s Identification and Sea Service Record Book, issued by the Department of Merchant Shipping. Finally, no income tax is charged, levied or collected upon the salary or other benefits from the employment of the master, officers and other crew members of a ship which is considered to be qualifying ship engaged in a qualifying activity (as described above). Cyprus is also a contracting party to the Convention on the High Seas, 1958 and the United Nations Convention on the Law of the Sea,

14 Admiralty Law in Cyprus Cyprus remains an increasingly important jurisdiction for Admiralty litigation, as a consequence of the distinctive status of Cyprus as a leading worldwide maritime hub. Admiralty Law refers to the jurisdiction of a distinct body of Law to hear certain types of cases, arising from maritime activities occurring in national and international waters. The principal matters governed by Admiralty Law concern shipping and boating, maritime insurance matters, collisions at sea, as well as civil matters involving payment of wages to crew members, transportation of passengers or cargo, salvage claims and marine pollution. The most prominent action held by admiralty litigation is the issue of a maritime lien against a vessel which enables the Court or its appointees to arrest and seize the vessel in satisfaction of the claims against her. Our firm offers a broad spectrum of admiralty litigation services for local and international clientele. Our Litigation Team offers a solid legal representation before the Admiralty Court in Nicosia and has assisted many clients in the past in resolving their disputes with third parties. Our Litigation Team can advise and assist its clients, inter alia, in the following matters: Claims for loss or damage to cargo Freight and off-hire disputes Collisions Salvage claims Pollution Transshipment and towage agreements Disputes under shipbuilding and repairing contracts Financing, security and the enforcement of mortgages Problems relating to the employment of officers and crew Personal injury claims Crew wages Expenses made on behalf of the ship by the captain or any other supplier

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