Shipping in Cyprus. July 2016

Transcription

1 Shipping in Cyprus July 2016

2 Shipping in Cyprus Cyprus holds a leading role in the shipping industry and ship management activities in South East Europe and is considered to be as one of the most attractive shipping centres in the world, since Cyprus has a strong shipping infrastructure, while providing a favorable tax regime and competitive shipping regulations, which allow Cyprus to consistently strengthen its position in the International Shipping and Business Environment. Why Cyprus? - A highly reputable International Shipping Centre Cyprus has a long established reputation as a Centre for Excellence and it is home to some of the world s leading names of the global shipping industry. According to the latest records of the Cypriot Department of Merchant Shipping there are approximately 42 ship managers, 45 charterers and 72 owners of foreign ships based in the Republic of Cyprus. Almost registered vessels with 23 million gross tonnage are registered under the Cyprus Flag. Cyprus ranks as the 10 th largest merchant fleet in the world and as the 3 rd largest merchant fleet in the EU, amongst the top three ship-management centres in the world and the largest third party shipmanagement centre in Europe. Consistent upgrade of shipping services which provides high level support and guidance to international shipping and a reputation of a Flag of Progress. Cyprus has a unique advantage of being a member of the United Nations, Council of Europe, Commonwealth, member of the Conference for Security and Co-operation in Europe and being member of the Group of Non Aligned Countries. Active member in many international organizations such as, the International Maritime Organization (IMO), the International Labour Organization (ILO) and the European Maritime Safety Agency (EMSA). All services offered by Cyprus are professionally represented and organized, by implementing the highest quality standards and by being monitored by the Maritime Administration which includes the Ministry of Communications and Works, the Department of Merchant Shipping and the Ports Authority. 2

3 Cyprus Tonnage Tax System Cyprus has an EU-approved regime with a very wide and legally endorsed Tonnage Tax System ( TTS ) introduced in 2010 under the Merchant Shipping Law. Owners of Cyprus Flag ships fall automatically under the tonnage tax regime. Option for ship owners of foreign flag ships, charterers and ship-managers to be taxed under the TTS, subject to certain conditions. Cyprus has a competitive advantage in the following areas, among others: TTS has no direct links to corporation tax; Competitive ship registration costs and fees; No crew / officers nationality restrictions; More than 28 Merchant Shipping Bilateral Agreements; Signatory to all international maritime conventions on safety, Other advantages of the TTS include: No tax on qualifying shipping activities other than the Tonnage Tax No tax on shipping profits made from qualifying shipping activities including profits from the sale of qualifying ships No tax on dividends paid out of profits made from qualifying shipping activities No tax on wages or benefits of seafarers on qualifying Cyprus Flag ships 3 security and pollution prevention; Full protection for financiers and mortgagees; Cyprus is included in the white list of Paris and Tokyo MOUs in relation to safety standards Allows split of activity between ship-management activities (crewing or technical) Allows mixed activities within a company/ group of companies (shipping subject to TT and the other activity is subject to 12,5% corporation tax)

4 Cyprus Tonnage Tax System Rates TT per 100 units TT per 400 units 36,50 36,50 31,03 31,03 20,08 20,08 12,78 12,78 7,30 7,30 Notes: The regime covers qualifying persons performing qualifying activities in relation to qualifying vessels. Qualifying persons are ship-owners, charterers (bareboat, demise, time and voyage) and shipmanagers providing technical and/ or crewing services. Qualifying activity for ship-owners and charterers means maritime transport of goods or people between Cyprus ports and foreign ports/ offshore installations, or between foreign ports or offshore installations and specifically includes towage, dredging and cable laying. Qualifying activity when applied to shipmanagers means services provided to a shipowner or bareboat charterer on the basis of written agreement in relation to crew and/ or technical management. Qualifying vessel is a sea-going vessel (that also includes transport humanitarian aid) that: has been certified in line with international principles and legislation of the flag country, and Is registered in the register of a member country of the International Maritime Organization (IMO) and International Labour Organization (ILO). 4

5 Cyprus Tonnage Tax System Ship ownership The Tonnage Tax ( TT ) regime applies to any owner of qualifying vessel: Cyprus Flag Vessels EU/ European Economic Area (EEA) flag vessels that exercised the option to be taxed under the TT regime and which are owned by a tax resident company in Cyprus Fleet of EU/ EEA and non EU/ EEA vessels that exercised the option to be taxed under the TT regime and which are owned by a tax resident company in Cyprus The legislation allows non EU/ EEA vessels to enter the TT regime provided the fleet is composed by at least 60% EU/ EEA vessels. If the above requirement is not met, the non EU/ EEA vessels may still qualify if certain criteria are met. Where an option is exercised to enter the TT system, the ship-owner must be a Cyprus tax resident and the option must remain in force for a least 10 years. The tax exemption for owners covers: Profits from the use of a qualifying vessel Profits from the disposal of a qualifying vessel and/or share and/or interest in it Profits from the disposal of shares in a shipowning company Dividends paid out of the above profits at all levels of distribution Interest income relating to the financing/maintenance/use of a qualifying vessel and the working capital, excluding interest on capital used for investments Cyprus Tonnage Tax System Ship chartering The option applies for ALL vessels (Cyprus/ EU/ EEA/ fleet) chartered under bareboat, demise time, voyage charter, provided the charterer is a legal person and a tax resident in Cyprus. If the election is not made, profits are taxable under 12,5% corporation tax. The fleet qualifying criteria are the same as for ship-owners and so is the minimum 10-year duration that should be applicable. The tax exemption for charterers covers: Profits from the use of a qualifying vessel Dividends paid out of such profits at all levels of distribution Interest income relating to the working capital/ qualifying activity provided such interest is used to pay expenses arising from the charter, excluding interest on capital used for investments (interest used for business purposes) 5

6 Cyprus Tonnage Tax System Ship management The rates applicable to ship managers are 25% of those applied for ship owners and charterers. If the choice is not made, profits are taxable under 12,5% corporation tax. The fleet qualifying criteria are the same as the ship-owners/ charterers as so is the minimum 10-year duration. Ship-managers are required to meet some additional criteria, as follows: The ship-manager is obliged to maintain a fully-fledged office in Cyprus employing personnel with sufficient knowledge/skills and qualifications At least 51% of all onshore personnel must be EU/ EEA citizens At least 2/3 of the total tonnage under management must be managed within the EU/ EEA (any excess of 1/3 taxed under 12,5% corporation tax) All ships and crew under management must comply with international standards and EU Law requirements relating to maritime security, safety, training and certification of seafarers, the environment, on-board working conditions etc. Ship managers performing technical management services must be certified under the ISM code. The tax exemption for ship-managers covers: Profits from technical and/ or crew management Dividends paid out of the above profits at all levels of distribution Interest income relating to the working capital/ qualifying activity provided such interest is used to pay expenses relating to shipmanagement, excluding interest on capital used for investments (interest for business purposes) The tax exemption for crew covers: The salary or other benefits from the employment of the master, the officers and other crew members of a qualifying Cyprus flag ship (including ships under parallel registration) are not subject to tax in Cyprus. 6

7 Ship registration A ship may be registered in Cyprus once it fulfils one of the following criteria: More than 50% of the shares of the ship must be owned by Cypriot citizens or by citizens of Member States of the EU or EEA who, in the instance of not being permanent residents of the Republic, will have to appoint an authorized representative in the Republic of Cyprus; or The total (100%) of the shares of the ship must be owned by corporations which operate in accordance with the laws of Cyprus and have their registered office in Cyprus, or they operate in accordance with the laws of any other EU or EEA Member State and have their registered office, central administration or principal place of business within the EU or the EEA, or are controlled by Cypriot citizens or citizens of a Member State. In both of the latter cases, they must have either appointed an authorized representative in Cyprus or the management of the ship must be entrusted in full to a Cypriot ship-management company in Cyprus. An authorized representative (as referred above) may be a Cypriot citizen or a citizen of any other Member State, who is resident in the Republic, or a partnership / corporation / branch established in accordance with the laws of Cyprus, which has its place of business in Cyprus and which employs permanent employees in the state (all non-european owners who wish to register their ships under the Cyprus flag may incorporate a company in Cyprus, which will either acquire the ship in its name, or bareboat charter the ship). 7 Ship registration fees GROSS TONNAGE FEES ( ) For each gross unit up to , For each gross unit between 0, For each gross unit over , The minimum fee is 213,58 and the maximum fee is 5.125,80 GROSS TONNAGE FEES ( ) For each gross unit 0, Minimum fee 427,15

8 Cypriot Tax System Overview Extremely favorable corporation tax of only 12,5% which is one of the lowest within the territory of EU Extensive double tax treaty network (which can provide reduction or exemption from withholding tax over interest payments made to creditor companies established in such countries by debtors of such companies) Access to EU Directives Bilateral Agreements of Cooperation in Merchant Shipping with 28 countries Generally, there is no controlled foreign corporation (CFC) legislation No thin-capitalization rules (funding by high debt/ equity ratio possible) Tax neutral reorganizations for both EU and non-eu group companies Stamp duty exemption on contracts related to Cyprus flag vessels Low transaction taxes IP Box regime with effective tax rate of 2,5% on qualifying assets Tax incentives for non-cyprus tax residents (expatriates) taking up employment in Cyprus: 20% exemption of the employment income capped at for an employee who was non-cyprus tax resident before the commencement of the employment in Cyprus (applicable for 5 years for employments which started in 2012 and thereafter) 50% exemption of the employment income for an employee whose salary exceeds per annum (applicable for 10 years) Exemptions from corporation tax: Dividend income (subject to easily met conditions) Profits from foreign permanent establishments (subject to conditions) Profits generated from transactions in titles (including shares, bonds, debentures etc.) Profits from disposal of vessels Exemptions from withholding tax on the repatriation of income in the form of: dividends interest almost all royalties Non-dom rules introduced for Cyprus tax residents not domiciled in Cyprus, which exempt them for any Special Defence Contribution (SDC) payable on interest, dividends and rental income derived from sources within or outside Cyprus. Distribution of profits to non-resident shareholders is completely tax-free Tax losses can be carried forward for five years following the end of the financial year under consideration Losses incurred abroad by a permanent establishment of a Cyprus company can be offset against profits of the Cyprus Company Group relief of tax losses between a Holding Company and its Subsidiaries (subject to certain conditions been satisfied) EU Interest and Royalty Directive can provide exemption from withholding tax over interest payments between affiliated EU-companies During 2016, the Cyprus Tax system enhanced its competiveness among the other European countries more than ever! 8

9 Key benefits offered by Cyprus The island serves an effective gateway to Europe, Asia, Africa and the Middle East Highly skilled and educated professionals with specialization in the finance industry EU full membership with many essential fiscal benefits Fully compliant with EU and OECD rules Comparatively low set-up and maintenance costs for international business entities Competitive ship registration costs Strong European influence on the values, the cultural, political and social life of its citizens A highly respectable and entrepreneurial business environment with fast-growing economy Sophisticated financial and business infrastructure Stable political environment Sound legal framework Efficient and reliable audit, accounting, tax, consulting, financial and banking services Attractive legislative and operational shipping infrastructure Extensive port facilities Provision of high quality services by the Department of Merchant Shipping and other related organisations Favourable social and financial conditions for people considering relocating to Cyprus Enviable quality of life Pleasant climate throughout the year Well-developed telecoms and infrastructure 9 The regulatory environment is transparent and sound Crime rates are very low and the sense of safety and security is quite high across the country The Shipping Industry in Cyprus along with the favorable tax system definitely create an attractive tax environment for corporate executives, foreign investors and high net-worth individuals to take up residency in Cyprus

10 Our shipping clients worldwide China Shipping Development Company Limited Evergreen Marine (UK) Limited Compagnie Maritime Belge BV VSC International Pte Ltd Belfast Shipping Agents Association ATR Freight Solutions Limited Allroute Shipping (NI) Limited Messina Group Zim Do Brazil Ltda Miami Diver Curacao Autoridad Portuatua Gijon India Steamship Co Jayshree Shipping Sächsische Binnenhäfen Oberelbe GmbH Credence Logistics Ltd. Maersk Lebanon SARL Panalpina Central Asia India Steamship Co. Ian Taylor Ecuador Sallaum Lines Ratnakar Shipping Shipping Company (Listed on Shanghai Stock Exchange) Shipping, aviation and leisure industries Bulk carriers (listed in Luxembourg) Ownership and chartering of vessels Secretarial services for shipping agents Shipping agency Shipping, warehousing and customs clearance Container Marine Transport Shipping agency (listed in Israel) Underwater and ship repair and maintenance Spanish leader in movement of solid bulk Chartering of oil tankers Dry cargo carriers Harbor Operating of barges Shipping containers and freight International shipping logistics company Operating liner, container and oil tankers Port operators Shipping company Dry cargo carriers 10

11 Contact Persons Address Head of Tax Neofytos Neofytou Manager, Tax Consulting Services Constantinos Katchamis Supervisor, Tax Consulting Services Valentinos Pavlides Senior, Tax Consulting Services Savvas M. Klitou Associate, Tax Consulting Services Stella Mourettou Nicosia Corner C Hatzopoulou & 30 Griva Digheni Ave Nicosia, Cyprus T: F: info@bakertillyklitou.com Limassol 163 Leontiou Street Clerimos Building 3022 Limassol, Cyprus T: F: limassol@bakertillyklitou.com 11