The Shipping Industry in Cyprus

The Shipping Industry in Cyprus

The Shipping Industry in Cyprus: A successful journey continues... 10th largest fleet worldwide 1st third party shipmanagement centre in the whole EU ~25% of the whole EU fleet The history of the Sea and Shipping in Cyprus traces back hundreds of years. The island s expert knowledge of sailing and trading was acquired through the many civilisations that conquered Cyprus in the ancient years, such as the Egyptians, Greeks, Romans, French, Venetians and British. Cyprus s constant striving for perfection in the field of merchant shipping has also been naturally facilitated by its almost ideal geographic location, which is at the crossroads of three continents, Europe, Asia and Africa. The extension and diversification of all possible avenues of shipping activity in Cyprus is to a large extend attributed to the country s excellent shipping infrastructure, which was developed through the years by the Maritime Administration (the Ministry of Communications and Works, the Department of Merchant Shipping and the Ports Authority), the responsible government body for shipping in Cyprus, and the Cyprus Shipping Industry, which is represented by the Cyprus Shipping Chamber. All services, both public and private required by ship-owners and investors are not only well represented and organised, but also to the highest quality standards. The Cyprus registry today, ranking tenth among international fleets - with 1,857 ocean going vessels of a gross tonnage exceeding 21 million- is continuously upgrading its services in order to offer a high standard of support to international shipping and a reputation of a Flag of Progress. Cyprus is a major shipmanagement centre worldwide with a total of around 60 shipmanagement companies operating in its territory. Several of these companies rank among the largest of their kind in the world. Cyprus appears to be among the top five countries and territories in the world with the largest number of third party shipmanagement companies on its territory. Cyprus participates actively in the different shipping related international fora such as The International Maritime Organization (IMO), the International Labour Organization (ILO) and the European Maritime Safety Agency (EMSA). Cyprus has been a member of the International Maritime Organisation since 1978 and a member of its Council since 1987. In addition, Cyprus participates actively in all Committees and Subcommittees of the Organisation, either through its High Commission in London or through well organised expert Delegations from Cyprus, mainly from the Department of Merchant Shipping which is the competent Department of the Ministry of Communications and Works on matters pertaining to ship safety, security and prevention of pollution from ships. Cyprus through its very attractive legislative and operational shipping infrastructure has the advantages to develop into an even greater pole of attraction for first-rate shipping companies, both from countries within and outside the EU. In addition, the Cyprus flag, being in effect one of the only two Open Registries within the EU, attracts a large number of quality tonnage to Cyprus.

Why Cyprus? A Sovereign Flag - An International Maritime Centre European Union and European Monetary Union member state Strategic location at the crossroads of three continents Liberal Foreign Direct Investment Regime allowing up to 100% foreign participation in most sectors of the economy No exchange control and freedom of movement of foreign currency Favourable tonnage tax scheme approved by the EU Various other tax incentives EU flag Bilateral Agreements of Cooperation in Merchant Shipping with 23 countries including major labour supplying countries Low set up and operating costs for companies High safety standards included in the White List of Paris MOU and Tokyo MOU One of only two Open Registries in EU High quality services by the Department of Merchant Shipping Ship owners whose ships are managed by Cypriot companies 23% Cyprus ships inspectors cover all important ports worldwide Signatory to numerous international maritime conventions Modern and efficient legal, accounting and banking services based on English practices Advanced telecommunications network and easy access by air and sea Highly educated, qualified and multilingual personnel 48% Germany Curacao Singapore 6% Russia Poland Netherland 2% 4% 8% 2% 2% 5% Norway Marshall Other Enviable quality of life Source: Central Bank of Cyprus 3

Tonnage Tax Regime at a Glance Why use Cyprus Ship Registry? One of the largest registries in the EU and worldwide Availability of provisional registration (valid for 6 months) Availability of two forms of parallel (bareboat) registration enabling chartered ships to be registered under two flags for a period of time Competitive registration fees TT benefits Ship owners of community flag ships and foreign flag ships may opt to be taxed under the tonnage system A charterer who charters a ship under BB, demise, time or voyage is eligible for the TT system provided it satisfies certain criteria A ship manager who provides crew and/or technical ship management services is eligible for the TT system provided it satisfies certain criteria As of 2010, the new Tonnage Tax ( TT ) regime applies to the qualifying ship owners, ship charterers and ship managers of qualifying ships engaged in qualifying activities. The qualifying ship owners, managers and charterers under TT Regime are exempt from income tax on their shipping activities such as: Exploitation of a qualifying (chartered) ship in a qualifying shipping activity or rendering crewing and/or ship management services to any qualifying ship Disposal of a qualifying ship or interest or share in the qualifying ship Disposal of shares in a ship owning company Dividends paid (directly or indirectly) out of the profits described above Bank interest earned on working capital or shipping revenue, provided that the said working capital or shipping revenue is used to pay expenses arising to the qualifying person out of the qualifying activity The European Commission considered that the new TT regime is in line with the European Union s Guidelines on State Aid to maritime transport and authorised the TT regime until 31 December 2019. TT Regime administration TT is payable on 31st March each year. It is calculated with reference to the net tonnage of the qualifying ships under one s ownership, charter or management. TT rates Units of net tonnage Rate per 100 units of net tonnage Ship owners/charterers Ship managers 0-1,000 36,50 9,13 1,001-10,000 31,03 7,76 10,001-25,000 20,08 5,02 25,001-40,000 12,78 3,20 in excess of 40,000 7,30 1,83 Any residual tonnage of less than 100 units of net tonnage shall be charged proportionally. Advantages of TT Regime Certainty as to the amount of tax payable each year Wide range of qualifying activities Wide range of qualifying vessels Crew members of qualifying Cyprus flagged (including parallel in registration) ships are exempt from income tax Submission of TT returns can be effected electronically TT Regime can be easily used alongside income tax if both qualifying and nonqualifying activities are conducted. 4 The Shipping Industry in Cyprus

Cyprus Tax Benefits 12,5% Corporate tax rate One of the lowest in the EU Tax exempt income includes: - Dividends (conditionally) - Profit from the sale of shares and other qualifying securities (unconditionally) - Profit from disposal of vessels - Profit attributable to foreign PE (conditionally) Extensive Double Tax Treaties network Access to the EU directives No thin-capitalization rules or D/E ratios No withholding taxes on payments to non-residents (apart from royalties paid for IP economically utilized in Cyprus) Company reorganisation rules ensuring tax neutrality for group restructuring transactions No exit taxation rules (in general) Capital Gains Tax only on gains from sale of real estate situated in Cyprus or sale of shares owning real estate situated in Cyprus (exemption applies if shares are listed on recognized stock exchange) IP Box regime: effective tax rate of 2.5% on profits from the use and sale of qualifying intangible assets Tonnage Tax regime Low transaction taxes Possibility to obtain tax rulings in advance by the tax authorities provides flexibility and minimization of tax risk Tax incentives for expatriate employees taking up employment in Cyprus - 50% exception of remuneration from any office or employment exercised in Cyprus that exceeds 100.000 per annum by an individual who was not tax resident of Cyprus prior to the commencement of employment (applicable for 5 years) - 20% exception with a maximum of 8.550 of remuneration from any office or employment exercised in Cyprus by an individual who was resident outside Cyprus before the commencement of his employment (applicable for 3 years) Stamp duty exception on contracts in relation to Cyprus flag vessel Non-dom rules for Cyprus tax resident not domiciled in Cyprus. Any interest, rents or dividends (whether actual or deemed) regardless of whether such income is derived from sources within Cyprus and regardless of whether such income is remitted to a bank account or economically used in Cyprus, is exempt from special defence contribution. 5

Sailing with You - Our Shipping Service Offerings EY has a long-term and deep commitment to the shipping industry, with a strong track record of service. Companies that operate within the ever-changing and complex shipping environment need service providers that understand their operations and the business issues that accompany the wide-array of shipping specializations. Like our shipping clients, EY shipping leaders have been in the industry through the highs and the lows. Thus, our approach and understanding of your challenges and complexities are from years of hands-on experience. The perspective we offer is not just about this moment in time, but in the context of a cyclical industry. Main Services Assurance Services Financial Statements Audit Financial Accounting Advisory Services Assistance during the IPO process Fraud Investigation and Dispute Services Climate Change and Sustainability Services Accounting Compliance Services Tax Advisory & Compliance Services Business Tax Services Transaction Tax Indirect Tax Human Capital International Tax Services (ITS) Tax advice in relation to planning of investments in shipping through holding structures Tax advice related to the tonnage tax regime Transaction Advisory Services Valuations and Business Modelling Restructuring Transaction support M&A Advisory Project Finance Advisory Services Enterprise Intelligence & Data Analytics Performance improvement Risk ervice Organization Controls Reporting (e.g., ISAE 3402/SSAE 16, ISO 27001) Information Security IT Internal Audit Financial Services Risk Management Actuarial Services Global Compliance and reporting Establishment and set up of legal entities Corporate Secretarial Support Services Administration Services Accounting Services Payroll Administration and personnel related services Tax and VAT services Selected Shipping Clients in EMEIA (Europe Middle East India Africa) Acergy Ardmore Shipping Corporation British Marine Clarkson PLC CMA CGM, S.A. COSCO Costamare Inc. Dockwise Shipping DryShips Inc. Diana Shipping Inc. Diana Containerships Inc. Dynagas LPG Partners L.P. Eitzen Bulk (Denmark) GC Rieber Shipping Globus Maritime Ltd Goldenport Holdings Hanjin Shipping Co Hellenic Carriers Ltd Inchcape Shipping Services Jo Tanker K Line Klaveness Knot Offshore Partners LP Knot Offshore Partners Leif Hoegh Maersk MSC SA Navios Maritime Midstream Partners L.P OceanRig Odfjell Tankers Royal Caribbean Cruise Line Paragon Shipping Inc. Seanergy Maritime Holdings Corp. Solstad Sovcomflot Group Star Bulk Carriers Corp. Stena AB Stolt-Nielsen Transocean Tsakos Energy Navigation Tschude Shipping ZIM 6 The Shipping Industry in Cyprus

Our Global Shipping Capability Importance of shipping sector EY provides comprehensive advisory services in restructuring cases, M & A situations and on accounting issues in the maritime sector. We have an established Global Shipping Competence Center in Hamburg, Germany. Clients include liner and charter companies, ship owners, issuing houses and financial institutes. EY has been the exclusive maritime advisor to the German government since 2011. Speeches/Exhibitions/Events We conduct yearly International Shipping Conferences with executives of shipping companies including: EMEIA Shipping Experts Workshop Maritimes dinners inviting executives of the industry Various Shipping-Workshops: accounting, assessment and taxes with representatives Speeches / panel discussions at various maritime conferences, e.g. Marine Money, Capital Link Resources/Databases Clarksons Shipping Intelligence Network / extensive market and company database Maritime Strategies International (MSI) / mathematical model for industry leading forecasts Drewry Shipping Consultants Lloyd s List, Tradewinds etc. Publications on the shipping industry Shipping Industry Almanac: Extensive, yearly updated handbook containing worldwide country-specific shipping-data. Thought Leadership Paper: All at sea how can shipping stay afloat? Overview on current challenges of the industry and potential approaches for solutions. Thought Leadership Paper: Drydocking in rough sea Shipyards at the crossroads. An analysis of the worldwide shipbuilding sector focusing on required reorganizations. Thought Leadership Paper: Yet another wave shipping industry in distress. Capital Agenda Insights: Running aground: restructuring an equitystarved shipping industry. l Shared world collaboration to make your working world better strength EY wor d Your world EY in Cyprus EY in Cyprus has its origins dating back to the 1930 s. We serve as a trusted business advisor and auditor to a broad range of clients, from private individuals and entrepreneurial businesses to major public companies and large multinationals. We recognize that all our clients are on a unique journey and we work with them to create a tailored client experience that helps them achieve meaningful results. The EY Cyprus firm is part of EY s Europe, Middle East, India and Africa (EMEIA) Area and one of the 21 countries that comprise the Central and Southeast Europe (CSE) Region. Within this structure, we provide fast, easy access to the information and people with the best skills and wealth of expertise, to help our clients make the right decisions. We are closely linked with EY s dedicated global industry centres, for sharing industry-focused knowledge and experience. In this way we anticipate market trends, identify implications and develop clear points of view on relevant industry issues. Cyprus is an attractive location for the development of entrepreneurship and a distribution hub and gateway to investment in the European Union, Eastern Europe, Asia and Africa. Accordingly we have also created dedicated, multilingual, teams to serve entities engaged in international operations and do business wherever you are. Also we offer tailored services to address the unique requirements of family businesses. Whatever your industry, our local teams and global network of professionals can provide you with highly responsive advice that meets your assurance, tax, transaction and advisory needs. 7

Contact Persons: Stavros Pantzaris Country Managing Partner, Assurance Services Leader, EY Cyprus Tel: +357 22 209 999 Stavros.pantzaris@cy.ey.com Philippos Raptopoulos Partner, Tax Services Leader, EY Cyprus Tel : +357 25 209 999 Philippos.raptopoulos@cy.ey.com Kyriakos Christodoulou Senior Manager, Assurance, EY Cyprus Tel : +357 25 209 999 Kyriakos.christodoulou@cy.ey.com Olga Chervinskaya Senior Manager, Tax Services, EY Cyprus Tel : +357 25 209 999 Olga.Chervinskaya@cy.ey.com EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. 2015 Ernst & Young Cyprus Ltd. All rights reserved. This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice. ey.com/cy