Cyprus: A Leading Maritime Nation

Last Updated: 22 October 2006

Introduction

Cyprus recognised, as early as 1963, the political, economic and social importance of shipping. Since then, Cyprus managed to attract shipping entrepreneurs and to develop the island into a fully-fledged shipping centre combining both a sovereign flag and a resident shipping industry, which is renowned for its high quality services and standards of safety.

The island´s strategic location, which is at the crossroads of three continents (Europe, Asia, Africa) enabled Cyprus to play a prominent role as an international shipping centre.

Cyprus, combines a legal system based on the English model, an efficient civil service, good labour relations, an outstandingly high level of professionalism in the legal and accounting sectors, an excellent banking system, state of the art telecommunications and airlinks to all important destinations, that form solid foundations for entrepreneurs to set up their business.

A number of fiscal and economic incentives are also available, such as competitive ship registration costs and annual tonnage taxes, a favourable tax regime for shipowning, shipmanagement and other international business enterprises, the availability of competent local employees and the comparatively low operation costs, which prompted many European and other entrepreneurs to establish local companies with fully fledged offices in the island.

The Cyprus registry today, ranking among the ten largest in the world - with 992 ocean going vessels of a gross tonnage exceeding 19,2 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 and Quality".

Cyprus has a substantial maritime cluster which has grown around 50 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 ships of different flags managed by companies established and operating in its territory. It is estimated that 5% of the world fleet is managed from Cyprus.

Among the shipmanagement companies established and operating from the Republic of Cyprus, 87% are controlled by EU, including Cypriot, interests. All companies employ about 40.000 seafarers out of whom 5.000 are EU nationals.

The maritime cluster includes also more than 150 companies with shipping related activities such as spare parts, telecommunications, equipments and paint suppliers, ship chandlers, marine insurance, classification societies and marine consultants.

Maritime Safety And Security

From the outset of the accession negotiations with the E.U., and in view of its obligations arising from the European requirements and the International rules, Cyprus adopted a series of successful measures aiming at the upgrading and the modernisation of Cypriot Shipping, through a safety policy which focused on the effective control of the ships and the improvement of the quality of its fleet.

Special emphasis has also been given to the speed and efficiency in providing services to the fleet as well as to the shipping community and in that respect, the administrative capacity of the Department of Merchant Shipping has been substantially strengthened. This has been achieved both with additional staff and with the utilisation of the latest computer and telecommunications technology. The hours of work of the Department have been extended and urgent matters may be dealt with after office hours. Our overseas offices both in Europe and in the U.S.A can also offer their services whenever they are requested.

This policy and the relevant measures proved to be successful and the exit of Cyprus flag from the Black List of the Paris MOU is a proof of that.

In view of the increasing danger of ships being used or being a target for terrorist activities, the Cyprus Maritime Administration attaches particular attention to maritime security. The ISPS Code has been adopted and implemented. All ships under the Cyprus flag as well as all port facilities in Cyprus have been duly certified as complying with the requirements of this Code.

Taxation Benefits For Shipping Companies

Cyprus offers a favourable tax regime to both Shipowners and Shipmanagers ensuring that their competitiveness and sustainability is safeguarded even after its accession to the EU.

The income derived by the shipowner of a Cyprus ship from the operation of such ship in international maritime transport, is exempted from income tax. Shipowning companies pay tax based on the tonnage of the Cyprus flag ships they own.

The dividends paid to the shareholder or the members of a corporation, out of profits made from the operation of a Cyprus ship are also exempted from the income tax.

Furthermore, shipmanagement companies operating in Cyprus have the option, either to pay tax at a fraction of the normal rate, on the basis of the tonnage of the ships they manage (taxation of shipmanagement services), excluding that of Cyprus flag ships under their full management, or to pay tax on their income at a rate of 4,25 percent.

Furthermore, Cyprus has concluded a number of treaties with more than 40 countries, whose main purpose is the avoidance of double taxation of income earned in any of the countries concerned.

Cyprus And The European Union

Cyprus has the third largest fleet within the European Union with a percentage of 16% of the total fleet of the 25 EU Member States.

The Cyprus Government attaches particular attention to our active presence at the various committees and working groups of the European Union discussing shipping issues.

Short Sea Shipping takes on a strategic importance in the Mediterranean given the distances involved and the lack of practical overland routes. Cyprus is highly interested in the development of Short Sea Shipping in the region. Our country (through the Ministry of Communications and Works and the Cyprus Ports Authority) is actively involved in the development of a "Motorway of the sea" in the Eastern Mediterranean area and of "Priority Transport Corridors in the Mediterranean".

The Cyprus’ accession to the EU had a substantial positive impact on both, the European and the Cypriot maritime industries. Some of the main points are:

  • There is an important contribution of the private and the governmental sectors in terms of shipping know-how in the fields of ship registration and shipmanagement, which several European partners lack. This know-how is channelled through the active participation of Cyprus in the various E.U Bodies such as the European Maritime Safety Agency (EMSA) and the Committee on Safe Seas and the Prevention of Pollution from Ships (COSS) as well as in the European Communities Shipowners Association (ECSA).
  • The European fleet capacity has increased upon Cyprus’ accession due to the Cyprus fleet contribution. This strengthens Europe’s voice in the international shipping regulatory bodies (IMO, ILO) along with a stronger position with regard to the entry into force of new regulations or amendments of existing ones.
  • The transformation of Cyprus as the Europe’s "watchdog" in the Eastern Mediterranean Region. Cyprus will have to install and operate by 2007 a vessel Traffic Monitoring and Information System (VTMIS), which will have the full capability to monitor, process and provide information on maritime traffic that enters the Middle East border of the EU, with positive effects for the whole region in respect of illegal immigrants traffic intercepting, reduction of accidents and protection of the marine environment.
  • Cyprus as Europe’s Eastern Border constitutes a bridge of communication and cooperation between Europe and the countries of the Middle East.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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