The Cyprus Department of Merchant Shipping (DMS) has recently
issued the following circulars to owners, managers and
representatives of ships under the Cyprus flag and to owners,
masters and representatives of foreign ships calling at ports in
"Ring fencing" provisions of the Tonnage Tax
Circular 21/2011 draws attention to the "ring fencing"
provisions of the Merchant Shipping (Fees and Taxing Provisions)
Law of 2010 (Law 44(I)/2010) ("the Tonnage Tax Law").
These provisions forbid the transfer of income or expenses
between affiliated persons engaged in activities subject to tonnage
tax and income tax, so as to ensure that only profits from
qualifying activities are subject to tonnage tax and that profits
from other activities are not sheltered within tonnage tax.
To this end, section 41 of the Tonnage Tax Law requires
transactions between two parts of the same corporate structure
(whether in Cyprus or abroad) to take place on arm's length
terms and prices, as if the two parties involved were independent
from each other and not part of the same corporate group.
Similarly, under section 42 of the Tonnage Tax Law qualifying
shipping activities of a person subject to tonnage tax must be
segregated from non-qualifying activities carried out by the same
accounted for on an arm's length basis. Where transactions
subject to section 41 or 42 have taken place other than on
arm's length terms the tax authorities may make an appropriate
adjustment to the taxable profits under section 33(1)(b) of the
Income Tax Law of 2002.
Section 43 of the Tonnage Tax Law requires taxpayers to whom the
provisions of section 41 apply to notify any potentially affected
person of the possible application of the provisions of section 33
of the Income Tax Law in relation to transactions between them.
Failure to comply with this obligation may give rise to criminal
liability under section 136 of the Cyprus Criminal Code. According
to section 43, notification must take place within 90 days of entry
into the tonnage tax scheme, but the retrospective application of
the scheme makes this timescale impossible and so the following
arrangements apply instead.
For qualifying owners of Cyprus ships, notification must take
place no later than 1 September 2011 in respect of ships which are
currently registered in the Register of Cyprus Ships and no later
than 90 days from the date of registration of each additional
vessel. For other persons or companies subject to tonnage tax
(owners or charterers of foreign ships or ship managers) the period
of 90 days will run from 15 July 2011, the cut-off date for the
Department of Merchant Shipping to decide on eligibility for the
tonnage tax scheme. Accordingly, notification must take place by 15
Taxpayers are required to maintain adequate records to
demonstrate that transactions have taken place on an arm's
length basis and to produce them to the authorities on request. If
the terms differ from normal market terms, adequate reasoning must
also be given.
The Department of Merchant Shipping has undertaken to provide
details regarding implementation of the arm's length principles
and the sanctions for non-compliance and we will cover these in a
Digital publications aboard Cyprus flag ships
Circular 17/2011 notified interested parties of the Department
of Merchant Shipping's decision to authorise the use of
nautical publications (such as sailing directions, lists of lights,
notices to mariners, tide tables and other publications necessary
for their intended voyage) in digital format aboard Cyprus flag
ships and to accept such publications as meeting the requirements
specified in SOLAS Regulation V/27.
A number of conditions must be observed if digital publications
are used. In particular there must be an adequate stand-by system
in case of failure or unavailability of the primary system.
In the event that the changeover to digital publications takes
place other than during an annual or renewal survey related to the
ship's safety certificate, the master change took place and the
implementation should be verified during the first annual or
renewal survey thereafter.
Following the installation and commissioning of the digital
system, any nautical publications which are in a printed form
should be stored so as to avoid being easily accessible and should
be clearly marked as being "out of use".
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.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Early on in the year the figures showed that the hard work of both Transport Malta and the private sector service providers paid off; the Malta maritime register climbed to the summit within Europe, becoming the largest ship register out of the 27.
Located in the heart of a significant array of shipping routes, Malta’s strategic position has enabled the country to develop one of the largest and most reputable ship registers in the world offering a variety of international maritime services.
It is a criminal offence to leave the scene of an accident,
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”