All ships can be registered?

Vessels of any size and type may be registered in the Cyprus Register of Ships or the Special Book of Parallel Registration, as long as they comply with the merchant shipping legislation and Department of Merchant Shipping circulars and satisfy the prescribed conditions for their age and type. It should be noted that the maximum age limit is 25 years for cargo ships, floating production storage and offloading vessels and mobile offshore drilling units. There is no age limit for passenger vessels, provided that they pass the entry inspection.

What types of ship registration are available?

The registration of ships - including every description of vessel used in navigation not propelled by oars - is governed by the Merchant Shipping (Registration of Ships, Sales and Mortgages) Law of 1963, as amended. Pursuant to the Law the Registrar of Cyprus ships, namely the Permanent Secretary of the Shipping Deputy Ministry, classifies three different types of shipping vessels:

  • 'Provisional' Registration: This is applicable to the registration of ships for 6 months. It can be renewed by the Registrar one time for an additional 3 months.
  • 'Permanent' Registration: The most common registration of a ship option in Cyprus. If a provisionally-registered ship requires permanent registration, it must be done within 6 months, or 9 months if the extension is applied.
  • 'Parallel' Registration: Divided between two categories, parallel registration applies to foreign ships of a Cyprus shipping company under bareboat charter to gain the Cyprus flag most often for 2 years (parallel-in) or owners of Cyprus vessels to choose to bareboat charter the ships to a foreign company/person for parallel registration in a foreign register for the length of a charter party (parallel-out).

What are the requirements to register a ship?

A ship may only be registered in the Register of Cyprus Ships if:

  • More than fifty per cent (50%) of the shares of the ship are owned:
    • by Cypriot citizens, or
    • by citizens of other Member States (EU/EEA) who in the instance of not being permanent residents of the Republic of Cyprus will have appointed an authorised representative in the Republic of Cyprus, or
  • The total (100%) of the shares of the ship are owned by one or more corporations, which have been established and operate:
    • in accordance with the laws of the Republic of Cyprus and have their registered office in the Republic, or
    • in accordance with the laws of any other Member State (EU/EEA) and have their registered office, central administration or principal place of business within the European Economic Area and which will have either appointed an authorised representative in Cyprus or ensured that the management of the ship is entrusted in full to a Cypriot or a Community ship management company having its place of business in Cyprus, or
    • outside Cyprus or outside any other Member State (EU/EEA) but controlled by Cypriot citizens or citizens of Member States and have either appointed an authorised representative in Cyprus or ensured that the management of the ship is entrusted in full to a Cypriot or a Community ship management company having its place of business in Cyprus.

It is noted that the corporation is deemed to be controlled by Cypriots or citizens of any other Member States when more than fifty per cent (50%) of its shares are owned by Cypriots or citizens of any other Member States or when the majority of the Directors of the corporation are Cypriot citizens or citizens of any other Member State.

An authorised representative may be a Cypriot citizen or a citizen of any other Member State, who is resident in Cyprus, or a partnership/corporation/branch established in accordance with the laws of Cyprus, which has its place of business in the Republic of Cyprus.

Therefore, it is common practice of those wishing to register their ships under the Cyprus flag to incorporate a company in Cyprus, which will either acquire the ship in its name, or bareboat charter the ship.

The registration procedure

Only lawyers registered as practicing advocates in Cyprus are entitled to draft the necessary documents for the incorporation of Cypriot companies as well as to carry out all registry transactions of a vessel owned by a Cypriot company. Therefore, the application shall be signed and filed by a Cypriot lawyer.

For the purposes of issuance of appropriate certificate, a formal application procedure needs to be followed, and certain requirements must be met, the most important of which are stated below:

Provisional Registration

For the Provisional Registration, an application must be submitted on behalf of the owner to the Deputy Ministry of Shipping, which requires the following information:

  • Company Certificates of the yacht owning company by the Registrar of Companies.
  • Existing name and present flag of the yacht;
  • Gross and net tonnage of the yacht;
  • Place and year of built;
  • Place where the yacht can be usually found;
  • Length.
  • International sign.
  • Serial no./Plate Hull no.
  • Proposed name of the yacht.
  • "Seaworthy Certificate", in cases where the yacht is not newly built. Such a certificate is issued by a surveyor of a classification society or a Cyprus government surveyor.
  • "Builders Certificate" (for newly built yachts).
  • Official evidence of ownership and freedom of encumbrances (for non-newly built and not registered under any flag).
  • Certificate of deletion from previous registry or a certificate that the yacht is owned by the sellers and has no encumbrances (for non-newly built yachts).
  • Bill of sale duly stamped and legalized.
  • Power of attorney.
  • Application for a radio license.

Permanent Registration

It is common practice for certain reasons to firstly registered the vessel provisionally. In this case, the Permanent Registration of a provisionally registered vessel must be completed within 9 months (including the 3 months extension). Upon filing the application for Permanent Registration, the following documents must be lodged with the Registrar (if not filed at the time of Provisional Registration):

  • Cyprus tonnage certificate (form MS12).
  • Certificate of survey (form MS1);
  • Application for registration;
  • Copy of the agreement signed by the ship's International Radio Accounting Authority.
  • Copies of the ship's statutory certificates;
  • International tonnage certificate;
  • Duly verified ship's carving and marking note.

Benefits of the Cyprus flag

Tonnage tax scheme and other tax benefits

Cyprus has an extremely beneficial, EU-approved tonnage tax regime for qualifying international shipping operations. Tax is charged on the basis of the tonnage and the age of the vessel, rather than on income, with discounts if the crew and technical management of the ship is carried out by a ship management company registered in Cyprus or elsewhere in the European Union. The tonnage tax regime offers substantial savings compared with conventional taxation and applies automatically to Cyprus-registered ships. There is no tax on profits from the operation or management of a Cyprus-registered vessel or on dividends received from a vessel-owning company, and the wages of officers and crew are exempt from income tax. There is no capital gains tax on the sale or transfer of a Cyprus-registered vessel or the shares of a vessel-owning company, and no stamp duty on ship mortgage deeds or other security documents. Furthermore, no estate duty imposed on inheritance,

Other benefits include:

  • EU flag.
  • The well-established legal infrastructure provides full protection for mortgagees and finance providers.
  • No stamp duties for ship mortgage deeds or security documentation.
  • Establishment and operating costs are significantly low.
  • More than 43 countries have double tax treaties with Cyprus

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.