Tax planning and Advising

HSS legal professionals and tax experts can assist clients with all tax matters related to their shipping activities including tax planning, formation of tax-effective corporate structures, enrollment to the Cyprus Tonnage Tax System and advice on all tax-related matters.

Ship-owning companies, ship-management companies and chartering companies can considerably benefit from the favourable tax regime existent in Cyprus. As of 2010 qualified ship-owing, ship-management and chartering companies can opt to enroll in the new Tonnage Tax System introduced by the Cyprus Department of Merchant Shipping (DMS) or be subject to Cyprus 12.5% corporate tax.  This modern and competitive system is based on net tonnage owned/managed/chartered and is paid annually.

For qualified ship-owning companies the new tax is calculated on the basis of the net tonnage these companies own and only applies for an owner of a “qualified ship” that engages in a “qualified shipping activity”.

 

Summary of applicable rates for tonnage tax calculation for a vessel:

 

 

NET TONNAGE

 

 

         

0 - 1.000

1.001 - 10.000

10.001 - 25.000

25.001 - 40.000

>  40.000

         

€36.50

€31.03

€20.08

€12.78

€7.30

         

Per 100 NT

Per 100 NT

Per 100 NT

Per 100 NT

Per 100 NT

 

Ship owning companies in Cyprus are offered a number of other tax-incentives:

  • No income tax on profits from shipping operations/activities
  • No tax on dividends from profits or arising or from ship sales
  • No tax on ship maintenance
  • No stamp duty on ship mortgage deeds
  • No estate duty/ inheritance tax after death of a shareholder
  • No tax on profits from ship sales or sales of shipping company shares
  • No tax on the interest gained from funds used as working capital
  • Emoluments of crew exempt from tax and contributions for social insurance

 

Ship Management Companies which qualify have an option to be taxed under the Tonnage Tax System at a rate equal to 25 per cent of the rates used to calculate the tonnage tax imposed on Cyprus registered ships or be subject to the basic 12.5 per cent corporate tax.  A ship management company which opts to be taxed under the Tonnage Tax System has to remain in the system for 10 years.

Summary of applicable rates for tonnage tax calculation for a Ship Management Company:

 

 

NET TONNAGE

 

 

         

0 - 1.000

1.001 - 10.000

10.001 - 25.000

25.001 - 40.000

>  40.000

         

€36.50

€31.03

€20.08

€12.78

€7.30

         

Per 400 NT

Per 400 NT

Per 400 NT

Per 400 NT

Per 400 NT

 

Qualified ship-management companies also enjoy:

  • NO income tax on profits earned or dividends paid from providing these services
  • NO tax on the salaries of officers and crew of such ships.

 

*For more information on Cyprus Tonnage Tax System or the general Cyprus tax regime please contact one of HSS Shipping Services expert to request an HSS Tax fact sheet.