The strength, breadth and experience of Cyprus’ maritime sector have helped it weather the economic storm, and with its favourable tonnage tax is attracting more shipping business to the island.
The maritime industry has been one of Cyprus’ most successful export services, with the island being considered one of the most influential global hubs for ship owning and ship management services. The country’s maritime capital, Limassol, is home to some of the world’s most influential names in shipping.Today, Cyprus is the largest third party ship management centre in Europe and the largest crew management centre in the world, while the island’s international ship register is the third largest in Europe and the 10th largest in the world.
More than 130 ship owning, shipmanagement and shipping related companies maintain fully-fledged offices and conduct their international activities from Cyprus. Some of the largest shipmanagement companies in the world have their headquarters and conduct their operations from Limassol. It is estimated that approximately 4% of the world’s fleet is managed from Cyprus. Among the ship owning and shipmanagement companies established and operating from Cyprus, 87% are controlled by EU, including Cypriot interests. Cyprus has been attracting the international maritime industry to its shores since the early 1960s when it introduced key legislation providing ship managers and owners with a more simplified and tax-efficient business environment. This paved the way for the expansion of the industry that now contributes approximately €1 billion each year to the economy, accounting for around 6% of GDP, and directly employing 4,000 shore-based personnel and 55,000 seafarers from around the world. Over the past decades, Cyprus has built up an exceptional maritime infrastructure and high level of expertise, particularly in the fields of surveying, ship-brokering and maritime insurance, while the country’s legal, accounting, tax and IT professionals offer high-quality support services to the sector.
In a determined effort to ensure the industry’s competitiveness, in March 2010, the government introduced an upgraded, EU-approved, tonnage tax system, which made the island even more attractive for ship managers, owners and charterers. The overall gross tonnage of ships sailing under the Cypriot flag rose 2% in 2014 to 22,708,248 tonnes after rising a 3.2% the year before, according to the Department of Merchant Shipping. The average gross tonnage per ship rose 4.3% to 12,836.8 tonnes in 2014 compared to 2013, when it rose 3.7% to 12,306.5 tonnes per ship compared to 2012. The number of vessels registered in Cyprus fell 2.2% in 2014 to 1,769 compared to 2013. Whereas in 2013 the number of ships under Cypriot flag fell 0.5% to 1,809 compared to 2012. A total of 277 bulk carriers made out almost half of the total registered gross tonnage, while 199 container ships and 53 oil tankers represented 18% and 10% respectively of overall tonnage.
In order to combat the growing international threat of piracy, in June 2012, Cyprus was one of the first countries to approve detailed legislation allowing armed guards aboard Cypriot-flagged vessels. Cyprus is also an attractive jurisdiction for motor and sailing yachts. Following the introduction of the Cyprus Yacht Leasing Scheme in March 2012, a Cypriot company can purchase a pleasure yacht and enter into a lease-sale agreement for the yacht with a third-party lessee. The aim of this structure is to enable yacht owners to pay VAT on their yachts calculated on the percentage of the time that the vessel is deemed to sail in EU waters – based on the assumption that the larger the yacht, the less time it stays there. Leveraging this system, the effective VAT rates can be reduced to as little as 3.4% of the initial value of a yacht in Cyprus.
The main challenge for the Cypriot shipping industry remains the Turkish embargo on Cyprus-flagged vessels entering its ports. However, there are hopes that on-going political dialogue will lead to a settlement, which can only have a positive effect on the development of the sector.