CYPRUS SHIPPING CYPRUS SHIPPING TAX & OTHER ADVANTAGES TAX - - PowerPoint PPT Presentation

CYPRUS SHIPPING “TAX & OTHER ADVANTAGES” CYPRUS SHIPPING “TAX & OTHER ADVANTAGES”

ANTHONY ASHIOTIS FCCA MANAGING PARTNER ANTHONY ASHIOTIS FCCA MANAGING PARTNER “CYPRUS SHIPPING” HAMBURG - 22 ND MARCH 20 12 “CYPRUS SHIPPING” HAMBURG - 22 ND MARCH 20 12

CYPRUS: “THE IDEAL INTERNATIONAL SHIPPING CENTRE”

Ideally positioned for business

Member of the EU

• Ideally located to serve 3

continents

• A strategic choice, allowing to

reach new, highly promising markets

Europe Europe Europe Africa Africa Africa Middle East & Asia Middle Middle East East & Asia & Asia

ANTHONY ASHIOTIS & CO Auditors ● Accountants ● Consultants

THE CYPRUS FLEET

ANTHONY ASHIOTIS & CO Auditors ● Accountants ● Consultants

FACTS: It is estimated that the Cypriot fleet accounts for a quarter of all the ships registered in the EU and the Cyprus shipping registry is the tenth-largest in the world. As a result, the sector makes a substantial contribution to the Cypriot economy, with recent figures indicating that shipping accounts for about 5% of gross domestic product. As of December 31, 2010, there were 1,862 ocean-going vessels exceeding 22 million gross tons on the jurisdiction's registry. Cyprus is the third biggest party ship management centre in the EU, with about 60 ship management companies operating in the territory. A substantial number of major ship management companies have chosen Cyprus in which to locate their headquarters. Other maritime-related activities which take place in Cyprus include bunkering, chartering, crewing, ship surveying, ship-broking, salvaging and marine insurance. Cyprus is not only famous for its donkeys!

WHY OPT FOR THE “CYPRUS” FLAG?

ANTHONY ASHIOTIS & CO Auditors ● Accountants ● Consultants

ANTHONY ASHIOTIS & CO Auditors ● Accountants ● Consultants

• Mem ber of the European Union
• Dem ocratic country with a free market economy.
• Strategic location at the crossroads of three continents.
• Double Tax Treaties with over 40 countries.
• No tax on profits from the operation or management of a Cypriot registered vessel or on dividends received from a ship-
• wning company.
• No capital gains tax on the sale or transfer of a Cypriot registered vessel or the shares of a ship-owning company.
• No estate duty on the inheritance of shares in a ship-owning company.
• No incom e tax on the emoluments of officers and crew.
• No stam p duty on ship mortgage deeds or other security documents.
• Com petitive ship registration costs and annual tonnage taxes as well a low company set up and operational expenses.
• Highly qualified managerial, clerical and technical staff available.
• Liberal Foreign Direct I nvestm ent regime allowing up to 100% foreign participation in most sectors of the economy.
• No exchange control and freedom of movement of foreign currency.
• Signatory to numerous international maritime conventions.
• Bilateral agreem ents with around 30 countries, through which Cyprus ships receive either national or favoured nation

treatment in the ports of other countries.

• Full protection for financiers and mortgagees.
• Excellent telecom m unications and easy access by air and sea.
• Modern and efficient legal, accounting and banking services based on English practices.

SOME OF THE MAIN ADVANTAGES CYPRUS HAS TO OFFER AS AN INTERNATIONAL SHIPPING CENTRE

ANTHONY ASHIOTIS & CO Auditors ● Accountants ● Consultants

Albert Einstein:

“The hardest thing in the world to understand is the Incom e Tax”.

Ev ery one w ill tell y ou: Ev ery one w ill tell y ou:

“In Cyprus …... its one of the sim plest!” TAX ISSUES…

TAX IS 'SIMPLE' & 'LOW'!

Cyprus ship owning companies, ship management companies and charterers pay taxes either under: “Incom e Ta x” 10% on net taxable profits (after expenses, tax exemptions, credits and allowances) OR “Tonna g e Ta x” A small amount is payable annually based on the net tonnage of the ship

ANTHONY ASHIOTIS & CO Auditors ● Accountants ● Consultants

TONNAGE TAX SYSTEM (TTS)

• The new Tonnage Tax System (TTS) for Cyprus merchant shipping was approved by

the European Commission on 24th March 2010.

• Under the new TTS, qualifying owners of Cyprus and foreign ships, charterers and

ship managers who opted and are accepted to be taxed under the TTS are subject to an annual tax referred to as tonnage tax, which is calculated

• n the basis of the net

tonnage of the qualifying ships they own, charter

• r manage.

ANTHONY ASHIOTIS & CO Auditors ● Accountants ● Consultants

ANTHONY ASHIOTIS & CO Auditors ● Accountants ● Consultants

EXAMPLE OF HOW TONNAGE TAX IS CALCULATED

ANTHONY ASHIOTIS & CO Auditors ● Accountants ● Consultants

In accordance with the Merchant Shipping (fees and Taxing Provisions) Law the

TAX EXEMPTIONS!

following are exempt from taxation and subject to tonnage tax : Income of a qualifying owner or charterer derived from the operation of a qualifying Cyprus, Community and / or foreign (under certain conditions) ship in a qualifying shipping activity; Income of a qualifying ship manager from the rendering of crew and/ or technical management services (ship management) to a qualifying ship; Salaries or other benefits paid to officers, masters and the crew of a qualifying Cyprus ship in a qualified shipping activity;

ANTHONY ASHIOTIS & CO Auditors ● Accountants ● Consultants

• Dividends paid to shareholders directly or indirectly resulting from profits
• from the operation/ ship management of a qualifying ship, or
• from the sale of a qualifying ship (only for owners);
• Bank interest earned on working capital or shipping revenue provided that the said

working capital or shipping revenue is used by a qualifying ship owner or charterer

• r ship manager
• Income or Profit made by a qualifying owner from the sale of a qualifying ship or

from the sale of any shares in a qualifying owner entity that is the owner of a qualifying ship.

TAX EXEMPTIONS!

ANTHONY ASHIOTIS & CO Auditors ● Accountants ● Consultants

0 % VAT!

Shipping activities are subject to 0 % VAT (no VAT charged) such as:

• Supply, modification, repair, maintenance, chartering and hiring of sea-going vessels, which

are used for navigation on the high seas and carrying passengers for reward or used for the purpose

• f commercial, industrial or other activities.
• Supply of services to meet the direct needs of sea going vessels.
• Transportation of passengers from the Republic to a place outside the Republic and vice versa

using a seagoing vessel.

ANTHONY ASHIOTIS & CO Auditors ● Accountants ● Consultants

HOW TO ENTER THE “TTS”?

OWNERS OF CYPRUS SHIPS

• Qualifying ow ners of Cyprus ships fall automatically within the scope of the TTS and

therefore do not need to exercise the option to be taxed under the TTS. They are automatically subject to tonnage tax due to their registration under the Cyprus flag unless the qualifying ships are sold, lost or broken up.

• In case of re-flagging of the Cyprus qualifying ship to a foreign flag and the owner is still

a tax resident of Cyprus, then this owner is considered as an owner of a foreign ship and continues to remain in the TTS until the expiration of the 10 years period (no corporate tax

• ption).

ANTHONY ASHIOTIS & CO Auditors ● Accountants ● Consultants

OWNERS OF FOREIGN SHIPS

Eligible for the TTS is an Owner of a foreign ship, who:

• is a tax resident of the Republic of Cyprus,
• has opted to be taxed under the TTS and
• wns a ship that is a qualifying ship, which is
• engaged in a qualifying shipping activity

Furthermore the owner of foreign ships must comply with the following requirements:

• “Community – Flagged Share” Requirement – 60% of the ships have EU flag
• (In case the Community ships are less than sixty per cent (60%) of the fleet in terms of tonnage,

the commercial and strategic management of the fleet must be carried out from the territory of the European Union/ EEA). Note: The option, which will be valid for ten years, may be exercised by a written Application for Approval of the Option to be taxed under the Cyprus TTS

HOW TO ENTER THE “TTS”?

ANTHONY ASHIOTIS & CO Auditors ● Accountants ● Consultants

Qualifying ship is any seagoing vessel certificated under the applicable international or national rules and regulations and registered in the ship register of any member of the International Maritime Organization (IMO) and the International Labour Organization (ILO) which is recognized by the Republic

• f Cyprus.

The new TTS specifically excludes certain types of ships such as:

WHAT IS A QUALIFYING SHIP?

• Fishing and fish factory vessels;
• Vessels used primarily for sport or recreation;
• Inland waterway navigation vessels;
• Harbour, estuary and river ferries and tug boats;
• Fixed offshore installations (not used for maritime transport);
• Non self-propelled floating cranes;
• Non-ocean going tug boats;
• Floating hotels, restaurants, casinos.

ANTHONY ASHIOTIS & CO Auditors ● Accountants ● Consultants

• Qualifying shipping activity

Any commercial activity that constitutes m aritim e transport or ship m anagem ent (crew management and/ or technical management) is considered a qualifying shipping activity.

• Maritim e Transport

The definition of maritime transport includes the traditional carriage of goods and passengers by sea, outside the territorial waters of the Republic of Cyprus, between a Cyprus port and a foreign port or an off-shore facility, or between foreign ports,

• r off-shore facilities including:
• Cable-laying activities;
• Towage activities;
• Dredging activities, provided that the dredger is self propelled, has carrying capacity for dredged material, is a

Community ship and spends at least 50% of its time in the carriage of dredged goods. The definition of maritime transport includes also ancillary activities to maritime transport such as all hotel, catering, entertainment and retailing activities on board a qualifying ship, as well as the loading and unloading of cargo, the operation

• f ticketing facilities and passenger terminals.

WHAT IS A QUALIFYING SHIPPING ACTIVITY?

ANTHONY ASHIOTIS & CO Auditors ● Accountants ● Consultants

SHIP MANAGERS

Eligible for the TTS is a ship manager who:

HOW TO ENTER THE “TTS”?

• is a tax resident of the Republic of Cyprus,
• has opted to be taxed under the TTS,
• provides ship management services (crew and/ or technical) to qualifying ships and meets at any time specific requirements

which mainly are the following:

• Maintain a fully fledged office in Cyprus;
• Employ a sufficient in number and qualifications personnel;
• At least 51% of the total number of that personnel must be EU/ EEA citizens;
• “Community – Flagged Share” Requirement – 60% of ships have an EU flag
• Economic link of managed ships with the Community – «The 2/ 3 Rule»;
• Provision of crew management services in accordance with the MLC 2006 requirements for crew managers
• Certified under the ISM Code (DOC) by the competent authority of the flag states of the ships under its technical

management Note: The option, which will be valid for ten years, may be exercised by a written Application for Approval of the Option to be taxed under the Cyprus TTS

ANTHONY ASHIOTIS & CO Auditors ● Accountants ● Consultants

CHARTERERS

Eligible for the TTS is a Charterer who charters ships under bareboat, demise, time or voyage charter and: is a tax resident of the Republic of Cyprus, has opted to be taxed under the TTS and the chartered ship is a qualifying ship, which is engaged in a qualifying shipping activity. Furthermore the charterer must comply with the following requirements:

• Minimal Share of the Fleet in Ownership - Chartered-in ships, no more than 75%
• “Community – Flagged Share” Requirement – 60% (or less under certain conditions) should have an EU flag

Note: The option, which will be valid for ten years, may be exercised by a written Application for Approval of the Option to be taxed under the Cyprus TTS

HOW TO ENTER THE “TTS”?

ANTHONY ASHIOTIS & CO Auditors ● Accountants ● Consultants

• Parallel Registration

Options

PARALLEL REGISTRATION IS ALLOWED

Under Cypriot legislation parallel (bareboat) registration of vessels is possible. The legislation provides for the two forms of internationally accepted bareboat registration: ‘Parallel-in’ registration and ‘Parallel-out’ registration.

• Status of Vessels Registered Parallel-in

Vessels registered parallel-in in the Register of Cyprus Ships must hoist the Cyprus flag (are not allowed to use the flag of the country of the foreign registry). The port of registry marked on the stern of the ship must be LIMASSOL (not that of the foreign registry).

• Status of Vessels Registered Parallel-out

Cyprus vessels registered parallel-out must hoist the flag of the foreign registry (cannot use the Cyprus flag). Also, the port of registry marked on the stern of the vessel must be that of the foreign registry.

ANTHONY ASHIOTIS & CO Auditors ● Accountants ● Consultants

• The Tonnage Tax System (TTS) is available to any owner, charterer or ship manager

who owns, charters or manages a qualifying ship

CONCLUSION: CYPRUS … MAKES SENSE!

in a qualifying shipping activity and this tax is a very low amount calculated and paid annually on the net tonnage of the ship.

• On taxable activities not under ‘TTS’income tax is payable at 10% after deducting

expenses, tax exemptions, tax credits and tax allowances often leading to ‘zero’ tax!

ANTHONY ASHIOTIS & CO Auditors ● Accountants ● Consultants

CYPRUS: NO SHARKS AROUND…

ANTHONY ASHIOTIS & CO Auditors ● Accountants ● Consultants

…NO FEAR…

ANTHONY ASHIOTIS & CO Auditors ● Accountants ● Consultants

... JUST HAPPY PEOPLE…

ANTHONY ASHIOTIS & CO Auditors ● Accountants ● Consultants

…PROUDLY SAILING THE “CYPRUS FLAG”!

Anthony Ashiotis FCCA – Managing Partner ANTHONY ASHIOTIS & CO Aud itors – Accounta nts - Consulta nts Anthony Ashiotis & Co T +357 22 455 455 F +357 22 516 999 ashiotis@ashiotis.com .cy www.ashiotis.com .cy Maria House, 8 Samou str.,

• St. Omologites,

CY-1086 Nicosia, Cyprus P.O. Box 26613, CY-1640

ANTHONY ASHIOTIS & CO Auditors ● Accountants ● Consultants