The Tonnage Tax system, which is currently in force in Cyprus, enables a fleet of vessels having its majority under the Cyprus flag, not only to enjoy the benefits of a prestigious and internationally acclaimed ship registry, but at the same time to take advantage of the extremely favourable taxation benefits.
The “Tonnage Taxation System” is based on a pro-rata charge according to a vessel’s (NT) “Net Tonnage”, regardless of what the income/pro t from this vessel might be. This in essence means that the SPV Companies and ultimately the Fund itself will be taxed locally as per the Tonnage Tax system, with the amount of earnings deducted for tax being almost negligible.
In addition, this is supplemented by the very favourable taxation framework for Alternative Investment Funds, offering an attractive taxation regime both for the fund itself as well as the investors.
The tonnage tax system is available to any owner who owns a qualifying ship in a qualifying shipping activity. The tonnage tax is calculated on the basis of the net tonnage of the qualifying ships.
A qualifying ship is any seagoing vessel certified under applicable international or national rules and regulations and registered in the ship register of any member of the International Maritime Organization and the International Labour Organization, which is recognised by Cyprus.
Any commercial activity that constitutes maritime transport is considered a qualifying activity. 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 between foreign ports.
Ship owners of Cyprus flag ships automatically fall within the scope of the tonnage tax system. The tonnage tax system covers profits from shipping operations, dividends paid directly or indirectly out of such profits, profits on the sale of the ship and interest earned on funds used as working capital or for the financing, operation and/or maintenance of the ship.
