Cyprus shipping · tonnage tax
Cyprus's tonnage-tax regime (Merchant Shipping Law 44(I)/2010, EU-State-Aid-approved until 31 Dec 2029) lets qualifying shipping companies pay tax on the TONNAGE of their vessels — not on actual profit. 11th-largest registered merchant fleet in the world. Pillar Two carve-out for qualifying shipping income.
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— WHAT YOU GET
Shipowning (≥75% of fleet under EU flag), ship-management (≥51% under EU flag), or chartering (bareboat / time / voyage with specific conditions). Qualifying vessels: ocean-going commercial maritime activities. Recreational and fishing vessels excluded.
Per-vessel annual amount based on net tonnage using a tiered scale in the Schedule to Law 44(I)/2010. Tiers: up to 1,000 NT (lower band), 1,001-10,000, 10,001-25,000, >25,000 NT. Total annual tonnage tax is a fraction of what 15% CIT on actual profits would be.
Replaces standard Cyprus CIT on qualifying shipping profits. Doesn't replace VAT on non-shipping supplies, SDC on non-shipping income, social insurance on crew. Non-Dom 0% SDC still applies to non-dom-resident shareholders.
Strategic and commercial management of qualifying activity in Cyprus. Cyprus-tax-resident company with effective management & control. Training-and-employment commitments + EU-flag mix requirements per the EU Maritime Guidelines. Annual reporting to Department of Merchant Shipping.
— EVERYTHING INCLUDED
— PROCESS
Confirm vessel qualification, election eligibility, EU flag composition target, substance plan, tonnage-tax vs standard CIT comparison.
Cyprus Ltd 10 working days. Vessel registration with the Cyprus Department of Merchant Shipping (4-8 weeks). Flag change coordination if vessels currently under another flag.
10-year irrevocable election filed at the end of the first qualifying tax year. Substance setup (Cyprus office, Cyprus-resident director, board meetings, qualifying activities documented).
Annual tonnage-tax return to Cyprus Department of Merchant Shipping. Annual financial statements + IR4 (for non-qualifying income). Quarterly board meetings + minutes. Annual EU flag composition monitoring.
Every Cyprus shipping engagement we run ships with documented EU flag composition, qualifying-activity substance, and Cyprus Tax Department alignment. If a successful EU State Aid or Tax Department challenge invalidates the regime purely because of our own error, we redo the work at no cost.
— COMMON QUESTIONS
Cyprus's Pillar Two transposition (Law 165(I)/2024) includes a CARVE-OUT for tonnage-tax regimes — qualifying shipping income is EXCLUDED from the GloBE calculation. Cyprus tonnage tax remains effectively unaffected by Pillar Two top-up.
Shipowning: ≥75% (by tonnage) must be under EU member-state flag. Ship-management: ≥51% under EU flag. Non-EU-flagged vessels can constitute the remainder; case-by-case treatment available for justified non-EU flag use.
Generally no — recreational yachts and pleasure craft fall outside the tonnage-tax regime. Commercial chartering of large yachts (with appropriate certification + scale) may qualify case-by-case; specialist counsel needed.
No. The 2026 reform raised standard CIT from 12.5% to 15% but did not touch Merchant Shipping Law 44(I)/2010. Tonnage-tax rates and mechanics are unchanged.
Cyprus 0% outbound WHT on dividends regardless of recipient country. Cyprus-resident Non-Dom shareholder: 0% SDC on dividends. End-to-end the shareholder receives the dividend tax-free at the Cyprus level.
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