The European Commission (EC) has approved a proposal by the Cypriot government to impose a tonnage tax on shipping companies which replaces the corporate tax.
The EC said the tonnage tax scheme, which exists in a number of other member countries, would “enhance the competitiveness of the Cypriot fleet without unduly distorting competition”.
The Cyprus Shipping Chamber said the decision was “the most important success for Cyprus shipping since the formation of the republic”.
Tonnage tax allows companies to opt for a levy calculated on the net tonnage of the fleet they operate, instead of being taxed on the profits of their maritime transport activities.
It is expected that a large number of shipping companies, both within and outside the EU, will seek to benefit from Cyprus’s new taxation system by establishing shipping offices on the island.
The EC said strict ring-fencing measures would avoid any risks of tax evasion or spill-over of the benefits of the scheme to non-shipping activities.
The government has estimated that the annual cost of the measure, authorised by the EC until 31 December 2019, would be €1.5 million.
The Cypriot maritime industry is one of the largest in the EU and the 10th largest worldwide, while Cyprus is the biggest third-party ship management centre in the EU, according to the EC.
The EC said the tonnage tax scheme, which exists in a number of other member countries, would “enhance the competitiveness of the Cypriot fleet without unduly distorting competition”.
The Cyprus Shipping Chamber said the decision was “the most important success for Cyprus shipping since the formation of the republic”.
Tonnage tax allows companies to opt for a levy calculated on the net tonnage of the fleet they operate, instead of being taxed on the profits of their maritime transport activities.
It is expected that a large number of shipping companies, both within and outside the EU, will seek to benefit from Cyprus’s new taxation system by establishing shipping offices on the island.
The EC said strict ring-fencing measures would avoid any risks of tax evasion or spill-over of the benefits of the scheme to non-shipping activities.
The government has estimated that the annual cost of the measure, authorised by the EC until 31 December 2019, would be €1.5 million.
The Cypriot maritime industry is one of the largest in the EU and the 10th largest worldwide, while Cyprus is the biggest third-party ship management centre in the EU, according to the EC.