The Merchant Shipping Legislation in 1963 effectively was the milestone in making Cyprus one of the leading maritime centres of the world.
The Cyprus Merchant Shipping (Registration of Ships, Sales and Mortgages) Law 1963 is basedon the English Merchant Shipping Acts of 1894 to 1954.
The procedure for the registration of vessels under the Cyprus flag are contained in the Act. The Act also governs the registration of mortgages on Cyprus flagged vessels. For a ship to be registered in Cyprus, she must be owned by a Cyprus legal entity. In order to register a ship under the Cyprus flag certain requirements must be satisfied. Firstly, 50% of the shares in the ship must be owned:
1) by Cypriots; or
2) by a Cyprus registered company irrespective of whether such a company is totally owned by aliens; or
3) with special permission of the Council of Ministers, by a foreign corporation in which Cypriots have a controlling interest.
Secondly, the ship must be under seventeen years of age, or if over seventeen, up to twenty years of age provided that:
a) the ship undergoes a special inspection; or
b) the vessel is managed from Cyprus.
Where the ship is between twenty and twenty-three years of age, it may be registered provided:
1) the beneficial owner has at least another two vessels registered under the Cyprus flag, each having a gross tonnage of over 1000 tons, with a good safety record, and whose average age, including the vessel to be registered, does not exceed seventeen years, or, its beneficial owner is Cypriot who, in the situation he resides abroad, fully manages his vessel;
2) the vessel undergoes a special inspection;
3) the vessel is managed from Cyprus. Where the ship is over twenty-three years of age, it may be registered provided:
a) it is owned by Cypriots permanently residing in Cyprus or by a Cypriotcompany;
b) the vessel undergoes a special inspection;
c) the vessel is managed from Cyprus.
While waiting for permanent registration, which will take place after all the administrative formalities have been completed, a provisional registration procedure is available. Such provisional registration will allow time for all the administrative formalities of permanent registration, while in the meantime the ship will be registered under the Cyprus flag.
The approval of the Minister of Communications and Works is required for provisional registration. However, provisional registration is possible of taking place in countries where Cyprus has an Embassy, High Commission, Consulate or Honorary Consul. Provided all the necessary documents, details and safety confirmation certificates are provided, provisional registration usually takes place within 10 days.
Once a ship is provisionally registered, permanent registration must take place within six months. However, an extension period of three months is available upon application.
Taxation of shipping companies
Shipping companies are virtually exempt from any type of tax. Furthermore, Offshore shipping companies and their foreign employees are entitled to maintain foreign currency accounts and may transfer their income abroad after payment of all necessary taxes.
-they pay no income tax on profits or dividends;
-they pay no estate duty;
-no capital gain is considered to arise from the sale or transfer of ownership of any ship or shares in a shipping company;
-emoluments of seamen employed on board Cyprus ships are exempt from tax;
-dividends distributed to shareholders of offshore ship management companies attract no tax;
-seamen employed by Cyprus offshore ship management companies on board foreign flag ships or in respect of services on board Cyprus flag ships managed by them pay no tax in respect of emoluments received by them. To qualify for tax exemption in respect of foreign flag ships, the emoluments must be paid through a bank operating in Cyprus.
-foreign employees of offshore shipping companies who derive their income from outside Cyprus are taxed at 10% of the normal tax rates applicable in Cyprus. If they receive their emoluments in Cyprus then they are totally exempt from tax.
-foreign employees of offshore shipping companies who work within Cyprus, are taxed at half the rate of tax.
With regards to a ship sailing under the Cyprus flag, it is exempt from tax in respect of all profits, dividends, capital gains tax and estate duty arising from shipping activities.
On confirmation of instructions, Chambers & Co undertake to register a Cyprus company which will own the ship. At the same time, an application is made to the Department of Merchant Shipping for the registration of the ship in the Cyprus Registry. Apart from the company’s certificates, the following documents accompanying the application are required:
1.A duly legalised Bill of Sale, by which the owner has acquired title to the ship.
2.Resolutions of the company’s board sanctioning the purchase of the ship and her registration under the Cyprus flag.
3.A Power of Attorney authorising an Attorney, to execute all necessary documents on behalf of the ship-owning company.
4.Declaration of Ownership (form M.S. 53).
5.Memorandum as to the Ship’s Husband (form MS 10).
6.The application for a radio license for the ship.
7.Deletion Certificate from the previous registry where appropriate.
8.Copy of the agreement signed with the ship’s International Radio Accounting Authority.
Provisional and Permanent Registration
Chambers & Co undertakes both the provisional and permanent registration of ships. Provisional registration of a ship in the Cyprus Registry is an option taken by some owners who require time (they have up to nine months) during which to complete the necessary administrative formalities before permanent registration can be effected.
Parallel registration is also available in Cyprus. Cyprus legislation provides for the two forms ofinternationally accepted bareboat registration: “Parallel in” and “Parallel out” registration. “Parallel in” registration allows a foreign flag vessel on bareboat charter to be registered in “parallel” under the Cyprus flag for a period of up to 2 years, which is renewable. “Parallel out” registration allows a Cyprus flag ship to be bareboat chartered to a foreign person orcompany and registered “parallel” in a foreign register for the duration of the charterparty.
Admiralty jurisdiction in Cyprus is exercised by the Supreme Court of Cyprus which, in accordance with Section 19(a) of the Courts of Justice Law has: “exclusive original jurisdiction as a Court of Admiralty vested with and exercising the same powers and jurisdiction as those vested in or exercised by the High Court of Justice in England in its Admiralty jurisdiction on the day immediately preceding Independence Day…”. A claimant before the Cyprus Admiralty court has a choice of whether to proceed by way of an action in personam or an action in rem. An action in rem is particularly effective for the protection of claims as it can provide security by arresting a ship situated within the Jurisdiction of the Cyprus Admiralty Court. Maritime lien is also another concept common to Cyprus law which recognises and uphold the same causes, giving rise to maritime liens, identical to those under English law.
Admiralty litigation in Cyprus has also considerably increased proportionally to the ever-increasing importance of Cyprus as a world shipping centre.
The bulk of the shipping related litigation work Chambers & Co undertakes is claims on behalf of cargo owners against the ship and for salvors in salvage actions. We also receive a substantial number of instructions from ship owners in collision and charterparty and bill of lading disputes.