An international maritime centre since antiquity, the strength, breadth and experience of Cyprus’ shipping sector is attracting quality tonnage and increasing numbers of first-rate shipping companies from around the world.
The maritime industry is one of Cyprus’ most successful export services, with the island considered one of the top global hubs for ship owning and shipmanagement services. The country’s maritime capital, Limassol, is home to some of the world’s most influential names in shipping. Today, Cyprus is the largest third-party shipmanagement centre in Europe and the largest crew management centre in the world, while the island’s international ship register is the third largest in Europe and the 11th largest in the world.
Strong Maritime History
Merchant shipping has long been of great importance to the island. A seafaring nation since antiquity and located along important trade routes, Cyprus has actively developed its shipping sector for decades. The international maritime industry began flocking to its shores in the early 1960s, when Cyprus introduced legislation providing ship managers and owners with a more tax-efficient business environment. This paved the way for the expansion of an industry that now contributes approximately €1 billion each year to the economy, accounting for over 7% of GDP (including auxiliary services) and directly employing 4,000 shore-based personnel and 55,000 seafarers from around the world. Cyprus has built up an exceptional maritime infrastructure and a high level of expertise, particularly in the fields of surveying, ship-brokering and maritime insurance, while the country’s legal, accounting, tax and IT professionals offer high-quality support services to the sector. In addition, Cyprus’ low corporation tax of 12.5% and its extensive network of Double Tax Treaties (DTTs) with 60 countries, make it a tax efficient business location.
A Flag of Progress
The Cyprus flag is considered one of the highest quality EU flags available today, and ranks at the top of various Port State Control Agreement ‘white lists’ – including the Paris and Tokyo MOUs. An important factor in the development of the industry has been the support and lobbying efforts of the Cyprus Shipping Chamber (CSC) – essentially the voice of the resident industry – and the efficiency of the Department of Merchant Shipping (DMS). Through continuous evaluation of the opportunities and challenges facing the sector, the DMS is determined to establish Cyprus as a five-star flag and to modernise its operations to better cater to shipping companies. Offering 24/7 support services and rapidly reacting to emergencies, while moving towards more sophisticated electronic and mobile communications as well as reinforcing its staff and supervisory ships in international ports, are all part of the DMS’ efforts to maintain Cyprus’ position as a key shipping hub. In order to combat the growing international threat of piracy, Cyprus also led the way as one of the first countries to approve detailed legislation allowing armed guards aboard Cypriot-flagged vessels in June 2012.
Through its attractive legislative and operational shipping infrastructure, Cyprus has the relevant advantages to develop into an even greater pole of attraction for top shipping companies, both from countries within and outside the EU. One of only two ‘Open Registries’ in the EU, Cyprus provides ship owners with considerable advantages in terms of the legal framework surrounding ship operations, such as crew recruitment, training and safety of seafarers and environmental protection policies – advantages that have direct implications for shipmanagement operations.
Cyprus’ low company set-up and operating costs and its advantageous tax framework continue to be a pull-factor for shipping companies. In a determined effort to ensure the industry’s competitiveness, the government introduced an upgraded, EU-approved, tonnage tax system (TT) in 2010, which enhanced the island’s reputation as a top location for ship managers, owners and charterers. A key benefit of the TT regime is the certainty it provides on the amount of annual payable tax. In addition, the regime covers a wide range of qualifying activities and vessels, and crew members of qualifying Cyprus-flagged ships (including parallel in registration) are exempt from income tax.
Largest Crew Management Centre Globally
Cyprus has a flourishing shipmanagement sector, with more than 130 shipowning, shipmanagement and shipping-related companies conducting their international operations and activities from Cyprus. It is estimated that approximately 5% of the world’s fleet and around 25% of global third-party shipmanagement activities are controlled from Cyprus. From the companies established in Cyprus, around 87% are controlled by EU interests, including Cypriot.
Cyprus has also become more attractive to Greek shipping professionals, with Greek shipowners and shipmanagement companies seeking to transfer part of their operations to Cyprus amid the uncertainty in the Greek economy. The share of revenue from Greece increased to 6% in the first half of 2015, from 2% the year before. Greek and Cypriot shipowners account for about 17% of the world tonnage, making the island a natural place to domicile much of this fleet and to build long-term business of substance. Brexit may also expand opportunities for Cyprus to attract companies forced to leave the City and move to another European country, with UK-regulated ship insurers preparing plans to open new outposts in EU jurisdictions. Several Greek ship-owners have already moved operations out of Britain, anticipating changes that could remove their favourable ‘non-domicile’ tax status.
An important benefit for shipping companies based in Cyprus is the ease with which they can source highly educated personnel. Shipping continues to be one of the highest paid industries in the country, providing a great opportunity to retain a highly trained workforce in a country still facing economic challenges and high numbers of unemployment.
In its efforts to tackle domestic unemployment, as well as to improve its shipping cluster, Cyprus launched the Cyprus Maritime Academy in 2016. Providing collective input from the private sector and renowned industry players, the Academy supports the Cyprus shipping industry by providing qualified junior officers on-board their vessels. The institution, which is under the umbrella of the University of Nicosia, has an aim to become an international training centre of excellence – educating top-notch crew for a continuously evolving and technologically advancing industry.
These efforts are expected to also help curtail the prospective global shortfall of seafarers by 2025, and place Cyprus firmly on the maritime map of the future. An added boost has come from new legislation providing tax incentives for high-earning expats, establishing Cyprus as a top location for foreign shipping executives – thus importing more expertise to the sector.
A Global Contender
Signatory to numerous international maritime conventions and with bilateral cooperation agreements with 23 countries, including major labour supplying countries, Cyprus is a strong global contender. The island’s active participation in various shipping related fora, such as The International Maritime Organization (IMO), the International Labour Organization (ILO) and the European Commission, ensure that the resident industry’s voice is heard internationally. The government has a continued commitment to the sector and fosters strong ties with industry associations, such as the Cyprus Shipping Chamber and Cyprus Union of Shipowners, and is determined to ramp up the promotion of this formidable sector. A pivotal element of these efforts is the biennial conference ‘Maritime Cyprus’, which was launched in 1989, and attracts around 800 shipping executives from around the globe every year. The event has grown into one of the world’s most significant shipping conferences, placing Cyprus in a prominent position to offer international shipping executives a platform to influence international policy and global shipping trends.
There is no question that global shipping was severely hit by the international financial crisis, but the fact remains that almost 90% of world trade is transported by the international shipping industry – and with recovery of economies worldwide prospects for the industry is set to grow further. Today, Cyprus has a robust shipping sector offering a solid tax framework and one of the widest scopes of coverage for shipping activities in Europe, through clear-cut separate inclusions of shipowning, shipmanagement and chartering. However, the key challenge for the industry remains the Turkish embargo on Cyprus-flagged vessels entering its ports. There are hopes that ongoing political dialogue will lead to a settlement in 2017, which would give renewed impetus to the sector. There is also tremendous potential for positive developments in the shipping industry due to the discovery of hydrocarbons in Cyprus’ EEZ as well as the wider Eastern Mediterranean region. Through its attractive shipping infrastructure, Cyprus has all the key advantages to attract more quality tonnage and increasing numbers of first-rate shipping companies from around the world in the years to come.
Updated: March 2017