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Cyprus maritime sector benefits from new tax regime
Wednesday, March 24, 2010

The European Commission has approved under EU state aid rules a proposal by the Cypriot government to impose a special reduced tax on companies engaged in international maritime transport, which replaces the corporate tax. The Commission found that the scheme, which exists in several other EU countries, will enhance the competitiveness of the Cypriot fleet without unduly distorting competition.

The Cypriot government has notified a tonnage tax measure for companies engaged in international maritime transport and liable to corporate tax in Cyprus. The scheme allows companies to opt for a tax calculated on the net tonnage of the fleet that they operate (tonnage tax) instead of being taxed on the actual profits of their maritime transport activities. The tonnage tax scheme would also be applicable under certain conditions to tugboats, dredgers and cable-layers.

The Commission considers that the scheme is in line with the European Union's Guidelines on state aid to maritime transport. It also found strict ring-fencing measures will avoid any risks of tax evasion or spill-over of the benefits of the scheme to non-shipping activities. Finally, the scheme complies with the aid ceiling provided for in the Guidelines. The government has estimated that the annual cost of the measure would be €1.5 million.

The Commission authorised the scheme until 31 December 2019. It is aimed at supporting the shipping sector in Cyprus and other EU countries with a strong maritime sector have a similar scheme.

The Cypriot maritime industry is one of the largest in the EU and the 10th largest worldwide. Moreover, Cyprus is the biggest third party ship management centre in the EU. The European Commission has approved under EU state aid rules a proposal by the Cypriot government to impose a special reduced tax on companies engaged in international maritime transport, which replaces the corporate tax. The Commission found that the scheme, which exists in several other EU countries, will enhance the competitiveness of the Cypriot fleet without unduly distorting competition.

The Cypriot government has notified a tonnage tax measure for companies engaged in international maritime transport and liable to corporate tax in Cyprus. The scheme allows companies to opt for a tax calculated on the net tonnage of the fleet that they operate (tonnage tax) instead of being taxed on the actual profits of their maritime transport activities. The tonnage tax scheme would also be applicable under certain conditions to tugboats, dredgers and cable-layers.

The Commission considers that the scheme is in line with the European Union's Guidelines on state aid to maritime transport. It also found strict ring-fencing measures will avoid any risks of tax evasion or spill-over of the benefits of the scheme to non-shipping activities. Finally, the scheme complies with the aid ceiling provided for in the Guidelines. The government has estimated that the annual cost of the measure would be €1.5 million.

The Commission authorised the scheme until 31 December 2019. It is aimed at supporting the shipping sector in Cyprus and other EU countries with a strong maritime sector have a similar scheme.

The Cypriot maritime industry is one of the largest in the EU and the 10th largest worldwide. Moreover, Cyprus is the biggest third party ship management centre in the EU

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