Special type of companies
Special type of companies
Shipping companies
The new Merchant Shipping Legislation fully approved by the EU and in force as from 1 January 2010 provides for exemption from all direct taxes and taxation under tonnage tax of qualifying ship-owners, charterers and ship-managers, from the operation of qualifying EU/EEA (European Economic Area) ships (and foreign ships under conditions) in qualifying activities.
The legislation allows non EU/EEA vessels to enter the tonnage tax regime provided the fleet is composed by at least 60% EU/EEA vessels. If this requirement is not met, then non EU/EEA vessels can still qualify if certain criteria are met.
Exemption is also given in relation to the salaries of officers and crew aboard a Cyprus ship.
Ship-owners
The exemption applies to:
- profits derived from the use of the ships
- interest income relating to the working capital of the company
- profits from the disposal of qualifying ships
- dividends received from the above profits at all distribution levels
- profit from the disposal of ship owning companies
The exemption also applies to the bare boat charterer of a vessel flying the Cyprus flag under parallel registration
Charterers
Exemption is given to:
- profits derived from the operation of chartered ships
- interest income relating to the working capital of the company
- dividends received from the above profits at all distribution levels
The law grants the exemption provided that the option to register for Tonnage Tax is exercised for all vessels and provided a composition requirement is met (at least 25% – reduced to 10% under conditions – of the net tonnage of the vessels owned or bare boat chartered in).
Ship-managers
The tax exemption covers:
- Profits from technical/crew management
- Dividends paid out of these profits at all levels of distribution
- Interest income relating to the working capital of the company
In order to qualify ship-managers must satisfy the following additional requirements:
- Maintain a fully-fledged office in Cyprus with personnel sufficient in number and qualification
- At least 51% of all onshore personnel must be EU/EEA citizens
- At least 2/3 of total tonnage under management must be managed within the EU/EEA (any excess of 1/3 taxed under corporation tax)
The application of the tonnage tax system is compulsory for owners of Cyprus flag ships and optional for owners of non-Cyprus flag ships, charterers and ship-managers. Those who choose to enter the Tonnage Tax regime must remain in the system for at least 10 years.
Insurance companies
Profits of insurance companies are liable to corporation tax similar to all other companies except in the case where the corporation tax payable on taxable profit of life insurance business is less than 1, 5% of the gross premium. In this case the difference is paid as additional corporation tax.
International Collective Investment Schemes (ICISs) and Undertakings for Collective Investment in Transferable Securities (UCITs)
The sole object of an ICIS is the collective investment of funds of the unit-holders.
ICISs can take the following legal forms:
- International fixed capital company
- International variable capital company
- International unit trust scheme and
- International investment limited partnership
UCITs can take the following legal forms:
- Common Fund
- Variable Capital Investment Company