Ship management services means the services provided by a ship manager to an owner or bareboat charterer of a ship by virtue of a relevant written ship management agreement, relating to the crew management services and / or to the technical management services of the ship.
A ship manager who provides commercial management services will not be considered as a qualifying ship manager for such services and will be liable to pay income tax on the corresponding part of his income.
Income derived from the rendering of ship management services is subject to income tax at the ordinary rate of 12.5%.
In accordance with the provisions of the Merchant Shipping (Fees and Taxing Provisions) Law, and for the period ending December 2020, the ship manager has the option to pay tonnage tax at 25% of the rates applicable to ship-owners and charterers for the qualifying ships under management, instead of income tax on the income derived from the rendering of ship management services to such ships, provided certain criteria are satisfied.
These criteria include that the ship manager:
- is resident for tax purposes of Cyprus
- maintains a fully-fledged office in Cyprus with personnel sufficient in number and qualification (51% of whom should be EU/EEA citizens)
- manages at least 2/3 of the total tonnage of the qualifying ships in a given fiscal year from the territory of any EU/EEA member state
- has a fleet comprising for a sufficient part or with sufficient consistency of EU flag ships and complies with relevant international standards
Certain additional criteria may apply depending on the service provided.
A ship manager who has opted for application of the tonnage tax system must remain under this regime for at least 10 years. Early withdrawal will result in penalties and in such case the ship manager cannot return to the tonnage tax system until the initial ten year period has lapsed.
The above should be used as a source of general information only. It is not intended to give a definitive statement of the Law and is subject to the Disclaimer.
For further details on these issues, please do not hesitate to contact us.