The Advantages Of Registering A Yacht In Cyprus – Marine/ Shipping

According to 2023 data from the Cyprus government, the
Cypriot merchant fleet ranks among the 10 largest fleets in the
world and it ranks 3rd in the European Union, comprising 12? of the
total fleet of the 27 Member States of the EU. It has 1,857
ocean-going vessels of a GT exceeding 21 million.

Being one of the smaller Member States of the EU, Cyprus
possesses an enviable geographical location and a long tradition in
the maritime sector, which is immensely impressive for any
observer.

All matters relating to the registration of ships and the
related transactions in the Register of Cyprus Ships or in the
Special Book of Parallel Registration are governed by the Merchant
Shipping (Registration of Ships, Sales and Mortgages) Law of 1963,
as amended from time to time to maintain relevance to changing
conditions.

Cyprus has developed and maintained a favourable system
worldwide and it is considered among the US and European countries
to have a high quality compliance system. This often enables
vessels flying the Cyprus Flag to have fewer issues with security
and scrutiny, one of the bigger advantages of the shipping and
yacht sector in Cyprus.

Below are the main features and advantages of registering a
yacht in Cyprus – the AGP Law team can assist with further
explanations of each element upon request:

• Low registration cost;




• No tax on profits from the operation;




• No income tax on the wages of crew;




• Favourable tonnage tax scheme;




• No stamp duty on ship mortgage;




• Maritime offices around the world;




• Mortgage protection for lenders;




• EU flag;




• Classification of the Cyprus flag in the White List of the
  Paris and Tokyo Memorandums of Understanding (MOUs) and exclusion
  from the “List of Targeted Flag States” of the US Coast
  Guard resulting in fewer inspections of the ships and less delays
  at the ports of both MOUs and of the US;




• Maritime offices in New York, London, Rotterdam, Piraeus,
  Brussels and Hamburg offering services to Cyprus ships;




• A network of local inspectors of Cyprus ships, covering
  important ports worldwide in order to ensure efficient and
  effective control of Cypriot vessels and to avoid detentions by
  port state control;




• Signatory to all international maritime conventions on safety
  and pollution prevention;




• Bilateral agreements with 26 countries, through which Cypriot
  ships receive either national or favoured nation treatment in the
  ports of other countries. Those agreements with labour supplying
  countries provide for specific terms of employment which are
  beneficial to both the shipowners and the seafarers;




• Efficient and qualitative provision of services by the
  Department of Merchant Shipping.

Conditions of Ownership:

A vessel may only be registered in the Register of Cyprus Ships
if:

More than fifty percent (50%) of the shares of the ship are
owned:

• by Cypriot citizens; or




• by citizens of other Member States who in the instance of not
  being permanent residents of the Republic will have appointed an
  authorised representative in the Republic of Cyprus; or

The total (100%) of the shares of the ship are owned by one or
more corporations, which have been established and operate:

• in accordance with the laws of the Republic of Cyprus and have
  their registered office in the Republic; or




• in accordance with the laws of any other Member State and have
  their registered office, central administration or principal place
  of business within the European Economic Area and which will have
  either appointed an authorized representative in Cyprus or the
  management of the ship is entrusted in full to a Cypriot or a
  Community ship management company having its place of business in
  Cyprus; or




• outside Cyprus or outside any other Member State but controlled
  by Cypriot citizens or citizens of Member States and have either
  appointed an authorised representative in Cyprus or the management
  of the ship is entrusted in full to a Cypriot or a Community ship
  management company having its place of business in Cyprus. The
  corporation is deemed to be controlled by Cypriots or citizens of
  any other Member States when more than fifty percent of its shares
  are owned by Cypriots or citizens of any other Member States or
  when the majority of the Directors of the corporation are Cypriot
  citizens or citizens of any other Member State.

Mortgages on Vessels:

Once a ship has been registered under the Cyprus flag, a
mortgage can be created thereby securing a loan or other financial
obligations on conditions agreed to by the parties, without the
need for exchange control permission. The creation of a mortgage
under Cypriot laws is not allowed on vessels registered parallel-in
in the Register of Cyprus Ships.

Age Limit of Vessels:

Vessels of any size and type may be registered in the Cyprus
Register of Ships or the Special Book of Parallel Registration as
long as they comply with the provisions contained in the merchant
shipping legislation and the circulars of the Department of
Merchant Shipping (DMS) and satisfy certain conditions according to
their age and type.

Recognised Classification Societies:

It should be noted that the vessel must be classed with one of
the classification societies that the Cypriot Government
recognises. These are ABS, BV, CCS, DNV GL, KR, LR, NK, PRS, RINA
AND RS.

Different Types of Registration Available:

• Provisional Registration of a ship may remain in force for six
  months. Thereafter, it may be renewed once, for a further three
  months.




• Permanent Registration. The permanent registration of a
  provisionally registered vessel must be effected within 6 months
  (or 9 months if the 3 month extension has been obtained) from the
  date on which it was provisionally registered.




• Parallel (Bareboat) Registration: The Cyprus legislation
  provides for the two forms or bareboat registration internationally
  accepted e.g. the “Parallel-in” registration and the
  “Parallel-out” registration of vessels, provided certain
  prerequisites are fulfilled. The Parallel-in registration offers
  the possibility to a foreign flag vessel on bareboat charter to a
  Cyprus Shipping company to be registered in parallel under the
  Cyprus flag for a period, usually of 2 years. The Parallel-out
  registration offers the possibility to owners of Cyprus ships to
  bareboat charter them to a foreign person or company and to effect
  a “Parallel” registration in a foreign register for the
  duration of the charter part.

VAT and Yacht Ownership

An often overlooked but important consideration, new guidelines
establish the Cyprus yacht VAT policy using the VAT Leasing Scheme.
Under the scheme, yacht registration in Cyprus leads to VAT rates
as low as 3.4% of the principal value of the yacht. Even other
favorable jurisdictions, such as Malta, do not have effective VAT
rates this low.

Through the scheme, a Cypriot company may purchase a yacht and
join a lease-sale agreement involving the yacht and a third party.
This third party may be an individual or a company from any
jurisdiction.

Using this method establishes the service as within Cyprus, and
only VAT is due on the lease at a rate of 17%, but only payable on
the leasing portion in which the yacht is within EU waters. While
it may seem difficult to calculate the exact duration of time spent
within EU waters, VAT authorities have created a percentage scale
to determine “presumed” duration. Most 24+ meters sailing
vessels are deemed in EU waters 20% of the time and therefore
reduce the VAT rate to 3.4%.

In addition to the above, yachts are not required to come to
Cyprus and the leases must not exceed a period of 48 months.

Only one company is necessary for the scheme. The yacht may be
“bought” by a Cyprus company, often deemed as a loan, and
then the company leases the yacht back to the original owner. Using
this process, yacht registration in Cyprus does not need to be
changed. Although one stipulation of the scheme is that qualifying
yachts need to have a T2L certificate stating that it was
manufactured in the EU.

Conclusion

It can be thus clearly seen that yacht registration in Cyprus
offers a vast number of benefits for the registration, management,
and operation of vessels. High-end marina developments are making
waves in the boating community worldwide and reported in the Cyprus
and international media and various maritime conferences and boat
shows and put yacht owners in the heart of an historic but highly
contemporary EU culture, landscape, and lifestyle which is truly
enviable.

A.G. Paphitis & Co LLC

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.