Shipping - EYFILE/… · 4 The Shipping Industry in Cyprus 5 EY is a $28.7 billion . global leader...

Shipping Industry Cyprus

A successful journey continues

Shipping Industry Cyprus

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EY Globaly EY in Cyprus

Why Cyprus? Cyprus Tax Benefits

Shipping Service Offerings

The Shipping Industry in Cyprus

32 The Shipping Industry in Cyprus

inCyprus

EYEY in Cyprus has its origins dating back to the 1930s. Today the Cyprus practice is a leader in assurance, tax, transactions and advisory services. We operate through our offices in Nicosia and Limassol and we are part of EY’s Europe, Middle East, India and Africa Area and one of the 22 countries that comprise the Central and Southeast Europe Region.

Within this structure, we are able to tap into our skilled global experts to provide fast and exceptional service enabling our clients to make the right decisions. We are closely linked with EY’s dedicated global industry centres, for sharing industry-focused knowledge and experience. In this way we anticipate market trends, identify implications and develop clear points of view on relevant industry issues.

We serve as a trusted business advisor and auditor to a broad range of clients, from private individuals and entrepreneurial businesses to major public companies and large multinationals. We recognize that all our clients are on a unique journey and we work with them to create a tailored client experience that helps them achieve meaningful results.

Cyprus is an attractive location for the development of entrepreneurship and a distribution hub and gateway to investment in the European Union, Eastern Europe, Asia and Africa.

Our industry specializations in Cyprus cover Asset Management, Banking and Capital Markets, Consumer Products, Hospitality, Insurance, Oil & Gas, Power & Utilities, Real Estate, Retail, Shipping and Telecommunications.

We have created dedicated, multilingual, teams to serve entities engaged in international operations and do business wherever you are.

Whatever your industry, our local teams and global network of professionals can provide highly responsive advice that meets client’s assurance, tax, transaction and advisory needs.

1930’s

2016

With every client, in every sector, we work hard to achieve better working in all we do. Because when business, governments and people work better, the world works better. And it all starts with a question. The better the question. The better the answer.The better the world works.

governance

4 The Shipping Industry in Cyprus 5

EY is a $28.7 billion global leader and one of the world’s leading professional services firms, with over 212,000 people in 700+ locations across over 150 countries, organized into 28 Regions and four Areas.

EY Central and Southeast Europe(CSE)

EY globally


A global network

Central and Southeast Europe

Europe Middle East India Africa (EMEIA)

Central and Southeast Europe encompasses the following 22 countries:EY is a global leader in

assurance, tax, transaction and advisory services. Worldwide, our 212,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential.

Globally, we operate under common professional, ethical and independence standards. Our offices around the world use the same methodology and are linked through an integrated technology platform to enable instantaneous communication and collaboration among team members, regardless of location. Our approach towards global alignment is manifested in the set-up of five large geographic areas.

EY Central & Southeast Europe, one of EMEIA’s 12 regions, brings together the practices of 22 countries.

The EMEIA Area operates as a single unit, integrating country practices across Europe, the Middle East, India and Africa and uniting more than 91,000 talented people and 4,345 partners across 12 regions and 99 countries. It works closely with our Americas, Asia- Pacific and Japan Areas to provide a truly integrated global service.

This client-driven organizational approach enables us to optimize quality of services and operational efficiency while allowing for both strengthened central controls and fast local responsiveness.

• Malta

• Moldova

• Montenegro

• Poland

• Romania

• Serbia

• Slovakia

• Slovenia

• Turkey

• Albania

• Bosnia and Herzegovina

• Bulgaria

• Croatia

• Cyprus

• Czech Republic

• Estonia

• FYROM

• Greece

• Hungary

• Kosovo

• Latvia

• Lithuania

EY has been actively globalizing for a number of years, aligning our governance and management structures so that we can provide you with the same high quality service in each of the 150 countries in which we operate.

As a member of EY Global and linked to the Europe Middle East India Africa (EMEIA), Central and Southeast Europe operates as one entity with over 8,000 people throughout this area, ensuring a prompt and continuous cooperation of a team of experts, assisting clients to anticipate, define and solve issues that are vital to their successful presence in the area.

This ensures that we are ideally placed to exploit the exciting opportunities in the area and better cater to the needs of our clients in a wider geographic span.


EY has a long-term and deep commitment to the shipping industry, with a strong track record of service.

Companies that operate within the ever-changing and complex shipping environment need service providers that understand their operations and the business issues that accompany the wide-array of shipping specializations.

Like our shipping clients, EY shipping leaders have been in the industry through the highs and the lows. Thus, our approach and understanding of your challenges and complexities are from years of hands-on experience. The perspective we offer is not just about this moment in time, but in the context of a cyclical industry.

Our competitive advantage lies in our focus on shipping operations as a key practice in our firm, our passion for working with a well-recognized list of audit clients throughout all the industry’s sectors, and our depth of talent developed while providing services to the shipping sector.

In the shipping sector in particular, the excellence exhibited by EY in providing solutions has earned us an undisputed #1 position as a provider of audit services to the world’s top shipping companies:

Acergy Ardmore Shipping CorporationBritish Marine Clarkson PLCCMA CGM, S.A. COSCO Costamare Inc.Diana Shipping Inc.Diana Containers Inc.Dragnis - Group of CompaniesDryships Inc. Dynagas LNG Partners LPDockwise Shipping Eitzen Bulk (Denmark)Eletson Shipping CorporationEnesel S.A.Excel Maritime Holding Company LLCFostiropoulos - Group of shipping companiesGlobus Maritime Ltd.Golar LLG Ltd.Golar LLG Partners LPGoldenport Holdings Inc.GC Rieber ShippingHanjin Shipping Co Hoegh LLG Partners LPInchcape Shipping ServicesJo TankerK Line KlavenessKnot Offshore Partners LPLaliotis Group of shipping companiesLatsco ShippingLeif HoeghMaersk Mediterranean Shipping Company (MSC)Navios Maritime Midstream Partners LPNeptune Holding OverseasOdfjell TankersOnassis GroupParagon Shipping Inc.Pacific & Atlantic GroupPleiades Shipping AgentsPrime Marine (Flagship Marine Ventures)Pyxis Tankers Inc.Restis Group of shipping companiesRoyal Caribbean Cruise LineSeanergy Maritime Holdings Corp.Seamar Management S.A.Solstad

Sovcomflot groupStar Bulk Carriers Corp.Stena AB Stolt-Nielsen Target Marine Ltd.ThenamarisTri Bulk Shipping Ltd. Tsakos Energy NavigationTschude Shipping Unicom Management Services (Cyprus) LtdZIM

The shipping industry leader

Our Shipping experience globally

EMEIA (Europe Middle East India Africa)

Asia Pacific

Americas

China Shipping Co.China Water Co Ltd.CMA CGM (China) Shipping Co., Ltd.Dockwise Ltd.Eitzen Chemical Shipping and Tracking PteHanjin Shipping Co.K Line PteLeif HoeghMalaysia International Shipping Corp.MaerskNeptune Orient LinesNorth West Shelf Shipping Co Pty LtdPacific International LinesPioneer Shipping (Asia) Ltd.Regional Container LinesRoyal Caribbean LineTrans Pacific Container Service

APL Canadian Steamship LinesCMA CGM, USACMA CGM, MexicoDouble Hull Tankers Inc. FednavInternational Shipholding Corp.K lineNeptune Orient LinesOdfjell USAOverseas Shipholding GroupRoyal Caribbean LineSeacor MarineStolt-NielsenTeekay ShippingTalleres Navales Del Golfo S.A.Ultrapetrol United MaritimeVan Ommeren Shipping

#1 position in providing services to the shipping industry


EY draws on resources of experienced professionals dedicated solely to supporting our shipping clients

The Shipping Industry in Cyprus:

A successful journey continues...


The history of the Sea and Shipping in Cyprus traces back hundreds of years.

The island’s expert knowledge of sailing and trading was acquired through the many civilisations that conquered Cyprus in the ancient years, such as the Egyptians, Greeks, Romans, French, Venetians and British. Cyprus’ constant striving for perfection in the field of merchant shipping has also been naturally facilitated by its almost ideal geographic location, which is at the crossroads of three continents, Europe, Asia and Africa.

The extension and diversification of all possible avenues of shipping activity in Cyprus is to a large extend attributed to the country’s excellent shipping infrastructure, which was developed through the years by the Maritime Administration (the Ministry of Communications and Works, the Department of Merchant Shipping and the Ports Authority), the responsible government body for shipping in Cyprus, and the Cyprus Shipping Industry, which is represented by the Cyprus Shipping Chamber. All services, both public and private required by ship-owners and investors are not only well represented and organised, but also to the highest quality standards.

The Cyprus registry today, ranking tenth among international fleets - with 1,857 ocean going vessels of a gross tonnage exceeding 21 million- is continuously upgrading its services in order to offer a high standard of support to international shipping and a reputation of a “Flag of Progress”. Cyprus is a major shipmanagement centre worldwide with a total

of around 60 shipmanagement companies operating in its territory. Several of these companies rank among the largest of their kind in the world. Cyprus appears to be among the top five countries and territories in the world with the largest number of third party shipmanagement companies in its territory.

Cyprus participates actively in the different shipping related international fora such as The International Maritime Organization (IMO), the International Labour Organization (ILO) and the European Maritime Safety Agency (EMSA).Cyprus has been a member of the International Maritime Organisation since 1978 and a member of its Council since 1987. In addition, Cyprus participates actively in all Committees and Subcommittees of the Organisation, either through its High Commission in London or through well organised expert Delegations from Cyprus, mainly from the Department of Merchant Shipping which is the competent Department of the Ministry of Communications and Works on matters pertaining to ship safety, security and prevention of pollution from ships.

Cyprus through its very attractive legislative and operational shipping infrastructure has the advantages to develop into an even greater pole of attraction for first-rate shipping companies, both from countries within and outside the EU. In addition, the Cyprus flag, being in effect one of the only two “Open Registries” within the EU, attracts a large number of quality tonnage to Cyprus.

...10th largest fleet worldwide

~25% of the whole EU fleet

1st third party shipmanagement centre in the whole EU


The extension and diversification of all possible avenues of shipping activity in Cyprus is to a large extend attributed to the country’s excellent shipping infrastructure


Why

?Cyprus

European Union and European Monetary Union member state

Strategic location at the crossroads of three continents

Liberal Foreign Direct Investment Regime allowing up to 100% foreign participation in most sectors of the economy

No exchange control and freedom of movement of foreign currency

Favourable tonnage tax scheme approved by the EU

Various other tax incentives

EU flag

Bilateral Agreements of Cooperation in Merchant Shipping with 23 countries including major labour supplying countries

Low set up and operating costs for companies

High safety standards – included in the White List of Paris MOU and Tokyo MOU

One of only two “Open Registries” in EU

High quality services by the Department of Merchant Shipping

Cyprus ships’ inspectors cover all important ports worldwide

Signatory to numerous international maritime conventions

Modern and efficient legal, accounting and banking services based on English practices

Advanced telecommunications network and easy access by air and sea

Highly educated, qualified and multilingual personnel

Enviable quality of life

A Sovereign Flag - An International Maritime Centre

Ship owners whose ships are managed by Cypriot companies

23%

2%2%

5%

8%

2%4%6%

48%

� Germany� Curacao� Singapore

� Russia� Poland� Netherlands

� Norway� Marshall� Other

Source: Central Bank of Cyprus

EY Central and Southeast Europe

Tonnage Tax Regime at a Glance


TT Regime administration

TT rates

All qualifying charterers and managers as well as qualifying owners of foreign flagged vessels shall submit TT return and pay TT by 28 February every year (with regard to the previous tax year), i.e. for the tax year 2016 the TT return and TT payment are due by 28 February 2017.

Qualifying owners of Cyprus flagged vessels shall submit TT return and pay TT by 31 March every year (with regard to the current tax year), i.e. for the tax year 2016 TT return and TT payment are due by 31 March 2016. Penalty for overdue TT – 10% of the amount of TT for every year of delay or part thereof.

As of 2010, the new Tonnage Tax (‘TT’) regime applies to the qualifying ship owners, ship charterers and ship managers of qualifying ships engaged in qualifying activities. The qualifying ship owners, managers and charterers under TT Regime are exempt from income tax on their shipping activities such as:

• Exploitation of a qualifying (chartered) ship in a qualifying shipping activity or rendering crewing and/or ship management services to any qualifying ship

• Disposal of a qualifying ship or interest or share in the qualifying ship

• Disposal of shares in a ship owning company

• Dividends paid (directly or indirectly) out of the profits described above

• Bank interest earned on working capital or shipping revenue, provided that the said working capital or shipping revenue is used to pay expenses arising to the qualifying person out of the qualifying activity

The European Commission considered that the new TT regime is in line with the European Union’s Guidelines on State Aid to maritime transport and authorised the TT regime until 31 December 2019.

Units of net tonnage Rate per 100 units of net tonnage

Ship owners/charterers Ship managers

0 - 1,000 €36,50 9,13

1,001 - 10,000 €31,03 7,76

10,001 - 25,000 €20,08 5,02

25,001 - 40,000 €12,78 3,20

in excess of 40,000 €7,30 1,83 Any residual tonnage of less than 100 units of net tonnage shall be charged proportionally.

TT benefit

Ship owners of community flag ships and foreign flag ships may opt to be taxed under the tonnage system

A charterer who charters a ship under BB, demise, time or voyage is eligible for the TT system provided it satisfies certain criteria

A ship manager who provides crew and/or technical ship management services is eligible for the TT system provided it satisfies certain criteria

Why use Cyprus Ship Registry?

One of the largest registries in the EU and worldwide

Availability of provisional registration (valid for 6 months)

Availability of two forms of parallel (bareboat) registration enabling chartered ships to be registered under two flags for a period of time

Competitive registration feesAdvantages of TT Regime

• Certainty as to the amount of tax payable each year

• Wide range of qualifying activities

• Wide range of qualifying vessels

• Crew members of qualifying Cyprus flagged (including parallel in registration) ships are exempt from income tax

• Submission of TT returns can be effected electronically

TT Regime can be easily used alongside income tax if both qualifying and non-qualifying activities are conducted.


Tax incentives for expatriate employees taking up employment in Cyprus

- 50% exemption of remuneration from any office or employment exercised in Cyprus that exceeds €100.000 per annum by an individual who was not tax resident of Cyprus prior to the commencement of employment (applicable for 10 years)

- 20% exemption with a maximum of €8.550 of remuneration from any office or employment exercised in Cyprus by an individual who was resident outside Cyprus before the commencement of his employment (applicable for 5 years, until 2020 inclusive)

Stamp duty exception on contracts in relation to Cyprus flag vessel

‘Non-dom’ rules for Cyprus tax resident not domiciled in Cyprus. Any interest, rents or dividends (whether actual or deemed) regardless of whether such income is derived from sources within Cyprus and regardless of whether such income is remitted to a bank account or economically used in Cyprus, is exempt from special defence contribution.

Notional Interest Deduction for new equity

Tax neutrality of foreign exchange differences

12,5%Corporate tax rate – One of the lowest in the EU

Tax exempt income includes: - Dividends (conditionally) - Profit from the sale of shares

and other qualifying securities (unconditionally)

- Profit from disposal of vessels - Profit attributable to foreign PE

(conditionally)

Extensive Double Tax Treaties network

Access to the EU directives

No thin-capitalization rules or D/E ratios

No withholding taxes on payments to non-residents (apart from royalties paid for IP economically utilized in Cyprus)

Company reorganisation rules ensuring tax neutrality for group restructuring transactions (conditionally)

No exit taxation rules (in general)

Capital Gains Tax only on gains from direct and indirect sale of real estate situated in Cyprus or sale of shares owning real estate situated in Cyprus (exemption applies if shares are listed on recognized stock exchange)

IP Box regime: effective tax rate of 2.5% on profits from the use and sale of qualifying intangible assets

Tonnage Tax regime

Low transaction taxes

Possibility to obtain tax rulings in advance by the tax authorities provides flexibility and minimization of tax risk

Cyprus Tax Benefits

Our Shipping Service Offerings


Sailingwith You

EY has a long-term and deep commitment to the shipping industry, with a strong track record of service.

Companies that operate within the ever-changing and complex shipping environment need service providers that understand their operations and the business issues that accompany the wide-array of shipping specializations.

Like our shipping clients, EY shipping leaders have been in the industry through the highs and the lows. Thus, our approach and understanding of your challenges and complexities are from years of hands-on experience.

The perspective we offer is not just about this moment in time, but in the context of a cyclical industry.

Main ServicesAssurance Services

• Financial Statements Audit• Financial Accounting Advisory

Services• Assistance during the IPO process• Fraud Investigation and Dispute

Services• Climate Change and Sustainability

Services• Accounting Compliance Services

Tax Advisory & Compliance Services

• Business Tax Services• Transaction Tax• Indirect Tax• Human Capital• International Tax Services (ITS)• Tax advice in relation to planning

of investments in shipping through holding structures

• Tax advice related to the tonnage tax regime

Transaction Advisory Services

• Valuations and Business Modelling

• Restructuring• Transaction support• M&A Advisory• Project Finance

Advisory Services

• Enterprise Intelligence & Data Analytics

• Performance Improvement• Risk• Service Organization Controls

Reporting (e.g., ISAE 3402/SSAE 16, ISO 27001)

• Information Security• IT Internal Audit• Financial Services Risk

Management • Actuarial Services

Global Compliance and reporting

• Establishment and set up of legal entities

• Corporate Secretarial Support Services

• Administration Services• Accounting Services• Payroll Administration and

personnel related services• Tax and VAT services

Shipping Law

Our Firm renders its legal services to ship owners, ship managers, carriers, maritime security companies, freight forwarders, underwriters and cargo claimants with respect to the following matters:

• Cyprus Ship Registration• Cyprus tonnage tax scheme

assistance and advice• Charterparties• Cargo recovery and defence• Law of the Sea• Passenger & cruise ship• Piracy and Maritime Security• Pollution• Protection & Indemnity Insurance• Salvage• Pollution• Collisions• Ship arrests• Shipbuilding,

conversion & repair• Ship finance and sale

& purchase• Yachts & Superyachts

Your wor

ld

EY World

Shared worldcollaborationto make your working world

better strength


Our Global Shipping Capability

Importance of shipping sector

Speeches /Exhibitions / Events

Resources /Databases

Publications on the shipping industry

►EY provides comprehensive advisory services in restructuring cases, M & A situations and on accounting issues in the maritime sector.

►We have an established “Global Shipping Competence Center” in Hamburg, Germany. ►Clients include liner and charter companies, ship owners, issuing houses and financial institutes.

►EY has been the exclusive maritime advisor to the German government since 2011.

We conduct yearly International Shipping Conferences with executives of shipping companies including:

►• EMEIA Shipping Experts Workshop

►• Maritimes dinners inviting executives of the industry

►• Various Shipping-Workshops: accounting, assessment and taxes with representatives

►• Speeches / panel discussions at various maritime conferences,

e.g. Marine Money, Capital Link

►• Clarksons Shipping Intelligence Network / extensive market and company database

►• Maritime Strategies International (MSI) / mathematical model for industry leading forecasts

►►• Drewry Shipping Consultants►►• Lloyd’s List, Tradewinds etc.

Shipping Industry Almanac:Extensive, yearly updated handbook containing worldwide country - specific shipping-data.

Thought Leadership Paper: All at sea – how can shipping stay afloat? Overview on current challenges of the industry and potential approaches for solutions.

Thought Leadership Paper: Drydocking in rough sea – Shipyards at the crossroads. An analysis of the worldwide shipbuilding sector focusing on required reorganizations.

Thought Leadership Paper: Yet another wave – shipping industry in distress.

Capital Agenda Insights: Running aground: restructuring an equity - starved shipping industry.

Contact Persons

Stavros PantzarisCountry Managing Partner [email protected] Tel: +357 22 209 999

Philippos RaptopoulosHead of Tax Services [email protected] Tel : +357 25 209 999

Stelios Demetriou Head of Transaction Advisory [email protected] : +357 22 209 999 Charalambos ConstantinouHead of Advisory Services [email protected] : +357 22 209 999

Offices

Nicosia OfficeJean Nouvel Tower 6 Stasinou Avenue P.O. Box 21656, 1511 Nicosia Tel: +357 22 209 999 Fax: +357 22 209 998 Limassol OfficeErnst & Young House 27 Spyrou Kyprianou Mesa Geitonia, 4003 Limassol, Cyprus P.O. Box 50123, 3601 Limassol, Cyprus Tel: +357 25 209 999 Fax: +357 25 209 998

EY | Assurance | Tax | Transactions | Advisory

About EY

EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.

© 2016 Ernst & Young Cyprus Ltd.All rights reserved.

This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice.

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Shipping - EYFILE/… · 4 The Shipping Industry in Cyprus 5 EY is a $28.7 billion . global leader...

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