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1. Overview
The Tonnage Tax System (TTS) for Cyprus merchant shipping was first approved by the European Commission as compatible with the requirements of the EU acquis, in accordance with the relevant guidelines on State Aid to Maritime Transport.

Qualifying owners of Cyprus and foreign ships, charterers and ship managers who opted and are accepted to be taxed under the TTS are subject to an annual tax referred to as tonnage tax, which is calculated on the basis of the net tonnage of the qualifying ships they own.

2. Prerequisites
Beneficiaries and Eligibility Requirements
The TTS is available to any owner, charterer or ship manager who owns, charters or manages a qualifying ship in a qualifying shipping activity.

2.1 Owners of Cyprus Ships
Eligible for the TTS is: an owner of a Cyprus ship who owns a qualifying ship which is engaged in a qualifying shipping activity.

Owners of Cyprus ships fall automatically within the scope of the TTS.

2.2 Owners of Foreign Ships
Eligible for the TTS is an owner of a foreign ship, who:
(i) is a tax resident of the Republic of Cyprus
(ii) has opted to be taxed under the TTS and
(iii) owns a qualifying ship, which is
(iv) engaged in a qualifying shipping activity.

Furthermore, the owner of foreign ships must comply with the following requirement: “Community-Flagged Share” Requirement.

2.3. Charterers
Eligible for the TTS is a charterer who charters ships under bareboat, demise, time or voyage charter and:
(i) is a tax resident of the Republic of Cyprus
(ii) has opted to be taxed under the TTS and
(iii) charters a qualifying ship, which is engaged in a qualifying shipping activity.

Furthermore the charterer must comply with the following requirements:
(i) Minimal Share of the Fleet in Ownership - Percentage of Chartered-in ships
(ii) “Community-Flagged Share” Requirement.

2.4. Ship Managers
Eligible for the TTS is a ship manager who:
(i) is a tax resident of the Republic of Cyprus
(ii) has opted to be taxed under the TTS
(iii) provides ship management services (crew and/or technical management) to qualifying ships and meets at any time the following requirements:
(a) Maintains a fully fledged office in Cyprus;
(b) Employs a sufficient in number and qualifications personnel;
(c) At least 51% of the total number of its personnel must be EU/EEA citizens;
(d) “Community-Flagged Share” Requirement;
(e) Economic link of managed ships with the Community (EU/EEA) - The “2/3 Rule”;
(f) Provision of crew management services in accordance with the MLC 2006 requirements for crew managers
(g) Certified under the ISM Code (DOC) by the competent authority of the flag States of the ships under its technical management

3. General provisions
3.1 Declaration for Taxation
Qualifying owners of foreign ships, qualifying charterers and qualifying ship managers are obliged, between the 1st January and 28th February of the next year following the fiscal year, to submit to the Permanent Secretary a Declaration for Taxation (the “Declaration”- Form MS TT 2 A/B/C) of the object of the tax and to pay the calculated amount according to the Declaration.

3.2 The Electronic Tonnage Tax System (eTTS)
An Electronic Tonnage Tax System (eTTS) has been prepared for the electronic submission of the tables containing information about the ships owned/chartered/ managed, which accompany the Application to enter the TTS and the Tax Declaration for every fiscal year electronically.

The eTTS can be accessed through the Deputy Ministry’s website.

Qualifying owners of foreign ships, qualifying charterers, and qualifying ship managers must use their access code and password provided to them when exercising their option for admission to the TTS (see Chapter 4) every time they want to access the eTTS.

3.3 Owners of Cyprus Ships
Terms of Payment
The tonnage tax is payable on 31st March each year. In case of deletion of a ship before this date, the tonnage tax is payable on the date of deletion. Late payment results in an additional annual fee of ten percent (10%) on the chargeable and leviable amount of tonnage tax for every year of the delay or part thereof, until the final discharge of the chargeable and leviable tax.

In case of deletion of the ship from the Cyprus Register before the expiration of the year for which tonnage tax has been paid for, the amount paid in excess shall not be reimbursed to the owner.

Tonnage Tax payable on Provisional Registration
At the time of the provisional registration of a vessel, tonnage tax for 6 months is payable.
For extending the period of the provisional registration of a vessel under the Cyprus flag for a maximum period of 3 months, tonnage tax for 3 months is payable.

Tonnage Tax payable on Permanent Registration
In case of a direct permanent registration of the ship, there shall be charged, levied and collected the tonnage tax corresponding to the non-expired part of the year, during which the permanent registration of the ship takes place.

Tonnage Tax payable on Parallel Registration (bareboat Registration)
The tonnage tax of ships registered in parallel is payable in advance for the entire period of the parallel (bareboat) registration and is not reimbursed even if the parallel registration is terminated earlier.

Cyprus Registry Maintenance Annual Fee
An annual fee of €300 is payable by the registered owner of every Cyprus ship. This fee is payable in advance on registration of the ship in the Cyprus Register and for subsequent years shall be payable together with the tonnage tax of the ship on 31st March of each year.
The annual fee is not refundable in case the ship is deleted from the Cyprus Register before the lapse of the year for which the annual fee was paid.

4. Legal Reference and Index of Forms

  • The Merchant Shipping (Fees and Taxing Provisions) Laws of 2010-2020.
  • The Merchant Shipping (Taxation and Ship Management Services) Regulations of 2000.

CYPRUS TONNAGE TAX SYSTEM INDEX OF FORMS
MS TT 1 : Application for Approval of the Option to be Taxed under the Cyprus Tonnage Tax System.
MS TT 2A Declaration for the Taxation of Owners of Foreign Ships
MS TT 2B: Declaration for the Taxation of Charterers
MS TT 2C: Declaration for the Taxation of Ship Management Services
MS TT 3 (EN): Statement Relating to Qualifying Towage Activities for Tonnage Tax (Schedule I, P.I. 353/2010)
MS TT 4 (EN) : Statement Relating to Qualifying Dredging Activities for Tonnage Tax (Schedule II, P.I. 353/2010)
MS TT 5 (EN) : Statement Regarding Compliance of a Qualifying Crew Manager with the obligation of Providing Financial Security for Liability for Claims in the event of Death or Long-Term Disability of Seafarers by virtue of the MLC Convention (Schedules I, P.I. 511/2010)
MS TT 6 (EN) : Statement of a Qualifying Crew Manager Regarding the Obligation to Conclude Private Contractual Arrangements for Compliance with the MLC Convention Provisions (Schedules II, P.I. 511/2010)
MS TT 7 : Statement Regarding the ISM Certification of Ship Managers Providing Technical Ship Management Services (Document Of Compliance)
MS TT 8: Declaration of Owner of a Cyprus Ship
MS TT 8 Α: Declaration of Owner of a Cyprus Ship (Physical/ Natural Person)
MS TT 8 B : Declaration of Auditors / Legal Representative of an Owner of Foreign Ships Admitted to the Tonnage Tax System
MS TT 8 C : Declaration of Auditors / Legal Representative of a Charterer Admitted to the Tonnage Tax System
MS TT 8 D : Declaration of Auditors of a Ship Manager Admitted to the Tonnage Tax System

All forms can be found in the relevant Tonnage Tax System webpage.

5. Assistance Services
Εliza Neophytou (eneophytou@dms.gov.cy);
Nicolas Ioannou (nioannou@dms.gov.cy)
Marilena Papoui (mpapoui@mof.gov.cy)
Andri Louca (alouca@mof.gov.cy)
Olia Mavroude (omavroude@parliament.cy)

6. Links/Further Information