Cyprus is considered to be one of the most popular business centers in the EU and worldwide, due to the country's taxation system and legal framework, which is based on the English Common Law. The shipping industry has marked a spectacular growth in the past few decades, ranking Cyprus as the 3rd lobby in the EU and the 10th internationally. In fact, the island's strategic position bridging 3 continents, makes it particularly accessible and business friendly.
Ship registration in Cyprus and all related transactions are governed by the Merchant Shipping (Registration of Ships, Sales and Mortgages) Laws of 1963 and 2005 (Law 45/1963 as amended) and complies to all provisions of the Government Policy on the Registration of Ships under the Cyprus flag. The procedure is effectuated at the Registrar of Cyprus Ships, which is situated at the Head Office of the Shipping Deputy Ministry of Cyprus and according to the Advocates Law of Cyprus, must be operated by a Cyprus lawyer.
A) Vessel Registration in Cyprus.
Vessels flying under the Cypriot flag can be registered in 3 different ways:
i) The Provisional Registration: This short-term registration lasts for a time period of 6 months and may be extended for another 3 months.
ii) The Permanent Registration: This is the next step after the Provisional registration and must be concluded within a timeframe of 6 months from the registration date. Alternatively, it may be finalized within a period of 9 months in the event that a 3 month extension has been applied during the first phase.
ii) The Parallel or Bareboat Registration: This type of registration is divided in 2 subcategories: a. The Parallel-in Registration: This registration procedure grants foreign ships on bareboat charter the possibility to be registered in parallel under the Cypriot flag for a time period of 2 years;
b. The Parallel-out Registration: This registration procedure grants the possibility to Cypriot vessels to be bareboat chartered to a foreign entity, while be registered in parallel abroad for the time period of the charter party operations.
B) Registration Procedure.
For the registration of a vessel under the Cyprus flag, the appointed lawyer must prepare and submit the following documentations to the Registrar of Cyprus Ships:
i) Declaration of Ownership;
ii) Company Memorandum
iii) Articles of Association
iv) Identity Card or Passport of the owner of the vessel, in the event that the owner is a physical person or
v) Corporate Certificates of the company, in the event that the owner of the vessel is a legal entity;
vi) Bill of Sales or Builder's Certificate.
Additional documents may be required, such as:
i) International Safety Management Code (ISM);
ii) International Ship and Port Facility Security Code (ISPS);
iii) Registration Form of a Mobile Maritime Radio Station;
iv) Shore Based Maintenance Agreement;
v) Registration of SAR Particulars;
vi) Confirmation of Classification Society.
Conditions of Vessel Registration:
i) All size and type of vessels are eligible for registration;
ii) Compliance with the provisions of the legislation of the Department of Merchant Shipping (DMS);
iii) Compliance with concrete conditions according to the vessels' age and type;
iv) Fishing vessels registration must be accompanied by an official communication of permission from the Director of the Department of Fisheries and Marine Research of the Ministry of Agriculture, Rural Development and Environment.
Conditions of Ownership:
A vessel is eligible for registration in the Republic of Cyprus only when one of the two following ownership conditions are met:
i) More than 50% of the shares of the ship must belong to a citizen of the Republic of Cyprus or of another Member State of the EU or the EEA.
ii) The total amount of the shares of the vessel must belong to one or more legal entities operating under the following conditions:
a) Registration, registered office and operation under the laws of the Republic Cyprus;
b) Registration, registered office and operation under the laws of another EU or EEA Member States. In this case, an Authorized Representative must be appointed in the Republic of Cyprus, as the management of the ship must be fully operated by a citizen of the Republic of Cyprus or a community ship management company;
c) Registration, registered office and operation under the laws of a third country outside the EU and the EEA, having appointed an Authorized Representative for the management of the vessel in the Republic of Cyprus.
Advantages of Vessel Registration in the Republic of Cyprus:
i) Obtention of the EU flag, offering freedom of movement of foreign currencies and no exchange control
ii) The Cyprus flag is "white-listed" on the Paris and the Tokyo Memoranda of Understanding, while it is not on the US Coast Guard's List of Targeted Flag Stated. Consequently, inspections and delays in the registration procedures are significantly reduced.
iii) Application of the EU-approved tonnage tax regime;
iv) Income Tax exemption for the crew and officers;
v) Low registration, establishment and operation costs;
vi) 0% Capital gains tax on the sale or transfer of a vessel registered in the Republic of Cyprus;
vii) Transparent and client-friendly legal framework, offering great protection for mortgagees and finance providers;
viii) No stamp duty on ship mortgage deed and/or other security documents
ix) The Department of Merchant Shipping offers rapid support both nationally, as well as through maritime offices in London, Piraeus, New York, Hamburg, Brussels and Rotterdam.
x) The Republic of Cyprus has signed all international maritime conventions on safety and pollution prevention.
xi) The Republic of Cyprus has signed more than 20 bilateral agreements worldwide. Vessels in the following conditions are not eligible for registration:
i) Vessels banned from entering ports, on Port State Control grounds by a Member State of the Memoranda of Understanding during the application period;
ii) Vessels detained on 3 occasions or more within the past 2 years prior to the registration application, on Port State Control grounds by States part of the Memoranda of Understanding or by the IS Coast Guard;
iii) Vessels built for exclusive exploitation on inland navigation, such as internal water, canals, rivers etc.
The vessel registration may be concluded in the Cyprus Register of Ships or the Special Book of Parallel Registration, depending on the type of registration chosen by the ship owner. For the Provisional Registration, the documentation may be submitted abroad, at the Consular Offices of the Republic of Cyprus. All documentation must be presented in the official languages of the Republic of Cyprus or a commonly used language by the competent authorities, which is usually the English language.
The present article is purely for informational purposes and does not, under any circumstances, constitute legal advice. For further information on the matter, please contact Arsen Theofanidis LLC and one of our legal consultants shall be glad to assist you.
Advocate – Legal Consultant
Arsen Theofanidis LLC