Cyprus’s enviable position at the crossroads of Europe, Asia and north Africa means it has long been a popular hub for the shipping industry. Its advanced infrastructure and services combined with a competitive tax regime and other strategic advantages make it an attractive location for a full range of shipping and ancillary shipping-related services.
The industry is an important element of the island’s economy, contributing about 7% of its GDP. And this global centre for international shipping has the third largest merchant fleet among the EU's 27 member countries, and one of the 10 largest in the world. More than 1022 vessels with a 21 million gross tonnage are registered under the flag of Cyprus, while more than 140 ship-owning and ship management-related companies control a fleet of 2400 from the country with a 48 million gross tonnage.
Cyprus’s Merchant Shipping Law, which was introduced in 2010, delivers the only EU-approved tonnage tax system (TTS), providing benefits for ship owners, ship managers and crew. Thomas A Kazakos, director-general of the Cyprus Shipping Chamber, says: “This is a fixed-rate tax based on the carrying capacity of a vessel. You have the security with this tax that doesn’t increase over the years, so you can plan your tax liabilities for the working life of a ship. There is no tax on shipping activities other than this tonnage tax; no levy on shipping profits or dividends.
“We are also the only EU-approved open registry regime that can host foreign ship-owning interests from around the world under its jurisdiction.”
The country has little trouble attracting investors in shipping. “They’re not here because of the nice weather – although it’s a plus,” says Mr Kazakos. “They’re here because they need to have a stable, legally transparent and approved taxation and operational framework. The good operators want proper tax planning, not tax evasion or tax havens.”
The right environment
Captain Eugen-Henning Adami, managing director of Mastermind Shipmanagement, has been involved in Cyprus since 1989. “This is a good place to be based,” he says. “In Germany, we were losing our competitive edge because the government didn’t open up concessions to the shipping industry. We have found ways to run our ships substantially more competitively from Cyprus.”
“Membership of the EU has boosted the image of the Cyprus flag as well as our shipping infrastructure, and we remain pro-European,” says Mr Kazakos. “Before we joined the EU there were innuendos that we weren’t a proper registry. Now we’re up there with the very best in terms of quality, safety, security and environmental protection. And we have a zero-tolerance approach to substandard shipping as we’re keen to protect the reputation of the Cypriot flag.”
The industry in Cyprus is committed to creating a stable workforce that draws on the skills of the island’s population, according to Mr Adami. “Expats have a tendency to return to their country. We wanted a more stable workforce to make shipping a cluster and make it more sustainable," he says.
"The industry addressed this by creating a proper education scheme in partnership with the [Institute of Chartered Shipbrokers]. Through this one-year ‘Understanding of Shipping’ scheme – which has been in operation for about 12 years – the shipping companies have trained close to 1000 students. The total workforce is 4500, so we've managed to train [almost one-quarter], and that's translated into Cypriots taking up technical, safety, quality and crewing positions. We have a Cypriot workforce that goes all the way up to management.”