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TAXATION OF SHIPMANAGEMENT COMPANIES
The Cyprus Department of Merchant Shipping has recently issued a circular reminding shipmanagers of the arrangements for assessment and payment of their liabilities for 2008.
Shipmanagers are normally taxed on the basis of the tonnage and age of ships under their management. However, under section 19 of the Income Tax Law of 2002 they may opt to be taxed according to the prevailing Income Tax Law at a rate of 4¼% on their income from ship management services.
Shipmanagers who opt for the alternative basis of taxation are required to provide the Department of Inland Revenue with an annual Confirmation of Shipmanager´s Status issued by the Department of Merchant Shipping certifying that the company is eligible to be taxed on this basis.
Shipmanagers who have not opted for the alternative basis of taxation should obtain and complete the relevant Declaration for the Taxation of Shipmanagement Services (Declaration). Forms may be obtained from the Department of Merchant Shipping or downloaded from its website, which also includes a calculator for the accurate calculation of the tax on each vessel.
The Department has also announced a new tax exemption. Shipmanagers are entitled to tax exemption in respect of: “any Community ship to which the provision of shipmanagement services in relation to its crewing and technical management is entirely contracted to a Cyprus or a Community shipmanagement company, which has an office in Cyprus staffed with sufficient (in number and qualifications) personnel, for technical, administration and accounting matters relating to ships.”
Community ships for which the shipmanagement agreement was valid throughout 2008 will be entitled to the exemption.
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