Cyprus tonnage tax replaces corporate income tax for qualifying shipping companies. Tax is based on a vessel's net tonnage (not on revenue or profit). For example, a 20,000 NT containership pays approximately €1,200/year tax — versus 12.5% of profit. This guide explains qualifying activities, election period, foreign vessels treatment, and the dual benefit of zero withholding on dividends from shipping profits.
What activities qualify for tonnage tax?
Charter, voyage, time, bareboat (in or out). Ship management services. Towage operations. Excluded: yacht charter for tourism (commercial yacht ≥24m may qualify), inland navigation, port construction. Election must cover all eligible vessels in fleet.
How long does the election last?
10 years minimum election. Renewable for another 10 years. Once elected, cannot opt back to corporate income tax mid-election. Plan carefully — make economic comparison for projected profit/tonnage levels before electing.
Foreign-flag vessels included?
Foreign-flag vessels managed from Cyprus can be included if owner is Cyprus tax resident. Subject to strategic management requirement: key decisions (chartering, crewing, financing) made in Cyprus. EU-flag vessels straightforward; non-EU flags need 60% EU-related qualifying threshold.
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