Cyprus Ship Registration
Cyprus has grown into one of the largest and most popular shipping centres in the world representing in particular an estimated 20% of the world’s third party managed fleet. The Register of Cyprus Ships is the tenth largest in the world with a merchant fleet exceeding 20 million gross tonnage and third largest in the European Union, comprising of a percentage of 11% of the total fleet of the EU.
Cyprus has grown into one of the largest and most popular shipping centres in the world representing in particular an estimated 20% of the world’s third party managed fleet. The Register of Cyprus Ships is the tenth largest in the world with e merchant fleet exceeding 20 million gross tonnage and third largest in the European Union, comprising of a percentage of 11% of the total fleet of the EU.
The Cyprus flag offers substantial economic advantages. These include the following:
• Favourable tonnage tax scheme approved by the European Union;
• No tax on income derived from the operation of the ships;
• No tax on dividends paid to shareholders out of profits made
• No tax on interest earned on working capital of the ship;
• No tax on the income, or profit made from the sale of a ship;
• No tax on the salary or other benefits of the mater, the officers and crew members of the ship;
• No estate duty on the inheritance of shares in a ship-owning company;
• No stamp duty on ship mortgage deeds or other security documents;
• Double tax avoidance treaties with 50 states, certain of which specifically provide for freight tax exemption.
Ship registration and the administration of the Register of Cyprus Ships and of the Special Book of Parallel Registration are governed by the Merchant Shipping (Registration of Ships, Sales and Mortgages) Laws of 1963 to 2005.
There are two additional Merchant Shipping Acts which relate to maritime labour and taxation and fees in relation to shipping, the Merchant Shipping (Masters and Seamen) Laws of 1963 to 2005 and the Merchant Shipping (Fees and Taxing Provisions) Law of 2010.
In addition to the relevant EU regulations which are directly applicable in the national legal order, Cyprus has transposed into its national laws all EU Directives which relate to the safety, security and the prevention from pollution from ships. Moreover, Cyprus is a contracting party to all international maritime conventions and protocols which govern safety and security, prevention of pollution from ships, maritime labour, training, , limitation of ship-owners’ civil liability and for the facilitation of maritime traffic. Finally, Cyprus has concluded numerous Merchant Shipping Bilateral Agreements which facilitate the cooperation with other States and promote conditions of mutual understanding.
Authority in relation to maritime matters in Cyprus, whether in relation to shipping or any other maritime-related activity such as maritime security or prevention of marine pollution, vests with the Department of Merchant Shipping which falls under the auspices of the Ministry of Communications and Works.
(A) The Government Policy on the Registration of Ships under the Cyprus flag (“the Policy”)
As regards ship registration, in addition to the Merchant Shipping (Registration of Ships, Sales and Mortgages) Law of 1963 to 2005, the Government Policy on the Registration of Ships under the Cyprus flag is further applicable.
The Policy provides that the Registrar of Cyprus ships will not consider applications for the registration in the Register of Cyprus Ships or in the Special Book of Parallel Registration of ships which:
(a) at the time of the application for their registration, are banned on port State control grounds by a State member of any one of the Memoranda of Understanding on port State control, from entering the ports of the States party to that memorandum or which have been banned by a State from entering its ports;
(b) have been detained on port State control grounds on three (3) or more occasions during the two (2) years period prior to the date of application for registration by States of the Paris or the Tokyo or the Mediterranean Memoranda of Understanding on port State control or by the United States Coast Guard; and
(c) have been constructed for exclusive use on inland navigation or which are to be used exclusively on inland navigation.
The Policy further imposes certain age requirements, whereby the age of a ship is calculated by deducting the year in which the keep of the ship was laid from the year in which the application for its registration was filed. In case a ship has undergone major convention or reconstruction, the year in which the major conversion or reconstruction begun may be taken into account, as opposed to the year in which the keel was laid.
Entry and all additional inspections are carried out by the Surveyors of the Department of Merchant Shipping at the expense of the registered owner or registered bareboat charterer, as the case may be. The entry inspection of a ship should be carried out no later than three (3) months from the date of the provisional, or parallel-in registration, or within one (1) month from the date of permanent registration if effected directly.
(B) Conditions of ownership
A ship may only be registered in the Register of Cyprus ships if:
(1) More than fifty per cent (50%) of the shares of the ship are owned:
a. By Cypriot citizens; or
b. By citizens of other EU or EEAA Member States who in the instance of not being permanent residents of the Republic of Cyprus will have appointed an authorised representative in the Republic of Cyprus,
(2) The total (1oo%) of the shares of the ship are owned by one or more corporations, which have been established and operate:
a. In accordance with the laws of the Republic of Cyprus and have their registered office in the Republic; or
b. In accordance with the laws of any other Member State and have their registered office, ventral administration or principal place of business within the European Economic Area and which have either appointed an authorised representative in Cyprus or ensured that the management of the ship is entrusted in full to a Cypriot or a Community ship management company having its place of business in Cyprus; or
c. Outside Cyprus or outside any other Member State but controlled by Cypriot citizens or citizen of a Member State and have either appointed an authorized representative in Cyprus or ensured that the management of the ship is entrusted in full to a Cypriot or a Community ship management company having its place of business in Cyprus.
Member State means a Member State of the European Union or other contracting party to the European Economic Area Agreement.
A corporation is controlled by Cypriots or citizens of any other Member State when more than fifty per cent (50%) of its shares are owned by Cypriot or citizens of any other Member State when more than fifty per cent (50%) of its shares are owned by Cypriots or citizens of any other Member State or when the majority of the Directors of the corporation are Cypriot citizens or citizens of any other Member State.
An authorized representative may be a Cypriot citizen or a citizen of any other Member State, who is resident in Cyprus, or a partnership/corporation/branch established in accordance with the laws of Cyprus, which has its place of business in the Republic of Cyprus. Under the Advocates Laws of Cyprus, only lawyers registered as practising advocates in Cyprus are entitled to draft the necessary documents for the incorporation of Cyprus companies as well as to carry out all registry transactions.
(C) Other Requirements
Management and Operation of a Cyprus ship
For ships which are required to comply with the requirements of SOLAS Chapters IX and XI-2 and the ISM and ISPS Codes, as well as, STWC regulation I/14 and the STWC Code, the management companies of same must hold a valid Interim or full term Document of Compliance (DoC) and each passenger vessel and cargo vessel of more than 500 gross tons, inclusive, should be provided with an Interim or full term Safety Management Certificate (SMS).
The required Interim Document of Compliance and Document of Compliance and the Interim Safety Management Certificate and Safety Management Certificate may be issued to such companies by one of the recognized by the Department of Merchant Shipping Classification Societies or by another SOLAS Contracting Government.
The application for the registration of a ship must be accompanied by the relevant Declaration of Particulars for the ISM Code and required security-related information.
Document of Safe Manning
As regards ships which pursuant to SOLAS Chapter V/14 and the relevant local legislation are required to obtain a Document of Safe Manning, the relevant application must be submitted along with the application for ship registration.
Certificate of Insurance or other Financial Security in Respect of Civil Liability
The application for ship registration should further be accompanied by the relevant applications for the issue of the following certificates, where such certificates are obligatory in respect of a the vessel in question:
(a) Certificate of Insurance or other Financial Security in Respect of Civil Liability for Bunker Oil Pollution Damage;
(b) Certificate of Insurance or other Financial Security in Respect of Civil Liability for Oil Pollution Damage;
(c) Certificate of Insurance or other Financial Security in Respect of Liability for the Death or Personal Injury to Passengers.
Declaration of Maritime Labour Compliance – Part I
Vessels which are required to be issued a Declaration of Maritime Labour Compliance and an interim and full Maritime Labour Certificate in accordance with the Maritime Labour Convention 2006 shall file the relevant application along with the application for ship registration. The above certificates may be issued by a Classification Society recognized by the Government of the Republic of Cyprus.
Radio Traffic Accounting Authority
All Cyprus ships must be covered by a radio traffic accounting authority recognized by the Government Republic of Cyprus. For the purpose of registration, the said authority must provide a confirmation to the Registrar that the registered owner has made with same the necessary arrangement for payment of all maritime radio communications made by the ship.
Point of Service Activation (PSA)
A PSA, recognized by the Government of the Republic of Cyprus, for the purpose of activation/deactivation for the maritime mobile earth stations, must be nominated
(D) Types of Registration
Under Cypriot legislation, there are three available types of registration namely the provisional registration, the permanent registration and the bareboat charterer registration, the latter of which may be divided into the parallel-in registration and parallel-out registration.
Provision registration, a popular option amongst most owners, is designed to allow owners a maximum period so as to deal with the formalities in relation to their previous State flag as well as the formalities towards permanent registration in the Cyprus Register for Ships.
A ship may be provisionally registered under the Cyprus flag either in Limassol by the Registrar of Cyprus ships or by a consular officer at any Cypriot Diplomatic or Consular Mission abroad. The application for registration must be made via a local registered advocate on behalf of the person or legal entity in whose name the ship will be registered.
Following submission of all documents in accordance with the legislative framework and subject to the ship being in compliance with the Government Policy for the Registration of Ships under the Cyprus flag, the Registrar or consular officer will proceed with the provisional registration of the ship and will issue the Provisional Certificate of Cyprus Registry, which is valid for six months from the date of issue. The registered owner will be informed of the conditions under which provisional registration has been permitted, as well as, of those which have to be fulfilled before the permanent registration can be completed and which will remain to apply after the permanent registration.
In addition the Registrar or consular officer will inform the Classification Society with which the ship is classed so that it can proceed with the survey and certification of same. The ship has to remain at a port or anchorage where she can be surveyed for the purposes of registration and shall remain at the said port so that she may be further surveyed by all the Classification Societies involved in the process of registration. Provisional registration may be extended for an additional three-month period.
As in the case of provisional registration, the ship has to fall within the ambit of the Government Policy for Registration of Ships under the Cyprus flag. The conditions upon which provisional registration was granted will also have to be complied with before permanent registration is granted as well as the all other requirements which have to be fulfilled before permanent registration can be realised. Provided the above have been duly completed and all necessary documentation has been submitted in accordance with the legislative framework, the ship’s Certificate of Cyprus Registry will be issued.
Bareboat charter registration
Bareboat charter registration covers both the registration of the bareboat charter of a foreign ship in the Special Book of Parallel registration (Parallel-In registration) as well as the registration of the bareboat charter of a Cyprus ship in a foreign register (Parallel-Out registration). Bareboat charter registration of both foreign and Cyprus ships is available in respect of more than 20 States whose legislation is compatible with Cyprus legislation.
1) Parallel-in registration:
Parallel-in registration provides for the same requirements as in the case of registration in the Register of Cyprus ships and allows for the registration of a foreign ship in the Special Book of Parallel Registration for a period of two years with the possibility of renewal.
The permission or consent of both the State where the ownership of the foreign ship is registered and the ship mortgagees is obligatory. Parallel-in registration does not result to the deletion of the vessel from the State of registry, but does not entitle the ship to use the relevant flag. During the parallel-in registration the ship will fly the Cypriot flag and will have the Cypriot nationality with all the rights and obligations this bears. The port of registry marked on the stern of the ship must be Limassol and not that of the foreign registry.
2) Parallel-out registration:
For a parallel-out registration to be effected, the bareboat charterer of a Cyprus ship must be qualified to register the bareboat charter in another State, under the laws of that other State. In addition, the consent of the Registrar of Cyprus ships is necessary following a receipt by the Registrar of the mortgagees’ approval to the intended parallel-out registration.
Despite not being removed from the Register, a ship under parallel-out registration is not allowed to flythe Cyprus flag or have the Cypriot nationality, which is suspended for the duration of parallel-out registration. The period of parallel-out registration may be up to three years with the possibility of renewal.
During that period the ship will fly the flag of the other State and have the nationality of the other State with all the rights and obligations this bears. The port of registry marked on the stern of the ship must be the port designated by the other State.
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.