Cyprus shipping sees 30% tonnage tax reduction for lower emissions

The Cyprus Shipping Deputy Ministry (SDM) has announced a new range of green incentives to reward vessels that demonstrate effective emissions reductions. From fiscal year 2021, annual tonnage tax will be reduced by up to 30 per cent for each vessel that demonstrates proactive measures to reduce its environmental impact, ensuring shipowners are rewarded for sustainable shipping efforts.

“As a leading maritime nation, we have an obligation to support efforts in reducing GHG emissions. We believe that flag states are well-positioned to support ship owners in making sustainable shipping choices which they can benefit from both operationally and financially. Striking the right balance between the green transformation and competitiveness is a challenge but also presents opportunities,” commented Deputy Minister for Shipping Vassilios Demetriades in a statement released on Tuesday.

The measure is intended to promote the use of cleaner fuels, the deployment of the relevant fuel infrastructure, the electrification of ships, and the use of energy efficiency technologies. “A combination of all of these options has the potential to improve the commercial and environmental sustainability of the sector, but shipowners need to be rewarded for investment in sustainable practices to accelerate uptake,” the statement said.

The Cyprus Tonnage Tax System was revised in 2010 and approved by the EU Commission at that time. “It is in its own right, an innovative and a pioneering piece of legislation, which updates existing and offers additional financial incentives to shipping activities in Cyprus, in full compliance with the relevant EU shipping taxation framework. It contains most of the favourable features found in tonnage tax systems of other traditional EU maritime countries, providing Cyprus with a competitive advantage,” writes the Cyprus Shipping Chamber.

“It extends the favourable benefits applicable to owners of Cyprus flag vessels and shipmanagers, to owners of foreign flag vessels and charterers. It also extends the tax benefits that previously only covered profits from the operation of vessels in shipping activities, to cover profits from the sale of vessels, interest earned on funds used other than for investment purposes and dividends paid directly or indirectly from shipping related profits,” according to the Cyprus Shipping Chamber.

“Cyprus believes incentives such as this will encourage greater environmental sustainability across the global industry while also enhancing Maritime Europe’s competitive advantage in new green technologies. This creates opportunities for jobs and growth, providing a first-mover advantage to the EU shipping industry. Clear objectives for 2030 and 2050 have been set by the IMO and all industry stakeholders must unite to create a clear pathway to achieve and exceed these goals,” the statement said.

Ranking amongst the top international fleets, Cyprus flags over 1,000 oceangoing vessels with a total gross tonnage exceeding 24 million. Cyprus is also in the process of formulating a long-term strategic vision for shipping, maritime and marine related activities, addressing the current challenges and opportunities and setting a vision, mission and objectives for the next two decades (2021-2040), the statement concluded.