A Guide to Ship Registration

A Modern Business and Maritime Centre

Geography and Population
Cyprus is situated in the eastern Mediterranean, lying at the hub of 3 continents and close to the busy trade routes linking Western Europe with the Arab World and the Far East. With an area of 9.251 sq kms Cyprus is the third largest island in the Mediterranean after Sicily and Sardinia. The island’s time zone is 7 hours ahead of New York and 7 hours behind Tokyo.

The island enjoys the best type of Mediterranean climate with about 300 days of sunshine per year. The bulk of the rain falls during the period from November to March.

The coldest month is January with minimum and maximum mean temperatures of 60C and 130C, respectively, while in July and August, the hottest months, the corresponding minimum and maximum mean temperatures are 290C and 360C.

Cyprus’ estimated population is 793.100 (population census 2001) of which 80,7 percent belongs to the Greek Cypriot community (including Armenians, Maronites and Latins), and 11 percent to the Turkish Cypriot community, whilst the remaining 8,3 percent are foreign residents. Greek and Turkish are the official languages of the Republic but English is widely spoken and understood, and is regularly used in commerce and government. Apart from the capital, Nicosia, with an estimated population of 206.200, all major cities are located on the coast. Limassol is the second largest city and the island’s biggest port. Larnaca and Paphos, which are popular holiday resorts, are the third and fourth largest cities, respectively.

Government and Legal System
The structure of government is similar to that in other western democracies where human rights, political pluralism and private property are safeguarded.

The Head of State is the President of the Republic who is elected by universal suffrage for a 5 year term of office. The Council of Ministers, which is appointed by the President, is the executive organ of the Republic. Legislative power lies with the House of Representatives whose members hold office for a period of 5 years. There is a multi-party system of democracy based on proportional representation.

On the 1st May 2004, Cyprus became a European Union Member State. Furthermore, Cyprus is a member of the United Nations and its specialised agencies, the Council of Europe, the Organization for Security and Cooperation in Europe, and the British Commonwealth. The island is represented by full diplomatic missions in 39 countries and 9 major international organisations around the world.

The legal system is based on the same principles as those applicable in the United Kingdom and all statutes regulating business matters and procedures are based essentially on English law. Most laws are translated into English. The Continental system of administrative law, according to which the legality of administrative decisions can be judicially controlled, has been introduced and applied by virtue of the constitution.

Original criminal jurisdiction rests in District Courts for minor offences and in Assize Courts for more serious crimes. All appeals are heard by the Supreme Court which is also empowered to pronounce final judgement in all cases of constitutional and administrative law.

The Economy
Cyprus has an open free market economy.
As a full member of the European Union Cyprus is ready to meet successfully the challenge of being part of the enlarged European family. The island’s economy is characterised by robustness and macroeconomic stability, which is evidenced by the favourable evaluations and comments of the European Commission, the International Monetary Fund and other international organisations. In addition, in 2005, Cyprus was ranked 29th in the United Nations Index of Human Development.

Per capita GNP is estimated at CY£10.033 in 2005 (EUR 17.142) which compares favourably with the EU average. Cyprus is classified by the World Bank, among the highincome countries. The average annual rate of growth in the past five years has been close to 3,2% while the average inflation rate stood at 2,5% and the average unemployment rate was 4,28% over the same period.

Important structural reforms are in progress in order to further modernise and liberalise its market-oriented economy, with a view to enhancing its international competitiveness and EU compatibility. These structural reforms together with macroeconomic stability provide a strong foundation for the successful participation of the island in the euro area in the near future. It is expected that on 1 January 2008 Cyprus will adopt the euro.

The economy is driven by thriving tourist and service sectors and an export-oriented industry.
In terms of their contribution to GNP, the most important sectors of the economy are: transport, storage and communication, financial intermediation, wholesale and retail trade, real estate and business activities, construction and education.

About 80 percent of Cyprus’ gross foreign exchange earnings are derived from tourism, the export of goods, transportation and international business and shipping companies.

Cyprus' main domestic exports are pharmaceutical products, citrus fruit, halloumi cheese, potatoes and cement. Industrial products account for 76 percent, while agricultural products for 23 percent of domestic exports. With regard to imports, intermediate inputs and consumer goods are the most important categories, accounting each for 30 percent of total imports.

Banking and Finance
The legal tender is the Cyprus Pound. Its ultimate market maker is the Central Bank which aims to keep it stable against the Euro (£1 = CY£0,585274). In addition to the Central Bank, the banking system consists of more than 15 banks incorporated in Cyprus and more than 20 branches of foreign banks.

Commercial banking arrangements and practices follow the British model. Strong correspondent networks are maintained around the world by local and international banks. Most of them subscribe to SWIFT, Reuters, Telerate and other services. Thus, they have easy access to the world banking network and are able to carry out traditional and specialized financial transactions.

Cypriots and foreigners residing on the island enjoy the benefits of a well developed insurance industry with all types of risk accepted, mainly through agents and intermediaries.The authorities regulate local banks and insurance companies in such a way as to safeguard the interests of depositors and assured, and to channel investments into productive activities.

The Stock Exchange commenced its operations in 1996. The Council of the Stock Exchange is responsible for implementing the Exchange's policies.
The operation of the Stock Exchange will, in time, encourage more companies to float new issues and acquire funds for productive investments. This development will give greater momentum to an emerging stock market, stimulated further by the island's thriving economy.

Foreign Direct Investment
In order to attract foreign investment and enhance economic prosperity in Cyprus, the Government has liberalised the Foreign Direct Investment (FDI) policy for both the EU and non EU nationals. Administrative procedures have been simplified and no limitations apply in most sectors of the economy, e.g. the minimum level of investment and the foreigners’ participation percentage. Consequently, foreign companies now have the opportunity of investing and establishing business in Cyprus on equal terms with local investors; no distinction is being made between foreign and Cypriot companies.

Direct Investment:
Foreign investors have the opportunity of participating in almost all sectors of the economy with equity participation of up to 100% in any Cypriot enterprise, without a minimum level of capital investment.
Foreign investors can register a company directly with the Registrar of Companies, and obtain licences, if needed from the appropriate authority according to the nature of investment.

There are no exchange control regulations, hence residents and non-residents may hold and manage assets and liabilities in any foreign currency and in any foreign country, including freely convertible and transferable balances with banks on the island.

Portfolio Investment:
Trading of shares by foreigners on the Cyprus Stock Exchange (CSE) is as easy as on any modern stock market. Foreign investors are subject to the same rules and regulations of the CSE as Cypriot or other EU nationals, regarding capital distribution. Provided that the investment is in line with the CSE’s laws and procedures, investors may acquire up to 100% of the share capital of all Cypriot companies, listed on the CSE, except companies operating in specific sectors, such as the banking sector.

Non residents only need to remit foreign funds either to an account in their own name or in the name of their Stockbroker in Cyprus. The Stockbroker is entitled to possess the necessary documentation evidence for the acquisition of shares.

Fiscal Incentives
A. Corporate Tax:
A company is tax resident in Cyprus when its management and control is exercised in the Republic. Their taxable income includes both income earned in Cyprus and abroad. A non-Cyprus tax resident is taxed only on income earned in Cyprus.

All companies are subject to a uniform tax rate of 10% except for semi-government organisations, which are taxed at 25%. The 10% tax is the lowest corporate tax rate in the European Union. A special tax regime applies for shipmanagement services (Chapter 6: Shipmanagement Services).

Cyprus tax resident companies are exempted in respect of dividends received from other Cyprus resident companies. Interest income is taxed at the corporate tax rate of 10% arising from or closely connected to the ordinary activities of the company. Moreover, 50% of all other interest income is exempted from income tax and is subject to special defence contribution at 10%. Profits gained from the sale of securities listed on a recognised Stock Exchange are exempted from tax for all companies.

B. Personal Income Tax
Individual tax resident of Cyprus is an individual who stays in the Republic for 183 days in the year of assessment. Cyprus tax residents are taxed on income earned both in Cyprus and abroad. On the contrary non tax residents are taxed on income earned only from Cyprus sources. Individuals who were not Cypriot residents before the commencement of their employment are allowed after the first year an exemption of 20% of their emoluments with maximum amount CY£5.000 annually. This exemption can be used for 3 years commencing from the 1st January following the first year of employment.
 

Human Resources
Cyprus maintains public elementary and secondary school systems of a very high standard. The educational system is complemented by vocational schools whose main objective is the satisfaction of the growing demand for skilled personnel by the tourism and manufacturing sectors. In every city there exists a selection of good quality private schools which are addressed mainly to the needs of foreign speaking pupils. These schools offer tuition in English, French, Italian, Armenian and Arabic at reasonable fees.

The island ranks among the leading countries of the world in terms of the proportion of university graduates. In 1992 the University of Cyprus, which is located in Nicosia, opened its doors to its first students. It currently has 6 faculties: Humanities; Social Sciences and Education; Pure and Applied Sciences; Economics and Management; Letters; and Engineering. During its short life, the University has produced over 4.400 publications and over 3.500 research papers in scientific and conference publications.

Cyprus has a well-trained and versatile work force. Qualified professional, technical and clerical staff with wide experience and fluency in English and other languages are available for employment at reasonable remuneration. Labour costs are significantly lower in Cyprus compared to the EU average. Terms and conditions of employment are negotiated either directly between the employee and the employer or through collective bargaining between trade unions and employers’ organisations.

As a result of the high educational level of the population and due to historic and economic links between Cyprus and other European countries, legal, accounting, management, computer and other services are of the highest standard. A large number of lawyers are graduates of British and other European universities or they are members of the English Inns of Court. Most accountants are British trained and they are members of either the Institute of Chartered Accountants or the Chartered Association of Certified Accountants. Professional advice, therefore, is available from experts who can draw on both local and international knowledge.

Transport and Telecommunications
There is a wide network of air-routes connecting Cyprus with Europe, Africa and Asia. The island’s two international airports are situated near Larnaca and Paphos, some 50 and 150 kms, respectively, from Nicosia. They handle well over 1.100 scheduled flights per week, served by 32 international airlines as well as flights operated by 41 charter airlines. The island is rapidly becoming a major international transit station for commercial air transportation with excellent connections within the entire region.

All the island’s port facilities are under the jurisdiction of the Cyprus Ports Authority which owns, manages, markets and develops the ports of Limassol, Larnaca, Vassiliko, Famagusta and Kyrenia. Famagusta, Kyrenia and Karavostasi are situated in the area which is illegally occupied by Turkish troops and are therefore closed for international maritime transport. It is illegal to enter or leave these ports.