Cyprus tonnage tax system “most advanced” in Europe

Traditionally, Cyprus and Germany have shared an excellent political and trade relationship, which became even closer following the accession of Cyprus to the European Union. The two countries maintain an open window of communication where European matters of mutual interest are discussed. Our countries share similar views on many European issues and have collaborated many times within the Union. The official visit of the German Chancellor, Ms Angela Merkel to Cyprus in January this year, marked a new era of expansion and development in the relations between the two countries.
Besides the political cooperation, one can easily notice the steep growth of our commercial relations. Germany has become one of the largest trading partners of Cyprus. Our imports from Germany have doubled in the last decade and their value reached the amount of 576 mln euros in 2010. During the same period the value of our exports to Germany has tripled and reached 106 mln euros. The economic relations between the two countries are expected to expand even further, facilitated by the new treaty on the avoidance of double taxation which was signed in February this year.
The economies of our countries, due to the large disparity in size and resources, follow different models. Germany, on the one hand is an industrialized country and one of the biggest exporters of manufactured goods. On the other hand, the lack of raw materials and its small market size, which prevent the achievement of economies of scale, explain Cyprus’s orientation towards the provision of services. Accounting and banking, legal services, tourism and shipping, are the main sectors where Cyprus has developed over the years. What is common between the two countries, is their unlimited commitment to quality. German brands are well known and distinguished for their excellent quality. From our side, we are very proud to claim that Cyprus today is an integrated high quality service provider.
When it comes to shipping, Cyprus is an integrated maritime centre. While having one of the largest merchant fleets in the world under its flag, it is firmly the leading third party ship management centre in Europe. Our maritime cluster has an exceptional relation with Germany. Its development is attributed to a large extent to German entrepreneurs, ship owners and ship managers who established their operational base on our island. Even today, Cyprus’s maritime cluster consists, by and large, of companies with German interests.
It is well known that shipping is a global industry, operating under keen competition. Cyprus spends a lot of effort to maintain a qualitative and, at the same time, competitive cluster. In this respect, Cyprus launched, last year, a completely new tonnage tax system, fully aligned with the European acquis and the relevant guidelines on State Aid to Maritime Transport, which has been approved by the European Commission. Our new tonnage tax system is currently the most advanced in Europe and compares favourably with similar systems of leading maritime centres outside Europe.
Our efforts are focused now on the presentation of the tonnage tax system to the shipping industry worldwide. Our aim is to make the system available to every eligible owner, manager and charterer.