The Department of Merchant Shipping has recently issued guidance on several aspects of the tonnage tax system under the Merchant Shipping (Fees and Taxing Provisions) Law (44(I)/2010).
Circular 44/2012 confirms that owners of yachts and pleasure craft are not required to file tax returns, even though they are deemed to be non-qualifying owners (and consequently not subject to tonnage tax), provided that the vessel concerned is used exclusively by the owner for non-commercial purposes. If the yacht or pleasure craft is used either wholly or partially for commercial purposes, the owner must submit income tax returns and tax computations to the Inland Revenue Department and will be taxed accordingly.
Circular 45/2012 notes that the Inland Revenue Department has sent notices to a number of shipping companies, requiring them to submit income tax returns for periods up to the year ended 31 December 2009, that is, before the tonnage tax law took effect. Registered owners and bareboat charterers of Cyprus ships earning income from the operation of such ships, as well as ship management companies earning income from the provision of ship management services, may apply to the Department of Merchant Shipping for the issuance of a tax clearance certificate. On presentation of this certificate, they will be released from the obligation to submit income tax returns, provided that they have no other sources of income.
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