Cyprus flag: A flag of progress and quality, by Esme Palas

In the small Island of Cyprus “Shipping is almost as old as time itself “. With an ideal geographical location at the crossroads of three continents Europe, Asia, Middle East, and Africa, Cyprus has been constantly striving for perfection in the field of merchant Shipping.

However it was only after the Islands Independence in 1960 that the Islands Role as an international centre for business and commerce was able to evolve considerably. Cyprus was soon established as a strategic and significant International business centre which followed the increased  trade, the growth of offshore activities and the rapid expansion of the economy of Cyprus following its Independence. By 1978 the Shipping Industry had grown to such a degree that the Government established a separate shipping department and since then there was a tremendous increase in numbers and tonnage of ships registered in Cyprus.

At this point however  Cyprus and its flag had begun to develop a reputation as a flag of convenience meaning that it registered ships and companies other than that of its own nationality. This unfortunately attracted less scrupulous ship owners.

Having become  aware and conscious that the Islands Shipping Industry had begun to develop a bad reputation the Cyprus Maritime Administration changed its policy and their focus  begun to shift  from increasing numbers to improving the  safety and quality of ships that were being registered. They began to focus on three pillars: Those of Quality, Competitiveness and Reliability. They began to work under pressure to improve the image and track record of the Cyprus Registry and focused their maritime policy oon the enhancement of maritime safety and maritime security.

Esme Pala

The Cyprus government begun to take certain measures including inter alia pushing laws and regulations through parliament in order to improve the standard of ships flying the Cypriot flag, in order to maintain high standards for the Cyprus merchant fleet  thereby  helping to establish a high quality fleet and  minimising  the number of marine accidents. The implementation of the Internationally applicable safety , security and environmental protection standards was the foundation on which Cyprus begun to build its reputation as a serious maritime flag and as a  base for international operations. Overall many actions and measures were  taken  by the   Cyprus Maritime Administration for the continuous improvement of the existing infrastructure  and of the incentives available to both residents and non-residents and  for the enhancement of the International reputation of the Cyprus flag as a flag of progress.

Overall a stricter registration procedure was implemented and extensive surveys of ships applying for registration under the Cyprus  flag were undertaken by surveyors on behalf of the administration in an attempt and effort to eliminate substandard vessels which might change the reputation of the Cyprus flag Internationaly. An age limit of vessels has been set for the registration of certain categories of ships and strict requirements have to be fulfilled at the time of registration

A network of independent inspectors of Cyprus Ships  has been set up at the most important ports around the world to provide adequate coverage of inspections globally. This has contributed substantially to the increase of inspections of Cyprus flag ships.

As a result of the effective implementation of these measures the number of detentions of Cyprus ships around the world has been reduced significantly. This drop in detentions of Cyprus flag ships has enabled Cyprus to achieve and maintain a white list status in the flag assessment system maintained by the Paris and the Tokyo  Memoranda of Understanding on Port state control .The Paris MOU is a coalition of 22 maritime nations and it monitors ship detention rates through port state control. Its aim is to eliminate the operation of sub-standard ships through a harmonised system of port state control. Cyprus reputation received a great boost when it was move d to the Paris Memorandum of understanding on port states controls white list in 2005. Cyprus became a full member of the Paris MOU in 2006.

The Cypriot Government also updated its  maritime legislation to bring it in line with European standards. Cyprus accession to the European Union on the 1^st of May 2004 reinforced the quality of the Cypriot registered fleet. At the same time Cypriot registered vessels begun to enjoy the benefits of flying the flag of a European Union Member State which remains highly competitive.

The Department of Merchant Shipping has already in place a complete system for adopting and implementing the IMOS Conventions.  In 2006 the IMO initiated an audit Scheme as a means of identifying weaknesses in systems which implement IMOs conventions for the purpose of refining and perfecting the system. Cyprus was the second country worldwide following Denmark who voluntarily participated in this Audit Scheme. The findings of this audit was that the Cypriot Department Of Merchant Shipping has substantially complied with the IMO Assembly principles established under Resolution S 974(24) and with the code for the implementation of the mandatory IMO instruments included in Resolution A973(24).

Another area to which the Department of Merchant Shipping attached particular importance is the area of Maritime Security. That is the reason why the ISPS (International Ship and Port Facility ) Code has been adopted and has been effectively implemented. All ships under the Cyprus Flag as well as port facilities in Cyprus have been dully certified as complying with the requirements of the ISPs CODE.

In the area of safety and pollution prevention Cyprus has fully harmonised its legislation with the legislation  prevailing in the EU.

Cyprus has entered into Bilateral agreements of cooperation in Merchant Shipping with 23 countries through which Cypriot Ships receive either national or favoured national treatment in ports of other countries. These agreements which have been entered into by labour supplying countries provide for specific terms of employment and resolution of labour disputes which are beneficial to both the ship-owners and the seafarers.

Cyprus has maritime offices in New York, London, Rotterdam  , Pire us , Brussels and Hamburg which offer services to Cyprus Ships.

Following a joint effort by the Cyprus Shipping Chamber and the Maritime administration the Cyprus flag has been removed from the US Coast Guard targeting system which clearly indicates that Cyprus is committed to high operational and safety standards .This has resulted to fewer inspections of the ships and less delays at the ports of both MOUS and the United States.

Cyprus has ensured it became an active member of all the International Organisations which have been established in an attempt to regulate the shipping Industry such as the IMO (International Maritime Organisation ) the ILO ( The International  Labour Organisation ) the European Council and the Commission. The presence of Cyprus it these International Maritime Fora strengthens the image of the Republic of Cyprus.

As a result of all the above mentioned measures Cyprus has been able to take a leading role in the Shipping World.

• Through implementing the correct policy successive Governments of Cyprus have managed to develop the island into a fully-fledged shipping centre combining both a sovereign flag and a resident shipping industry which is renowned for its high quality services and standards of safety.
• Cyprus whose Ship Registry now ranks 3^rd in Europe and 10the Internationally with the 10^th largest merchant fleet globally and the 3^rd largest fleet in the EU  is now without question a reputable, reliable and tax efficient shipping centre.
• It is clear that the Cyprus Merchant Shipping department is continuously upgrading its services in order to offer a high standard of support to its flag users and maintain its reputation as a flag of Progress and Quality.
• As a result of the continuous efforts by the Cyprus Maritime Administration the Shipping Sector has been able to secure many  fiscal and economic benefits.
• A novel tonnage tax system was introduced in 2010 which allows those to whom it applies to pay tax based on the tonnage of their ships instead of the traditional method of taxing the profits. This means that for the lifetime of the ship the tax rate remains steady. Accordingly there is no tax on profits from the operation or management of a Cyprus registered vessel or on dividends received from a vessel owning company or on capital gains from the sale of a vessel.
• This New Tonnage Tax System extends the benefits applicable to owners of Cyprus flag vessels and ship managers to owners of foreign flag vessels and charterers.
• Furthermore It has been approved by the European Commission on the 24t of March 2010 as compatible with the requirements of the EU acquis in accordance with the relevant guidelines of  state Aid to Maritime Transport. The new system is incorporated in the National legislation and it is a very favourable and competitive tax regime for ship owning shhip management and chartering companies.
• There is no income tax on the wages of officers or crew.
• There is a competitive corporate tax currently at 12.5% for other international business enterprises.
• No stamp duty has to be paid  on ship mortgage deeds or other security documents
• Ship registration costs are very competitive and
• There is an outstanding high level professionals in the legal and accounting sectors within Cyprus.
• There is a wide scale availability of competent local employees as well as a comparatively low set up and operation costs for companies.
• The Island of Cyprus  has state of the art telecommunications and easy access by air and sea.
• Furthermore the Cyprus Government has  entered into treaties on the avoidance of double taxation with 43 countries, It is a signatory to numerous international maritime conventions. Cyprus is also a member of the Eurozone and  a democratic country with a free market economy.

There is no doubt that today  the Cyprus Flag is universally accepted as a high quality flag offering  quality , service as well as other numerous advantages to ship  owners who choose to register their vessels in the Cyprus Ship Registry .

With all the above fiscal and economic incentives afforded to the shipping sector and  to vessels sailing under the Cyprus flag as well as with all the steps taken by the maritime administration for the continuous  improvements of the existing infrastructure and incentives available to both the residents and non-residents there is no doubt that the Cyprus Flag has an impeccable reputation.  Nobody can any longer maintain or substantiate any unfounded accusations of the past which involved Cyprus Shipping and the Cyprus flag being considered a so called flag of convenience or a substandard flag. Cyprus has fairly acquired the reputation of a flag of progress, quality and choice.