Shipping firm P&O Ferries announced that it had decided to move the registration of the six vessels in its English Channel operating fleet to Cyprus ahead of the UK’s departure from the European Union, in part to keep its tax arrangements inside the bloc.
“In advance of Britain leaving the European Union on 29 March 2019 we undertook a review of the flag status of our ships on the English Channel. For operational and accounting reasons, we have concluded that the best course of action is to re-flag all ships to be under the Cyprus flag,” the company said.
On the question why the company chose the Cyprus flag in particular, he added: “The Cyprus flag is on the `white list` of both the Paris and Tokyo Memoranda of Understanding, resulting in fewer inspections and delays, and will result in significantly more favourable tonnage tax arrangements as the ships will be flagged in an EU member state.”
The change is being made to preserve the tonnage tax financing arrangements, under which the ships are required to remain flagged in an EU member state. Cyprus ranks as the largest third-party ship management centre in the EU and has the third largest merchant fleet in Europe and the tenth largest in the world.
Cyprus has an EU-approved ‘Open Registry’ regime with a Tonnage Tax System (TTS) that covers the three main maritime transport activities – ship owning, ship management (crew and technical management) and chartering. The TTS provides for shipping companies to pay corporation tax based on the tonnage of their vessels rather than on profit.
Ship owners of Cyprus flag ships automatically fall within TTS, whereas Cyprus tax resident ship owners of EU/EEA flag ships and of fleets comprising EU/EEA and third country flag ships may opt to be taxed under TTS.