New Merchant Shipping Law of 2020


Cyprus has recently introduced the New Merchant Shipping Law of 2020 (hereinafter “the new Law”) which is a consolidation of the basic Law of 2010 (Law 44(I)/2010) and the amendments introduced by the Law of 2020.   

The amendments of the Merchant Shipping Law are in line with the decision of the European Commission on 16 December 2019 to extend the Cyprus tonnage tax system and to approve it as being in accordance with the European Union ("EU") Guidelines on state aid to maritime transport industry.

The renewed tonnage tax system in Cyprus covers the three major shipping activities in Cyprus being the Ship-owing, Shipmanagement and Chartering.



  • Prolongation of the validity period

By virtue of the Law of 2020, the validity period of the Merchant Shipping Law of 2010 has been extended for another ten years until the 31st of December 2029.

  • Maritime transport

The definition of the maritime transport has been amended so as to include ancillary activities to maritime transport provided that the revenue from such activities do not exceed the 50% of the total gross income from the activities of each qualifying ship under tonnage tax from a qualifying ship owner or a qualifying ship charterer.

  • Ancillary activities

The new Law defines the ancillary activities as:

  1. The activities related with a qualifying ship under tonnage tax, which are related with the core maritime transport activities of a qualifying owner or charterer, excluding though commercial activities being part of the operations of a port carrying out at a profit, or
  2. In case where the qualifying ship owner or charterer of a qualifying ship under tonnage tax is a member of a group of companies, the activities of that qualifying ship related with the core maritime transport activities provided by another company form part of that group which is a tax resident in Cyprus.
  • Qualifying ship

As already defined in section 2 of the basic Law, a qualifying ship is every seagoing vessel that has been certified according to the current international or national regulations and is registered in the register of any country that is a member of the International Maritime Organisation and the International Labour Organisation and that has been recognised by the Cyprus Republic.

The new Law includes both a list of eligible vessels as well as a list of the vessels which are excluded from the definition:

The vessels which are included in the definition of “qualifying ship” are the following:

  1. vessels operating maritime transport activities, such as cargo and passenger ships;
  2. cable-laying ships, pipe-laying ships;
  3. ocean-going dredgers, ocean-going tug boats;
  4. crane vessels, self-propelled barges;
  5. research vessels;
  6. mobile offshore drilling units (MODUS);
  7. off-shore support/servicing vessels engaged in petroleum and gas activities;
  8. multi-purpose break-bulk and other types of support/ servicing vessels;
  9. cruise ships;
  10. commercial yachts;
  11. rescue and marine assistance vessels;
  12. guard vessels for maritime security and environmental clean-up purposes;
  13. vessels for raising, repairing and dismantling windmills;
  14. ice management vessels;
  15. accommodation vessels for housing offshore workers at sea;
  16. any vessel engaged in the transportation of any UN/EU humanitarian aid or is involved in any UN or EU humanitarian relief operations.
  17. any other vessels which may be determined as qualifying ships, following the prior notification approval by the European Commission.

According to the new Law, the above-mentioned list of eligible vessels may be extended following the prior notification approval by the European Commission.

The vessels excluded from the definition are the following:

  1. fishing and fish factory vessels;
  2. private yachts;
  3. vessels constructed and used exclusively for inland waterway navigation;
  4. fixed off-shore installations and floating storage units which are not used for maritime transport;
  5. non-ocean going tug boats and non-ocean-going dredgers;
  6. floating hotels or restaurants;
  7. floating or cruising casinos;
  8. non-propelled barges
  9. any other vessels which may be determined as non-qualifying ships, following the prior notification approval by the European Commission.
  • Bareboat Charter

Following the amendments of Article 6 of the basic Law, intra-group transactions are eligible for tonnage tax without restrictions.

Specifically, an owner of a ship which is bareboat chartered out shall be deemed to be a qualifying owner if the ship is bareboat chartered to a charterer being part of the same group with the owner.

Conversely, non-intra group transactions will be eligible for tonnage tax provided that:

  1. the owner proves that the ship was bareboat chartered out as a result of a temporary over-capacity and the charter period does not exceed three years,
  2. the temporary over-capacity mentioned above, refers to ships that the owner acquired (bought or chartered) for his own shipping activities,
  3. at least the 50% of the tonnage tax fleet must still be operated by the ship owner.

The above provisions do not apply to existing bareboat charter agreements until their expiration date or up to 31 December 2022, whichever takes place earlier.

  • Reduction of Tonnage Tax

Under the new Law, the tonnage tax is possible to be further reduced by 30% in the case of a Cyprus ship (section 9 of the new Law) or EU/EEA ship (section 13 of the new Law) using mechanisms for environmental preservation of the marine environment and the reduction of the effects of climate change.

The eligibility criteria for such reduction as well as the level of reduction may be set by a relevant Order of the Council of Ministers published in the Official Gazette of the Republic.

  • Tax Exemptions for Seafarers

In accordance with the EU decision, the tax benefits existing for seafarers have been extended to seafarers of Community ships.

More specifically, under section 55 of the new Law the tax exemptions apply to seafarers who:

  1. are liable to income tax in Cyprus, and
  2. are employed on board a Community ship which is a qualifying ship engaged in a qualifying shipping activity.

Where the vessels provide scheduled passenger services between ports of the Community, only seafarers who are citizens of the EU/EEA are eligible to benefit from the scheme. In all other cases, the exemptions apply to all seafarers (citizens of a Member State or a non-Member State).



The extension of the Cyprus Tonnage Tax system for another ten years by the European Commission proofs the system’s fairness and transparency. This extension will enable the Cyprus shipping industry to grow even more making Cyprus one of the leading jurisdictions in the shipping industry.



This publication has been prepared as a general guide and for information purposes only. It is not a substitution for professional advice. One must not rely on it without receiving independent advice based on the particular facts of his/her own case.  No responsibility can be accepted by the authors or the publishers for any loss occasioned by acting or refraining from acting on the basis of this publication.


Contact Persons:

Marios Palesis
Partner – Tax Department


Yiota Michael
Senior Associate – Tax Department



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