Yacht registration under the Cyprus flag: advantages and conditions
23 January, 2025
1072
Cyprus, a beautiful island with crystal clear waters of the Mediterranean Sea, offers unique opportunities for yacht registration under its flag. In this article, we will highlight advantages and conditions of such process.
Cyprus is the EU member state, which makes yacht registration under its flag an attractive option for those who operate a yacht with VAT paid in the EU or those who are planning commercial operation in the Mediterranean Sea. The VAT rate for yacht import to Cyprus makes up 19%, which can be profitable for owners planning customs clearance of their yacht in the EU. It is also possible to use a leasing scheme for yacht ownership, which provides an opportunity to divide and to optimize the VAT paid on the yacht, especially in case of her operation outside the EU.
Both natural persons and legal entities can own a yacht under the Cyprus flag, in compliance with certain conditions:
1. over fifty percent (50%) of the yacht shall be owned by a Cypriot citizen or a citizen of another member state (EU/EEA), or
2. all (100%) shares of the yacht shall be owned by one or more companies:
– incorporated in Cyprus, having their registered office in Cyprus and carrying out their principal activities there;
– incorporated in one of the EU or EEA countries, having their registered office in the EU or EEA;
– incorporated outside the EU or EEA but managed by citizens of Cyprus or the EU and EEA.
With regards to the aforesaid, in order to protect property, the best option for yacht registration in Cyprus is to incorporate a local company. Its founder can be either natural person or legal entity without restrictions in his/her/its registration and incorporation country, including the EU non-resident.
The flag of Cyprus is included in the Whitelists of the Paris and Tokyo MOU, which confirms high security standards that the Cyprus register adheres to. However, while choosing the Cypriot jurisdiction for yacht registration, one should take into account the planned area of her operation. Given the well-known conflict between Cyprus and Turkey, it may be difficult to operate a yacht under the Cypriot flag in Turkey.
Yacht registration in Cyprus is a convenient and transparent process. It is important to note the following features:
– no restrictions on size, length and age of the yacht;
– yacht initial survey by the register surveyors is required, but it is not mandatory for yachts under 15 years old;
– yacht registration can be temporary, permanent or parallel for chartering activities;
– permanent registration of a yacht under the Cyprus flag is termless.
It should be noted also that Cyprus is a recognized leader in tax optimization of a shipowner company, providing a high level of reliability and corporate service. Cyprus offers exemption from capital gains tax on sale of the yacht or shares in the company – yacht owner.
In respect of companies that commercially operate yachts under the Cyprus flag, there are the following benefits and advantages:
- no taxation on yacht operation/management and on dividends paid by the company – yacht owner;
- no taxation of crew salaries;
- no requirements for crew nationality;
- flexible scheme of tonnage tax payment, calculated on the basis of the yacht tonnage;
- availability of bilateral double taxation treaties with over 60 countries.
Specification of the Cypriot legislation is the fact that any actions in the Cyprus Register can be carried out only by lawyers registered in Cyprus as practicing attorneys. Since Interlegal Cyprus Office has such resources, we can organize the process on site and provide legal support at each stage of preparing the yacht for operation, such as company/yacht registration and obtaining the necessary insurance coverage. Yacht registration in Cyprus is a profitable and convenient solution for yacht owners. With high safety standards, attractive tax conditions and a simplified registration procedure, Cyprus is a perfect choice for those looking for a place to register their own yacht.
