Does Brexit have a positive effect on Cyprus?

Does Brexit have a positive effect on Cyprus?

 


By George Antoniades, PhD(s) Business Adm., Lecturer/Marketing & Public Relations Programme Coordinator-The CTL Eurocollege Limassol

 

The Brexit process has brought up many uncertainties. This has British companies in industries like shipping, trying to find solutions and smoothen the impact of the “divorce” on their profitability.

According to information from Cyprus News Agency [1], the British operator P&O, initially reflagged two of its vessels to Cyprus, and then registered its entire English Channel fleet of six ships on the island.  One of the main reasons that P&O decided on the Cyprus flag as the best option for reflagging its ships is because the country is a member of the “White List” of Paris and Tokyo Memoranda of Understanding. The Paris Memorandum of Understanding or Paris MoU is an official document in which the 27 participating Maritime Authorities agree to implement a harmonized system of Port State Control [2]. The Tokyo Memorandum consists of 20 member Authorities in the Asia-Pacific region[3], participating for the same reasons as the Paris MoU, in the Asia-Pacific region. Being on the white list of these organizations means fewer delays for the owners due to fewer inspections. One other important benefit is the fact that Cyprus-flag ships can be taxed according to the tonnage of their vessels rather than their income. In addition to the economic benefits, ships under the Cyprus flag have a number of other benefits. For example, the Cyprus Shipping Chamber states that there is a network of inspectors of Cyprus ships covering important ports worldwide[4]. Other benefits include maritime offices in New York, London, Rotterdam, Piraeus, Brussels and Hamburg offering services to Cyprus ships[5]. It is probably for these reasons that the Cyprus registry is the 3rd largest merchant fleet in Europe and 10th in the world, accounting for over 1000 ocean going vessels according to the Cyprus Shipping Chamber[4].

Other companies related to the industry are also following similar strategies, like for example London P&I Club, a British ship insurance company which is setting up a subsidiary in Cyprus. The insurer wants to make certain that it will continue to have access to the European Union. It is also safe to assume that favorable tax rates contributed positively to this decision. The corporate income tax rate in Cyprus is 12.5%, which according to taxfoundation.org [6] is among the 20 lowest corporate tax rates in the world.

It is expected that Brexit will have consequences on our island to a lesser or greater degree. However, as far as the shipping industry is concerned, the investments made by the above two companies seem to suggest that Brexit will favour our island, at least in some areas. The country’s tonnage taxation system together with the fact that ships under the Cyprus flag have fewer inspections, therefore fewer delays due to their position in the white lists of the two memoranda of understanding, has already attracted a number of additions to our fleet. Let’s hope others will follow.

 [1] (http://www.cna.org.cy/WebNewsen.aspx?a=8bdc3cff47a84827b0b2a2da1d8ec6b7)
[2] (https://www.parismou.org/inspections-risk/library-faq/memorandum).
[3] (http://www.tokyo-mou.org/)
[4] ( https://csc-cy.org/cyprus-a-leading-maritime-center/)
[5](http://www.mfa.gov.cy/mfa/Embassies/embassy_thehague.nsf/ecsw30_en/[email protected])
[6] (https://taxfoundation.org/corporate-tax-rates-around-world-2018/)

Categories: Business, News in English
Tags: brexit