The Republic of Cyprus, being a leading maritime state, understands the importance of promoting sustainable practices within its shipping sector. More specifically, the Shipping Deputy Ministry of Cyprus is well known for its practices for environmental developments at a worldwide level. One of the top priorities of the Shipping Deputy Ministry of Cyprus is the support of sustainable shipping by way of adopting various measures at a worldwide level for the reduction of emissions and to achieve a sustainable future of the shipping industry, such as the use of more environmentally friendly fuels, the development of relevant infrastructure, the electrification of ships and the use of energy efficiency technologies. By combining all of the aforementioned options, an opportunity is given for the improvement of the commercial and environmental sustainability of the industry, while at the same time shipowners are rewarded for investing in sustainable practices by way of financial incentives.
In this regard, in an effort to decarbonise Shipping, the Shipping Deputy Ministry of Cyprus is taking proactive steps to incentivize and accelerate decarbonisation by announcing a revised series of green incentives to reward ships that demonstrate effective reductions in Greenhouse gas emissions.
Started from January 2024, any vessel that takes measures for the reduction of its climate impact, its Annual Tonnage Tax will be reduced by up to 30%. Thus, this practise will ensure that any shipowner will be rewarded for his/her sustainable shipping efforts.
The benefit of such reduction of the Annual Tonnage Tax, can only be applied to Cypriot and Community ship owners by meeting the criteria of the environmental incentives as mentioned below:
• EEXI – ships that have achieved a reduction of the Achieved Energy Efficiency Index of the Existing Ship in relation to the Required Energy Efficiency Index of the Existing Ship by a percentage of more than 10%, (regulations 19, 23 and 25 / Annex VI of the revised MARPOL) will receive the corresponding annual tonnage tax discount between 5 – 25%.
• IMO DCS – the environmental incentive related to the Data Collection System (IMO DCS) of the International Maritime Organization, applies to ships of 5,000 gross tonnage and above with declared hours at sea of at least 4,380 per year and complying with regulation 27 of Annex VI of the revised MARPOL. Ships that achieve a reduction in the ratio of total fuel consumption to total distance travelled between two consecutive reference periods of more than 4% will receive an annual tonnage tax rebate of between 10 – 20%
• CII – the environmental incentive is related to the Carbon Intensity Index (CII) of the IMO and applies to ships of 5,000 GT and above, which are subject to the provisions of Regulation 28 of Annex VI of the amended MARPOL Convention. Ships that achieve Class A or B operational carbon intensity in one year, with declared hours at sea of at least 4,380 per year will receive an annual tonnage tax rebate of 10% – Class B and 20% – Class A.
It is worth mentioned, that any detention of a vessel due to environmental reason upon an inspection by the ECL, and/or violation by a vessel of any European Commission regulation regarding the environmental protection and/or decommission of a vessel during the calendar year, leads to non-eligibility for the environmental incentive.
In conclusion, the environmental incentives introduced by the Shipping Deputy Ministry of Cyprus, represent a significant step towards to achieving decarbonisation in the shipping industry. By providing these incentives, the Republic of Cyprus is positioning itself as a leader state in sustainable shipping practices and strengthening the shift of the Cyprus flag to the use of environmentally friendly vessels and methods. As the world transitions towards a low-carbon future, Cyprus is paving the way for a cleaner and more environmentally friendly shipping sector by demonstrating the commitment of Cyprus Shipping Industry to the Green transformation.
Cyprus has one of the largest registered merchant fleets in the world, being at the same time a well-established shipping and ship management center, located close to the Suez Canal.
Cyprus Registry is also one of the only two open registries within the European Union, allowing non-Cypriot citizens to register their ships under the Cyprus flag, provided that they fulfil the specific conditions of ownership that the Merchant Shipping (Registration of Ships, Sales and Mortgages) Laws of 1963, require.
The Cyprus flag offers many economic benefits such as the following:
- Low set-up and operating costs for companies;
- No registration and mortgage fees for ocean going vessels;
- Competitive yacht registration costs and fees;
- No registration duty is payable on the shares of as shipping company.
- Attractive and transparent Tonnage Tax System;
- There are not any restrictions in relation to the nationality of the seafarers;
- There are not tax profits from the operation or management of a vessel flying the Cyprus flag.
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Mortgages on vessels are a common practice in the maritime/shipping industry and can be an effective way for shipowners to obtain financing for their vessels. Cyprus, as a popular maritime nation, has a well-established legal framework for mortgages on vessels, which provides both lenders and borrowers with a clear set of rules and regulations to follow.
The Legal Framework
The legal framework which governs mortgages on vessels in Cyprus is the Cyprus Merchant Shipping (Registration of Ships, Sales and Mortgages) Law of 1963. Several amendments of this particular law have been made from time to time in order to keep up with the changing needs of the shipping industry and to ensure that the legal framework remains updated.
The procedure for registering a mortgage on a vessel in Cyprus
In accordance with the abovementioned law, a mortgage on a vessel can be created by way of a registered instrument. The mortgage must be registered with the Registrar of Cyprus Ships, and the mortgagee must be a person or entity that is entitled to hold a mortgage under the Cyprus law. The mortgagee must also have the right to enforce the mortgage in Cyprus. If the mortgagee is a Cypriot company and/or entity, the mortgage will also have to be registered with the Registrar of Companies on the first 42 days of its registration.
The mortgage instrument must be in writing and signed by both the mortgagor and the mortgagee. It must also contain certain mandatory provisions, including a description of the vessel, the amount of the mortgage, the interest rate, the repayment terms, and the conditions under which the mortgagee can enforce the mortgage. If the mortgagor defaults on the repayment of the mortgage, the mortgagee can enforce the mortgage in accordance with the provisions of the law. The mortgagee has the right to arrest the vessel, and it can seek a court order to sell the vessel in order to recover the outstanding debt.
In this respect, according to the Deputy Ministry of Shipping (DMS) in Cyprus, the documents required for the registration of a mortgage on a vessel are the following:
- Written Application by a local lawyer together with €30 Advocate stamps.
- Resolutions of Directors on behalf of the Shipowners.
- Duly executed Power of Attorney on behalf of the Shipowners.
- Mortgage and Deed of Covenants (duly executed).
- Certificate of Directors and Secretary (in case of Cyprus registered Company).
- Incumbency Certificate duly executed (in case of foreign registered Company’s).
The advantages of registering a mortgage on a vessel in Cyprus
There are of course several advantages to both shipowners and lenders if a mortgage is registered on a vessel under the flag of Cyprus. One of the main advantages is that Cyprus is a well-respected maritime nation, with a long history of maritime trade and shipping. This means that mortgages on vessels in Cyprus are generally viewed as secure investments, which can help to attract lenders and keep interest rates low. Another advantage is that mortgages on vessels in Cyprus are relatively easy to obtain, provided that the borrower meets the necessary requirements. This can be particularly beneficial for small and medium-sized shipowners who may struggle to obtain financing from traditional lenders.
Conclusion
In conclusion, mortgages on vessels in Cyprus provide a secure and reliable way for shipowners to obtain financing for their vessels. The legal framework in Cyprus is well-established and provides both lenders and borrowers with a clear set of rules and regulations to follow. Shipowners and lenders considering mortgages on vessels in Cyprus should consult with a maritime lawyer to ensure that they understand the legal requirements and obligations associated with this type of financing.