CYPRUS Law and Practice Contributed by: Kyriacos Scordis and Sofi Mylona, SCORDIS PAPAPETROU & Co LLC
The most prominent arbitration institutions in Cyprus are: • the Cyprus Arbitration and Mediation Centre; • the Cyprus Branch of the Chartered Institute of Arbitrators; and • the Cyprus Eurasia Dispute Resolution and Arbitration Centre. 6.6 Remedies Where Proceedings Are Commenced in Breach of Foreign Jurisdiction or Arbitration Clauses Proceedings that have commenced – not - withstanding the foreign jurisdiction clause or arbitration clause – can be challenged by the defendant by an application for stay. Where an application for stay has been filed, a Cyprus court has discretion to decide whether to grant a stay. In practice, however, a stay of proceedings will be granted by the court unless a strong cause for not doing so is shown; the burden of proving such a cause lies with the party requesting the stay. When exercising its discretion, the court should take into account all the circumstances of the case. 7. Ship-Owners’ Income Tax Relief 7.1 Exemptions or Tax Reliefs on the Income of Ship-Owners’ Companies Generally, the Cyprus corporate tax system comprises the following key characteristics. • Corporate tax rate of 12.5% for trading operations. • Exemption from tax in almost all inbound dividend payments. • Exemption from: (a) taxation of profits derived by foreign per - manent establishments; and
(b) withholding tax on payment of interest, dividends and royalties. • No capital gains tax. • An extensive double-tax treaty network. Cyprus offers: • complete tax exemption of all profits and divi - dends at all levels of distribution arising from qualifying shipping operations; • no stamp duty payable on bills of sale and mortgages on Cyprus ships and related docu - ments; and • no capital gains tax payable on the sale and transfer of a ship or shares in a shipping company. Furthermore, the Cyprus Parliament enacted the Merchant Shipping (Fees and Taxing Provisions) Law of 2010 (which applied retroactively from 1 January 2010 for ten years); by a decision of the European Commission, this tonnage tax law has been extended for a further ten years with the enactment of the Merchant Shipping (Fees and Taxing Provisions) (as amended) Law of 2020, which applies from 1 January 2020 to 31 December 2029. The latter Law is fully compat - ible with the requirements of the EU acquis on State Aid to Maritime Transport. The tonnage tax system (TTS) is based on the payment by qualified persons of tonnage tax on the basis of the net tonnage of ships, and pro - vides full exemption from all income taxes that would normally be imposed under the Cyprus income and defence tax laws. Pursuant to the Merchant Shipping (Fees and Taxing Provisions) (as amended) Law of 2020, the TTS is available to qualifying ship-owners, charterers (bareboat, demise, time and voyage) and ship managers (providing technical and/or
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