TaxLegi 28.3.2024
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Cyprus at the forefront of Maritime Sustainability with the innovative European BlueBARGE project
The maritime industry currently accounts for approximately 3% of global greenhouse gas emissions, a figure expected to rise as global trade continues to grow. Consequently, emission reduction from maritime activities is crucial for fighting climate change and for keeping up with recent European and international regulations. Nevertheless, the international maritime industry has taken bold steps towards decarbonisation; regulatory bodies are imposing ambitious targets and launching initiatives to ease the transition to a sustainable future, exemplified by the International Maritime Organisation's strategy aiming to cut emissions from shipping by half by 2050 compared to 2008 levels.
BlueBarge project
In alignment with these goals, the BlueBARGE project was announced, undertaking the design, development, and demonstration of an optimal power-barge solution primarily aimed at providing offshore power to moored vessels. This solution aims to reduce local pollution emissions and the overall greenhouse gas footprint.
The proposed power-barge solution will explore various options, including containerised power supply modules, with battery modules being prioritised due to their high energy efficiency and readiness level. The project will address challenges related to electrical integration, interface compatibility with ships, ports, and local grids, as well as operational safety and regulatory compliance.
The overarching objective of the BlueBARGE project is to deliver a comprehensive "power bunkering" solution with high readiness, contributing to the maritime industry's transition towards electrification and decarbonisation.
The role of Cyprus in the BlueBarge Project
As part of this project, Cyprus has emerged as a key player, showcasing its commitment to advancing the local maritime field. Cyprus's involvement in the BlueBARGE project signifies its recognition of the importance of the maritime sector for its economy and its willingness to embrace cutting-edge solutions to address challenges such as environmental sustainability, efficiency, and competitiveness.
With a budget exceeding 11 million euros, the project, co-financed by CINEA’s Horizon Europe programme, aims to drive the maritime port sector's electrification and decarbonisation efforts at the European and international levels. Cyprus’s Shipping Deputy Minister announced that equipment adaptations for the project will take place at a Limassol shipyard and anchorage, with an ambitious completion timeline of 36 months, aiming for commercialisation by 2030.
This initiative is part of a broader long-term vision outlined by the Cyprus Deputy Ministry, which has already implemented various green incentives to incentivise emission reduction efforts among shipowners. Notably, measures such as reductions in tonnage tax for environmentally proactive vessels serve to encourage the adoption of cleaner technologies and practices within the maritime industry.
In essence, the BlueBARGE project represents a significant milestone in Cyprus's journey towards a greener future. With its focus on developing a new ship electrification model, the project is poised to significantly enhance our country’s reputation as a proactive and forward-thinking member of the European maritime community.
Marina Ioannidou - CCaSS – EY Cyprus
Era Xenofontos - ESG Taxes – EY Cyprus
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CESOP: Last call for compliance
From 1 January 2024, new European Union (EU) rules will require Payment Service Providers (PSPs) in the EU to report cross-border payments on a quarterly basis, via what is termed as the Central Electronic System of Payments (CESOP). PSPs can be defined as financial institutions authorized to process money transactions between merchants and their customers, and the services covered will include merchant acquirers, payment facilitation, card issuers, banking payments, e-commerce and e-money.
With the objective to target Value Added Tax compliance on cross-border payments, customer and transaction information will need to be shared electronically with tax authorities throughout the EU.
The first reporting deadline is fast approaching. EY can support in a number of ways:
1. Health checks for first reporting: Our team can review the established functional requirements, data models, systems architecture, reporting processes, governance and control prior to the first submission.
2. Reporting services: With a potential obligation to report in 27 member states, an EY First proprietary software can submit reports, where permitted to do so by local tax authorities.
3. Full outsource: In addition to reporting, when given full payments data, the team can support with data transformation and removal of non-reportable payments, aggregation and fuzzy matching for payee, Taxpayer Identification Number (TIN) validation checks, data quality checks, data governance and control.
4. Reporting tool license: Finally, EY First is available under license, SaaS or desktop and is used by more than 300 clients globally for Automatic Exchange of Information reporting.
By:
Panayiotis Tziongouros
Partner | International Tax and Transaction Services
Panayiotis.Tziongouros@cy.ey.com
Georgios Mavroyiakoumos
Assistant Manager | Indirect Tax Services
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Cyprus is in line with the Environmental Incentives of the European Commission’s Green Deal: maximum 30% rebate on the Annual Tonnage Tax
Background
With its continuous effort and development to achieve emissions reduction goals and to ensure a more sustainable future for the shipping industry, the Shipping Deputy Ministry of Cyprus encompasses a series of environmental incentives which aim to support the decarbonization of the shipping industry and to reward ships which effectively participate in such sustainable innovative practises.
As from January 2024, Cypriot shipowners and Community ships that are following the mechanisms for the protection of the shipping environment and the new testing approaches for the climate change mitigation, will be eligible to receive up to a 30% rebate in annual tonnage tax if they are engaged in a qualifying shipping activity as per the Merchant Shipping (Fees and Taxing Provisions) Laws of 2010-2020.
Main provisions
Cyprus provides a ‘’rebate’’ on its Tonnage Tax System comparing what emissions reductions are required of ships, with what they actually achieve:
Incentive 1: Energy Efficiency Design Index (EEDI):
- 5 - 25%: Applies for ships which achieve further reduction of the attained EEDI compared to the required EEDI (Regulation 20 / MARPOL ANNEX VI).
- 5 - 30%: Applies for ships which demonstrate a voluntary implementation and follow Phase 1 (5%) or Phase 2 (15%) or Phase 3 (30%), thus going voluntarily beyond the relevant environmental standards.
Incentive 2: IMO Data Collection System (D.C.S):
- 10 – 20%: Applies for ships 5,000 GT and above which comply with the Regulation 22A of MARPOL ANNEX VI and demonstrate reduction of the total fuel oil consumption in relation to the distance travelled, compared to the immediately previous reporting period.
Incentive 3: Use of Alternative fuels:
- 15 - 30%: Applies for ships which use alternative fuels and achieve CO2 emissions reductions of at least 20% in comparison with traditional fuels on a case-by-case basis after successful review of the submitted documents.
Additional provisions
During the calendar year where the companies applied for any of the environmental incentive, are not eligible to obtain such incentive, if their ships:
- are detained due to any environmental deficiency(ies) (violation of any International / National regulation / Directive of European Commission) during PSC inspection.
- violate any regulation / Directive of European Commission related to the environmental protection (e.g Directive 2016/802 EC, Regulation (EU) 2015/757, Regulation (EU) No 1257/2013).
- are not in laid-up condition (warm or cold).
Conclusion
Cyprus as a key flag member state during this transformative journey is addressing more and more the climate change phenomenon and benefits from both an environmental and commercial angle.
Those green incentives lead Cyprus become an important maritime ally in environmental responsibility and consistency. It also proves country’s ecological footprint in line with the EU Green Deal, spotlighting new green technologies.
Era Xenofontos
ESG Taxes – EY Cyprus
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Announcement regarding the examination of applications for Naturalization
The Ministry of Interior has announced on 22/03/2024 further clarifications regarding the recently amended Civil Registry Law provisions for Naturalization.
Specifically, amongst others it has now been clarified that:
- Basic knowledge of the Island's history and political/social status will need to be proven by a Certificate of Success with a grade at least 60%. Such certificate can be obtained by the Examinations Service of the Ministry of Education, after a successful examination.
- Highly qualified employees, the category which is eligible for the fast track process, is determined as:
- either employees of an International Business Company with a Work Permit as Director, Key Personnel, or Specialist
- or employees of such companies under any other type of permissible permit who receive a minimum of €2,500 per month and hold a university degree (or equivalent, or proof of employment corresponding to 2-years in a relevant position)
- Applications for Naturalization will only be accepted if they satisfy all the relevant requirements.
How we can help:
Our Immigration experts can assist you in understanding all the recent changes, and guide you through the whole process of applying for Naturalization.
By:
Panayiotis Thrasyvoulou
Partner | Head of People Advisory Services
Panayiotis.Thrasyvoulou@cy.ey.com
Riginos Polydefkis
Director | Head of Immigration Services
Costas Anastasiou
Manager | Immigration Services
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Extension to the submission of forms TD 602 and TD 603 for January 2024
On the 29th of February 2024, the Tax Authorities issued an announcement notifying taxpayers that, as a result of various modifications that had to be made on the Declarations of Withheld Special Defence Contribution and on the Declarations of Withheld General Health System Contributions on dividends (Form T.D. 603) and on interest (Form T.D. 602), the relevant declarations for January 2024 have not yet been released and are therefore not available for submission through the Taxisnet system. It is expected that the referred to declaration forms will be made available for submission in the upcoming days.
Based on the above, the Tax Commissioner decided that for the declarations relating to the month of January 2024, which will be submitted by 31 March 2024, no administrative penalty will be imposed.It was also highlighted in the announcement that the date of settlement of any Special Defence Contributions and General Health System Contributions withheld on dividends (codes 603/703) and on interest (codes 602/702), for January 2024, remains the 29th of February 2024 and the relevant payment should have been made through the Tax Portal. For any payments that made after the above-mentioned date, penalties and interests will be imposed as provided for in the relevant law.
Our team remains at your disposal for any information and/or clarifications required.
Philippos Raptopoulos
Partner | Head of Tax and Legal Services
Petros Liassides
Partner | Direct Tax Services
Charalambos Palaontas
Partner | Transfer Pricing Services
Myria Saparilla
Partner | Direct Tax Services
Anna Papamichael
Partner | Direct Tax Services
Eleni Sofocleous
Partner | Direct Tax Services
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Cyprus publishes 10-year government bond yield rates for notional interest deduction purposes
On 7 March 2024, the Cypriot Tax Department issued an announcement that lists the 10-year government bond yield rates as of 31 December 2023 for a number of countries (listed in the table below) with respect to the notional interest deduction (NID) on equity. These yield rates should be used to determine the reference interest rate for claiming NID for the 2024 tax year. The key NID provisions and the applicability of the 10-year government bond yield rates are summarized below.
Notional interest deduction
As of 1 January 2015, Cyprus tax-resident companies (as well as foreign companies with permanent establishments in Cyprus) that carry on a business are entitled to claim an NID on their equity capital introduced on or after 1 January 2015.
The NID is deducted from the company's taxable income for the relevant tax year (subject to any restrictions) for the period of time during which the company used the equity in carrying on its activities. The NID is subject to a number of conditions, including a taxable-income limitation. The NID equals the multiple of the "reference interest rate" (as defined below) and "new equity."
"Reference interest rate" means the 10-year government bond yield of the country in which the new equity is invested, as of 31 December of the year preceding the tax year, increased by 5%.
10-year government bond yield rates1 as of 31 December 2023 (applicable for 2024 tax year)*
