Article as appeared in Stacy's Index to Merchant Shipping in Cyprus - November 2007
The accession of the new countries in the European Union (EU) including Cyprus, has reinforced Europe’s leadership on the world’s maritime scene and has created new prospects for the development of the shipping industry in Cyprus.
The maritime industry played and will continue to play a very important role in Cyprus and its Economy. This is reflected by both the large number of ships registered under the Cyprus flag and the number of maritime companies operating from Cyprus, many of which are owned by Cypriot residents.
Cyprus is today a world leading ship management centre with some of the local companies being among the largest of their kind worldwide.
The driving force in the shipping industry as in many other cases, is our human capital which thanks to its outgoing nature and dynamism has managed to achieve miracles, considering the size of our country.
The significant efforts made by the Cyprus maritime administration, the Cypriot managers, operators and shipowners to tackle weaknesses and improve quality and safety of the Cypriot fleet have resulted in the removal of the Cypriot flag from the Paris MOU Black list in 2004 to the White list in 2006. This is a major success but more can still be done to further improve Cyprus position and image.
The shipping industry and its related activities have been enjoying above average growth over the last few years. Globalisation and the world trading conditions are conducive to further developments in the shipping industry through heavy investment into new fleet capacity, acquisitions, joint ventures and alliances.
At PricewaterhouseCoopers Cyprus, thanks to our specialized know-how and the international network that we have at our disposal, we provide our clients with the information and advise that makes the difference. Because in today’s complicated world, the technique – but also the art – lies in the ability to provide simple solutions to complex problems.
The tenth "Maritime Cyprus Conference" opens it doors in Limassol on the 23 September 2007. The main aim of the conference is to operate as a forum where important and current issues relating to International Shipping are addressed.
The challenges facing the industry relevant to our services and how PwC can help are summarized below:
The challenges
Meeting IFRS requirements
International Financial Reporting Standards (IFRS) is a fact of business life.
It is a European requirement that listed companies must adopt IFRS for their group financial statements but also for all companies who want their financial statements and performance to be widely and easily understood by their shareholders. It is also vital before seeking additional finance from bankers and the world’s capital markets to present accounts that meet the requirements of transparency and comparability that IFRS provide. Companies that use IFRS can expect more meaningful internal and external financial reporting which gives them a competitive advantage.
How can PwC help?
While IFRS are not industry specific there are a number of issues which relate to the shipping industry.
PwC Cyprus has accumulated vast experience in applying IFRS to companies’ financial statements as Cypriot accounting practice was always using International Accounting Standards for financial statements preparation. This together with our long and extensive knowledge of the shipping industry enable us to help our clients with IFRS advisory services as well as provision of accounting and audit services of the highest standards. Our relevant publication Full Steam Ahead – What IFRS means to the Shipping Industry can be found on our Global web site www.pwc.com/transport.
Taxation matters
Favorable tax and other incentives have played an important role in the development of Cyprus as an international shipping and ship management centre. The different tax legislations and tax and VAT rates applicable to different types of revenue and profits arising from shipping and shipping related activities can sometimes complicate matters.
Additionally there is a need for an international tax planning strategy to ensure tax opportunities are identified and risks are properly managed.
How can PwC Help?
Our tax specialists, who have also developed extensive experience and knowledge in the shipping industry, can assist in establishing clarity around the taxation issues relating to the organization and develop tax policies and strategies who capitalize on the opportunities available and managing the associated tax risks. Our publication on European tonnage tax regimes for the shipping industry is a unique report in that it presents a thorough and detailed comparison of the different regimes in the European Union.
The brochure contains a detailed description of the regimes and calculation examples, as well as an outline of the background of the tonnage tax regimes. It can be downloaded from our global web site www.pwc.com/transport.
Transaction Support Services
The shipping industry is characterized by a significant level of finance raising, joint venture, merger and acquisition activity. Transactions are often complex and need advice on regulatory environment, valuations and due diligence work.
How can PwC help?
Our advisory specialists have extensive experience with shipping companies, which gives them a deep understanding of clients’ specific needs. The firm has recently been involved in the finance raising efforts of a number of shipping groups both from the banking sector as well as through stock exchange listings. At the same time, partners and staff from the firm are involved in providing corporate finance and general business advice to a number of shipping groups, on an ongoing basis.
