In order to promote its objective of improving the quality of Cyprus shipping, the Merchant Shipping (Fees and Taxing Provisions) Law of 2010 imposes a surcharge on the tonnage tax payable in respect of qualifying vessels registered in countries which appear on the 'grey list' or 'black list' of the Paris Memorandum of Understanding (MOU). Article 17(2) provides for a surcharge payable by owners of 30% for ships registered in countries appearing on the grey list and 60% for ships registered in countries appearing on the black list, and articles 27(2) and 40(2) provide for the corresponding surcharges payable by charterers and managers respectively.

On the basis of the annual report of the Paris MOU for 2015, the Department of Merchant Shipping has determined that the flags listed below are included in the relevant grey or black list for the purposes of calculating tonnage tax for 2016.

Article 34(4) provides that ships under management flying a flag on the black list of the Paris MOU will be deemed to comply with international and EU standards and consequently qualify for the tonnage tax system only if the technical and crew management of every such ship is performed entirely from the territory of an EU member state. In the event of breach of this requirement, Section 54 empowers the Department of Merchant Shipping to impose sanctions, including administrative fines and exclusion from the tonnage tax system.