Opportunities and challenges
for the shipping industry*
Introduction
Belgium
China
Cyprus
Denmark
France
Germany
Greece
Hong Kong
Ireland
Italy
Luxembourg
Malta
Mauritius
The Netherlands
Norway
Poland
Portugal
Singapore
Spain
Sweden
United Kingdom
Opportunities and challenges
for the shipping industry
Advancing globalisation, more flexible tax regimes
and an increasingly mobile workforce are creating
opportunities and challenges for the shipping
industry. New corporate strategies and processes
are required to deal with an industry which is
being reshaped through market consolidation
and shifts in the balance of world trade.
Sustained profitability in many sectors,
increasingly international operations and ever more
sophisticated tax authorities are leading shipping
companies to look at effective ways to align their
corporate, operational and tax structures.
Challenge yourself with
these questions
Are you completely happy with
your current tax structure – is it best
in class?
Could you lower the cost of
your working capital through tax
optimised funding?
Are you in control of tax compliance
wherever you operate – for all taxes?
PricewaterhouseCoopers
helps you to address
these questions
With its well established global network
of shipping industry specialists,
PricewaterhouseCoopers offers
comprehensive taxation and legal advice
to help you achieve the best tax
operational model for your business.
Index
Facing the challenges
The wide range of taxes falling on
shipping business can be a major burden.
Industry volatility and complex rules can
make it difficult to manage the group’s
taxation. A flexible, efficient structure
and well understood procedures
are essential.
The shipping business is capital
intensive: technical and environmental
developments trigger an ongoing need
for investment. Tax optimised financing
models help lower the cost of capital
investment.
Managing the workforce and meeting
employer compliance obligations at the
lowest cost has become increasingly
challenging, as shipping companies and
groups become more global through
alliances and mergers.
PricewaterhouseCoopers
can help add value to
your business
Through our shipping industry experience
and expertise we can help you realise
the best solutions to some of the key
challenges that face the industry:
Taxation of shipping income
and Tonnage Tax
PricewaterhouseCoopers has
considerable experience of helping global
shipping businesses to manage the many
company and employee taxation risks
associated with cross-border operations.
Tax risk management
Tax risk management should be on the
Boardroom agenda.
PricewaterhouseCoopers works with
your key people to establish clarity
around the company’s tax risk profile,
develop global tax strategies and policies,
and design a tax risk management model
that meets your commercial objectives.
By working in partnership with you and
your management team, our proactive
approach helps you to create and protect
stakeholder value.
M&A considerations
Transactions are often complex and
impacted by the regulatory environment,
competition issues, or opportunities for
subsidies. PricewaterhouseCoopers is
one of the leading M&A advisers in these
areas. We are also market leading
providers of associated transaction
services including financial due diligence,
tax structuring and legal services. We also
provide post-deal integration support to
help you meet value expectations.
Global Compliance
PricewaterhouseCoopers can help you
to optimise your worldwide tax position
by taking a global view of your business
and finding the most appropriate tonnage
tax and other favourable tax regimes for
your business.
International Mobility and
Cross-border Employment
The combination of dedicated teams with
state of the art software tools allows us to
offer you enhanced control of your
compliance globally, efficiently and cost
effectively, making us a leading provider in
corporate tax, VAT, sales tax and payroll
compliance.
Lowering the cost of capital
An increasingly mobile workforce can
create tax residence or permanent
establishment problems. You may even
inadvertently be allowing your staff to
work abroad illegally.
PricewaterhouseCoopers has built up
considerable know-how in tax optimised
financing. Our experience allows you to
save on your investment cost.
Index
PricewaterhouseCoopers
Shipping Network
PricewaterhouseCoopers has
established a European and Global
Shipping Network of industry experts.
Within this network, a dedicated team
of tax and legal professionals provide
advice and support to businesses
like yours.
This network of highly experienced
professionals can advise your company
at an international level and guarantee
you responsive and consistent high
quality services.
Through our network of local
specialists PricewaterhouseCoopers
can offer the solutions and help
needed to manage your business on
a local and global basis.
The PricewaterhouseCoopers Shipping
Network has built on its commitment to
exchange experience through our
global databases and regular meetings,
allowing all members to share
knowledge and find solutions that fit
your needs.
No matter where you are navigating,
PricewaterhouseCoopers has a
Shipping Team ready.
TRANSPORT & LOGISTICS INDUSTRY NETWORK
Global Network, Local Expertise, Individual Services
Belgium*
Solutions for shipping companies
Opportunities in Belgium
Thanks to its central location, Belgium regularly serves as
a spring board to the European Union. A major part of the EU’s
economic activity is located in an area 1,500 km long and
200 km wide running from Liverpool (UK) to Genoa (Italy).
Belgium is located right in the centre of this area and therefore
deserves to be called the hub of Europe. Belgium’s role as
a transit zone is due chiefly to the fact that an important part of
Europe’s road traffic is performed by Belgian carriers. In addition,
Antwerp is Europe’s second largest port and one of the
10 largest in the world.
Since the introduction of a series of (tax) measures in support of
companies running maritime operations, Belgium saw some of
its most important maritime companies “returning to base” flying
the Belgian flag. Based on the number of rulings already requested
for and granted in a short period of time, one may conclude that
– due to the competitiveness of the newly installed regime –
Belgium will regain some of the lost ground in the maritime sector.
Belgian ship register
Registering with Belgium’s Maritime Registry implies flying
the Belgian flag. To be admitted to registration, all ships to be
registered in Belgium shall have to be inspected beforehand by
the Belgian Maritime Inspectorate.
In principle, command over Belgian-registered ships should
be entrusted to Masters of Belgian nationality. The empowered
official may depart from this rule, at the shipowner’s request,
if the needs of trade or navigation so require.
Belgian wage taxes and Social Security
A Belgian employer, employing employees who are taxable in
Belgium, is in principle obliged to withhold Belgian wage taxes
on the income derived by the employees and deposit the
amount to the account of the Belgian tax authorities.
Employers belonging to the merchant marine, dredging or
towage sector are however, under certain conditions, exempted
from the obligation to transfer the amount of the wage taxes
withheld. As such an incentive, equal to the amount of wage
taxes withheld, is given by the Belgian state to employers active
in these sectors.
In pursuance of domestic law, Belgian Social Security coverage
is available for seafarers who are on board of a Belgian flag ship,
enrolled in the Belgian Maritime Register and are resident of the
European Economic Area or countries with which Belgium has
concluded a bilateral Social Security treaty.
Registration statement;
In case the Belgian Social Security scheme applies, the
seafarers fall under a particular category seen the specifics
inherent to their profession. The level of Social Security
contributions for this category is less than the ordinary Social
Security contributions due for employees (total exemption for
the employer’s Social Security contributions, partial exemption
for the employee’s contributions and reduced contributions to
the Accidents at Work Fund).
Original tonnage certificates;
Belgian tax framework
A document showing a clean title of ownership (building
contract, purchasing document, assets brought into
business, etc.);
Belgian shipping companies are subject to the general tax
framework applicable to all commercial companies with
the exception of some tax incentives that are specially intended
for shipping companies. Thanks to a comprehensive treaty
framework (e.g. with Hong Kong) and specific Belgian tax
incentives (e.g. the notional interest deduction concept),
Belgium can be an interesting option for shipping companies
wishing to lower their overall effective tax rate.
Seagoing vessels are registered upon submission of certain
documents to the register. Those include amongst other:
The articles of association of the company or companies
owning the seagoing vessel.
Index
Belgium*
A Belgian entity operating a vessel is subject to Corporate
Income Tax at a rate of 33.99% on its net taxable profits. Some
of the main Belgian tax incentives for shipping companies are
the following:
A. Tonnage tax regime (“TTS”)
Generalities
- Both Belgian companies and Belgian branches of foreign
companies may elect into the TTS, provided certain
conditions and qualifications are being complied with;
- Shipping entities can elect into the TTS if they are engaged
in maritime transport, i.e. when the entities derive “profits
from sea shipping”. The latter concept is explicitly defined
in Belgian law;
- The requirement to fly a Member State’s flag in order to
constitute an eligible shipping activity need not be met,
if the conditions thereto, as set out in the Community
Guidelines, are met.
Tax advantages
- The applicability of the TTS is secured by a ruling granted
for an initial period of 10 years, with an automatic renewal
every 10 years;
- Capital gains upon the sale of seagoing vessels are
not taxable;
- Corporate income taxes are levied on a virtual taxable
profit computed by applying a notional profit tax to
the tonnage, in accordance with the following scales:
Up to 1,000 tons:
From 1,001 to 10,000 tons:
From 10,001 to 20,000 tons:
From 20,001 to 40,000 tons:
In excess of 40,000 tons:
EUR
EUR
EUR
EUR
EUR
1.00
0.60
0.40
0.20
0.05
per
per
per
per
per
100
100
100
100
100
net
net
net
net
net
tons
tons
tons
tons
tons
Belgium is the first Member State to introduce the low rate
of EUR 0.05.
B. Other advantages for shipping companies not electing
into the TTS
Accelerated amortisation scheme: For new seagoing
vessels (or co-owned parts or shares thereof) one can apply
an accelerated amortisation with a scale of 20% for the first
accounting year, 15% for the two following accounting years
and 10% for the remaining accounting years. For secondhand seagoing vessels (or co-owned parts or shares thereof)
and costs related to the renovation or modernisation upon
acquisition thereof, the same amortisation scales can be
applied, provided certain conditions are met.
Exemption from capital gains on vessels: Capital gains
realised on the seagoing vessels held by taxpayers that are
exclusively engaged in sea shipping business, are exempt
from corporate income tax, provided a.o. the entire sales
price is reinvested and the ships have been accounted for as
“fixed assets” for more than 5 years prior to realisation.
National interest deduction: As from tax year 2007, Belgian
corporate income taxpayers are for tax purposes allowed to
claim a notional interest deduction, reflecting the economic
cost of the use of capital equal to the cost of long-term risk
free financing. As for determining the basis on which the
notional interest deduction is calculated, the company’s/
branch’s (share) capital plus its retained earnings, under
Belgian GAAP and as per the last year-end date are taken
into account. For the tax year 2009 (financial year endings as
per December 31, 2008 or later), the notional interest
deduction rate is set at 4.307%. The rate is based on the
average of the monthly published interest rate, which is paid
on 10-year Belgian Government Bonds, of the prior year.
Hence, it is adjusted annually.
Investment deduction: Belgian companies or branches that
are exclusively engaged in the sea shipping business with new
sea-going vessels or second-hand vessels that are used for the
first time by a Belgian taxpayer, are eligible for an investment
deduction of 30% of the acquisition price. Failing sufficient
income, the unused portion of the deduction can be carried
over to subsequent years. Such carry-over is suspended
during, and re-activated after a tonnage tax period.
Contact
For more information, please contact:
Pascal Janssens
[email protected]
Tel.: +32 (0)3 259 3119
Information in this leaflet was last updated in January 2008 and is presented in a summarised form and is intended for general guidance only.
Specific advice should be obtained before any action is taken.
© 2008 PricewaterhouseCoopers. All rights reserved. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International Limited,
each of which is a separate and independent legal entity.
www.pwc.com/be
Index
TRANSPORT & LOGISTICS INDUSTRY NETWORK
Global Network, Local Expertise, Individual Services
China*
Solutions for shipping companies
Opportunities in China
The new CIT Law was promulgated on March 16, 2007 and
came into effect from January 1, 2008. The new standard CIT
rate is reduced to 25%. A lower tax rate is available for qualified
small and thin-profit companies (20%) and for qualified high/new
technology enterprises (15%).
Introduction
Ever since China’s adoption of its “Open Door” policy in 1979,
the Chinese Government has introduced various policies and
measures to attract foreign investment into China. The pace of
opening to the outside world, however, has varied with industry
sectors. Foreign participation in the maritime business in China
has been regulated until China’s formal accession to the World
Trade Organisation (“WTO”) in December 2001, which led to
China’s opening up of market access to various previously
regulated industries. Relaxation in the rules has provided foreign
investors the opportunity to step up their participation/
involvement in the maritime business in China. Depending on
the nature of the maritime activities, a foreign investor can
now participate in the form of joint ventures or wholly foreignowned enterprises.
China has also experienced remarkable growth in its foreign
trade in recent years. Latest statistics ranked China as the third
largest trading country in the world. Reportedly more than 80%
of exports are through ocean freight and freight volume is
forecast to grow by 8% to 10% on yearly basis. Port
development is also a priority for the Chinese Government,
seeing to the construction of excellent port facilities throughout
the coastlines.
The right business environment, relaxation in the regulatory
regime for foreign investors all contribute towards a favourable
environment for the shipping industry’s rapid development and
present opportunities for domestic and foreign players alike.
FIEs which are currently subject to 33% CIT rate should
immediately benefit from the new reduced rate.
FIEs engaged in the transportation of goods (including sea, land,
air) which were incorporated prior to March 16, 2007 and are
qualified for tax incentives (in the form of tax holiday or reduced
tax rate) under the existing CIT Law can continue to enjoy such
incentives for a prescribed period under the grandfathering
provisions in the new CIT Law. Other than this, there appears to
be little incentives available under the new CIT Law for FIEs in
this sector.
Business Tax
Business Tax (“BT”) is a tax on the income earned from the
provision of certain services in China. BT rates range from 3%
to 20% depending on the nature of services. Income from
transportation service is subject to BT at the rate of 3%. Other
services such as shipping agency, freight forwarding, logistics
services etc. are subject to BT at the rate of 5%. BT is usually
calculated on gross basis with limited allowable deductions.
For agency services, e.g. shipping agency, freight forwarding,
etc, BT is calculated on net income basis.
Stamp Duty
General PRC Corporate Tax Regime
Stamp Duty is levied on dutiable documents at prescribed rates.
For contracts or equivalent documents for transportation, the
relevant stamp duty rate is 0.05% on the transportation fee.
Corporate Income Tax
Other taxes
Generally, all Foreign-Invested Enterprises (“FIEs”) incorporated
in China are subject to Corporate Income Tax (“CIT”) on their
profits. The standard CIT rate used to be 30% plus a local tax
of 3%.
FIEs incorporated in China (including shipping FIEs) may
potentially be subject to a number of other taxes such as Deed
Tax, Land Appreciation Tax, Urban Real Estate Tax, Motor
Vehicle Acquisition Tax and various other local levies.
Index
China*
Avoidance of Double Taxation
According to the relevant Chinese tax law and regulations,
if a foreign shipping company derives shipping income from
carrying passengers, cargo and parcels from Chinese ports,
the gross shipping revenue so earned shall be subject to BT and
the net shipping income shall be subject to CIT. In this regard,
the PRC tax authorities adopt a deemed profit method to assess
the CIT on the taxable profit of foreign shipping companies.
The deemed profit rate is 5% of the gross shipping revenue.
Thus the CIT is 1.65% (33% x 5%) of the gross shipping
revenue. Therefore the total tax cost for a foreign shipping
company is 4.65% (being 1.65% plus BT of 3%) on gross
shipping income.
Notwithstanding the above, China has an extensive network of
Double Taxation Treaties (currently signed up with more than
90 countries) and Shipping and Air Transport Agreements
(currently signed up with more than 50 countries) providing for
reciprocal tax exemption or a reduced tax rate on the relevant
income for both the eligible companies themselves as well as
crews working on board.
Contacts
For more information, please contact:
Linjun Shen
[email protected]
Tel.: +86 21 6123 3060
Betty Ko
[email protected]
Tel.: +86 21 6123 3380
Information in this leaflet was last updated in January 2008 and is presented in a summarised form and is intended for general guidance only.
Specific advice should be obtained before any action is taken.
© 2008 PricewaterhouseCoopers. All rights reserved. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International Limited,
each of which is a separate and independent legal entity.
www.pwc.com/cn
Index
TRANSPORT & LOGISTICS INDUSTRY NETWORK
Global Network, Local Expertise, Individual Services
Cyprus*
Solutions for shipping companies
Opportunities in Cyprus
Essentially the relief provides that:
Cyprus is considered to be an ideal centre for the establishment
and operation of shipping and shipping related companies,
which seek to exploit the benefits of Cyprus’ strategic position
and its well-developed infrastructure.
The double tax treaties signed and the numerous bilateral
agreements in conjunction with the tax benefits introduced for
both foreign and local shipowners, triggered the tremendous
expansion of the Cyprus Shipping Registry, both in terms of
number of vessels registered as well as gross tonnage. Today,
Cyprus ranks among the top ten countries with one of the
largest shipping fleet in the world, with ships representing
a gross tonnage of 22 million. The Cyprus Merchant fleet
represents approximately 6% of the merchant fleet under EU
flags being the 3rd largest fleet in the EU. Cyprus has also
become one of the largest third-party shipmanagement centres
with about 100 shipmanagement companies.
The island has its own well-established maritime infrastructure
comprising the admiralty courts, unions and Classification
Society. It also has a specialised department, The Department of
Merchant Shipping, which is operating under the Ministry of
Communications and Works and offers a dedicated service to
the shipping industry.
no income tax is payable on the profits derived from any
shipping activity by a Cyprus shipping company which owns
and uses or charters out ships under the Cyprus flag or on
dividends paid out of such profits at all levels of distribution;
the exemption extends to the profits generated by a bare
boat charterer of a foreign flag vessel, registered in Cyprus
under parallel registration;
no capital gains tax is payable on the sale or transfer of
a ship (any flag) or shares in a shipping company;
no income tax is payable on the salaries of officers and crew
of Cyprus ships which operate in international waters;
no stamp duty is payable on bills of sale and mortgages on
ships and related documents.
Cyprus international business companies, that generate profits
from shipping activities of ships under non-Cyprus flag, are
taxed under normal taxation rules and they are liable to
corporation tax at the rate of 10%. Dividend distributions from
such profits:
have no WHT if paid to non Cyprus residents
are fully exempt from tax in the hands of a Cyprus holding
Company.
Tonnage tax
A substantial percentage of the vessels in the Cyprus Registry is
currently managed by specialised ship management companies,
which operate from fully manned offices in Cyprus. This
promotes the proximity and close relationship between the
Cyprus Government and the shipping community.
Tonnage tax is payable by shipowners of Cyprus flag ships.
The tax depends on the tonnage of the ship and its age.
Taxation
Shipmanagement activities
Cyprus offers complete tax exemption on all profits and
dividends arising from shipping operations. This tax relief was
introduced in 1963 for 10 years and has been extended a
number of times. The current expiry date is December 31, 2020
and it is likely that it will be extended.
Cyprus shipmanagement companies that manage Cyprus flag
vessels pay no tax, whereas the shipmanagment of foreign flag
vessels is subject to tonnage tax at 25% of the tonnage tax
rates or subject to 4.25% tax on the profits.
Index
Tonnage Tax of a ship =
(Basic Charge + Gross Tonnage Increment) x Age Multiplier
Cyprus*
In particular, the main characteristics of the shipmanagment tax
regime are the following:
The taxation regime covers the three types of internationally
accepted shipmanagement services, i.e. crewing, technical
and commercial management of ships, rendered under a
contract with the owner or bareboat charterer of a ship, by
persons who have an office in Cyprus manned with sufficient
personnel in number and qualifications.
Shipmanagement companies are taxed in accordance with
the provisions of the Merchant Shipping (Fees and Taxing
provisions) Law, unless they elect to be taxed for a specific tax
year in accordance with the provisions of the Income Tax Law.
In accordance with the provisions of the Merchant Shipping
(Fees and Taxing Provisions) Law, and for the period ending
December 31, 2020, any income arising from the provision of
shipmanagement services is subject to a tax rate equal to
25% of the tonnage tax rates of the vessels under
management. This tax is applicable to foreign flag vessels
under management and is calculated based on the annual
tonnage tax these vessels would have to pay if they were
registered in the Cyprus Register of Ships. Shipmanagement
services offered to Cyprus flag vessels are exempt.
In accordance with the same legislation, no tax will be
withheld from dividends distributed out of profits generated
from shipmanagement activities and no tax is imposed to the
recipient shareholders in respect of these dividends at all
levels of distribution.
Registration of ships
A vessel may be registered in Cyprus if more than one half of
the shares of the ship are owned by:
a Cypriot, or
a corporation established and operating under and in
accordance with the laws of the Republic of Cyprus and
having its registered office in the Republic, or
a corporation incorporated outside the Republic in which
the controlling interest is vested in Cypriots (physical
persons), if specially authorised by a decision of the Council
of Ministers of the Republic.
In view of the above requirements, all non-Cypriot owners who
wish to register their ships under the Cyprus flag must
incorporate a company in Cyprus which will either acquire
the ship in its name, or bareboat charter the ship.
Provisional registration
Cyprus merchant shipping legislation allows for the provisional
registration of a vessel and most owners usually opt to have
their ship provisionally registered first. The provisional
registration is deemed to be a full registration for a period of
up to six months and it can be extended further for three
months with an application prior to the expiration of the sixmonth period.
Permanent registration
The permanent registration of a vessel registered provisionally
under the Cyprus flag must be completed within nine months,
including the three-month extension period, which is the
maximum provisional registration period. It is not necessary for
the ship to be present in a Cyprus port. Once the necessary
documents are submitted and formalities completed, the
Registrar of Cyprus ships will issue the “Certificate of Cyprus
Registry” and the vessel will be permanently registered under
the Cyprus flag.
Parallel registration
Under Cyprus legislation the possibility of parallel (bareboat)
registration of vessels exists. The legislation provides for the two
forms of internationally accepted bareboat registration: “Parallelin” registration and “Parallel-out” registration. These two options
offer some very interesting opportunities for leaseback, hire
purchase and finance arrangements. The administrative practice
of the Department of Merchant Shipping has confirmed that
the parallel (bareboat) registration of vessels under the Cyprus
regime may be effected with more than 20 states whose
legislation is compatible with Cyprus legislation.
Contacts
For more information, please contact:
Nicos Neophytou
[email protected]
Tel.: +357-25555000
Cleo Papadopoulou
[email protected]
Tel.: +357-25555000
Information in this leaflet was last updated in September 2007 and is presented in a summarised form and is intended for general guidance only.
Specific advice should be obtained before any action is taken.
© 2007 PricewaterhouseCoopers. All rights reserved. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International Limited,
each of which is a separate and independent legal entity.
www.pwc.com/cy
Index
TRANSPORT & LOGISTICS INDUSTRY NETWORK
Global Network, Local Expertise, Individual Services
Denmark*
Solutions for shipping companies
Opportunities in Denmark
The Danish tonnage tax system
The Danish Tonnage Tax Act was adopted by the Danish
Parliament on April 18, 2002. The decision of whether or not to
enter into the scheme is binding for a period of 10 years. This
also applies to newly established shipping entities.
Possibilities exist to transfer shipping entities, which have not
from the beginning applied the Danish Tonnage Tax Act, to
the Danish Tonnage Tax Act.
The main principle of the tonnage tax regime is that shipping
entities which qualify for the usage of this regime are not taxed
on the basis of their actual income derived from their business,
but on a fictitious income based on the net tons carrying
capability of their fleet used for purposes covered by
the tonnage tax scheme.
Shipping entities, which do not apply the Danish Tonnage Tax Act,
will be taxed according to the general tax provisions in Denmark.
This presentation only provides a general overview of the Danish
tonnage tax scheme, and does not cover the special Seamen
taxation rules besides the following brief description.
If the ship is registered in the Danish International Shipregister
(“DIS”), DIS gives Danish ship owners an opportunity to reduce
their manning costs to an internationally competitive level. Like
other countries, Denmark has chosen tax incentives as a means
of reducing costs. The seafarer is thus exempt from paying
income tax on the salary earned on DIS ships, so the shipping
company in fact only has to pay net wages, thereby reducing
its labour costs significantly.
Requirements in order to qualify
The tonnage tax scheme is available to Danish shipping entities
organised as limited liability companies (A/S or ApS), foreign
shipping companies with the place of management control in
Denmark, and EU shipping companies with a permanent
establishment in Denmark.
Index
As a main rule, group related shipping companies based in
Denmark must make the same choice regarding the tonnage tax
scheme. However shipping companies which do not have the
same management or operating organisation, and do not
conduct business in related fields can be exempt from the joint
decision provision.
The only type of shipping business which qualifies for the
tonnage tax scheme, is the commercial transportation of
passengers or cargo between different destinations with ships
owned, or chartered on a “bareboat” or “time-charter with
a call/buy option by the company” basis, provided such ships
have a minimum gross tonnage of 20 tons, and the business is
strategically and commercially carried out from Denmark. Ships
hired in on timecharter contracts without call/buy options can
only be included in the tonnage tax scheme with a gross
tonnage amount equivalent to 4 times the total gross tonnage of
owned tonnage and tonnage on bareboat terms and timecharter contracts with call/buy options. Please note that this rule
is under change and the level is expected to be raised to
10 times the level of owned tonnage during 2008.
Income from activities, which are carried out in close connection
to this business, such as the usage of containers and loading
facilities, etc. can also be included in the tonnage tax scheme.
Ships which are used for exploration, diving, fishing, sand
dredging, etc., are specifically exempt from the tonnage tax
scheme. The same applies for certain types of ships such as
barges, floating docks, etc. However, EU/EEC registered ships
used for towage activities at sea during at least 50% of
its operating time during the income year can be included in
the tonnage tax system. The exemption does not apply for
towage activities in and around ports.
Because of the change in EU governmental support rules an
EU flag requirement has been introduced in the Danish tonnage
tax system with effect from 2005. The rule states that a shipping
company that has elected to use the tonnage tax system, must
in average during the year of income maintain or increase
the percentage of owned gross tonnage registered in an EU/EEC
registry. This main rule does not apply if the average EU/EEC
registered tonnage of all the shipping companies using
the Danish tonnage tax system has not been decreased, or
if the average EU/EEC gross tonnage of the specific shipping
company is at least 60%.
Denmark*
However if a shipping company at the point of entering
the tonnage tax system does not own any EU/EEC registered
tonnage, the flag requirement does not apply, because
the rule only stipulates a requirement to maintain or increase
the company’s share of EU/EEC registered tonnage.
depreciations for tax purposes. Special rules apply for shipping
entities that already existed when they elected to become
subject to the tonnage tax and when an entity elects to include
some other assets at a later point in time which where not
previously subject to the tonnage tax regime.
As a new addition ship operating companies can also use
the Danish tonnage tax system. A ship operator is defined as
a company doing business with crew management and
technical management of ships qualified for use in the tonnage
tax system. It is a requirement that the ship operator has taken
over the full operating responsibility and all obligations and
responsibilities according to the ISM codex.
Gains on the sale of ships
Taxable income
The taxable income for the part of the business, which qualifies
for the tonnage tax scheme, is determined for each ship as
a fixed amount per 100 net tons (NT) per day according to
the Table below:
For ships used in the tonnage tax scheme prior to
January 1, 2007 any gain on the sale of such ships will be
taxable. The taxable gain is calculated as the sale price minus
the purchase price plus improvements. Any losses on ships
acquired and sold within the same income year as the year
when gain is realised are deductible from the gain.
Ship net ton
Expected changes in the Danish regime
0-1,000 NT
1,001-10,000 NT
10,001-25,000 NT
Over 25,000 NT
Fixed amount per day
per 100 net ton
DKK 7.8 per day per 100 NT
DKK 5.6 per day per 100 NT
DKK 3.35 per day per 100 NT
DKK 2.2 per day per 100 NT
Amount
in Euro
0.94
0.67
0.40
0.27
The income is taxed at the ordinary corporate tax rate (25%).
No deductions re shipping income will be allowed. Special rules
apply for financial income and financial expenses, and in relation
to so called “thin capitalisation”. Income, which does not qualify
for the tonnage tax scheme, is taxed according to the general
tax provisions in Denmark.
Depreciation
For shipping companies covered by the tonnage tax regime, gains
on the sale of ships which have not been used in the regime prior
to January 1, 2007 is tax exempt. The same applies to gains on
the sale of contracts on the delivery of ships, provided that the
ship was destined to be delivered after January 1, 2007.
The Danish Government has decided to amend some of the
rules in the tonage tax regime to favour the shipping companies.
These rules are currently undergoing EU approval before they
can be implemented. The first amendment is as mentioned
above to change the allowed level of timechartered ships used
by a shipping entity to 10 times the level of owned, bareboat,
and timechartered ships with buy options, instead of the current
4:1 ratio. Further it has been decided that fees for the
administration of a pool recieved by a shipping company, which
has entered into the tonnage tax scheme, will be considered to
be tonnage income and therefore not taxable, provided the
shipping company itself has at least one ship (chartered or
owned) in the pool which it administrates.
These changes are expected to be implemented during 2008.
Shipping entities, which apply the tonnage tax regime from
the time of their establishment, may not deduct tax
Contacts
For more information, please contact:
Bo Schou-Jacobsen
[email protected]
Tel.: +45 39 45 36 39
Lars Koch Jensen
[email protected]
Tel.: +45 39 45 94 57
Ove Lykke Hindhede
[email protected]
Tel.: +45 39 45 94 29
Information in this leaflet was last updated in January 2008 and is presented in a summarised form and is intended for general guidance only.
Specific advice should be obtained before any action is taken.
© 2008 PricewaterhouseCoopers. All rights reserved. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International Limited,
each of which is a separate and independent legal entity.
www.pwc.com/dk
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TRANSPORT & LOGISTICS INDUSTRY NETWORK
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France*
Solutions for shipping companies
Opportunities in France
French labour law and social security
For the last 20 years, France has been opening itself up to
the world and adapting to a globalised economy. The French
economy ranks fifth in the world in terms of gross domestic
product, third for exports of services and third for outward foreign
investments. There can be no doubt that France is a major
economic power at the heart of Europe, the world’s largest market.
Just as important, five out of the fifteen main ports in Europe are
located in France: Marseille, Mediterranean’s largest port and
the 3rd largest in Europe in terms of freight traffic; Le Havre,
Europe’s 5th largest port; Dunkirk, which handles 47.56 million
tons annually and is experiencing steady growth, followed by
St-Nazaire and Bordeaux.
The French International Register (“RIF”)
In view of the harmonisation of the EU policies, of the
reinforcement of safety and security at sea, developing ship
owners competitiveness and maritime employment, a new
shipping register, the French International Register (“RIF”),
has been implemented by the law of May 3, 2005.
The main advantages of the French International Register are
the following:
The RIF register offers all guarantees with regard to ships
safety and security as ships registered in the RIF are
submitted to any safety and security, certification and
training, health and safety at work, and environmental
protection rules applicable as per French law, European
regulations and France international commitments;
The RIF offers simplified administrative procedures with
regard to registering through a “single window” (so-called
“Guichet Unique”), which will assist the ship owners/
operators in their relations with the French Administration;
The RIF registration is accompanied by various fiscal and
exonerations measure;
The RIF sets a social base for seafarers residing outside France;
The RIF sets nationality rules with regard to the crew;
The RIF is a EU registry.
Registering in the RIF is not submitted to any registration,
annual, or other fees.
Index
Seafarers sailing on board vessels registered in the RIF are hired by
the ship owner/operator. Seafarers living outside France can also be
placed at the owner’s disposal by a maritime manning agency.
Seafarers residing in France, whatever their nationality, are
submitted to French laws, amongst others regarding health
insurance and pension scheme. They are covered by
the seafarers special social security system (“ENIM”).
The terms of employment and the social security coverage for
seafarers residing outside France, are subject to the minimum
requirement set by the law creating the RIF, but otherwise
determined by the contractual stipulations of the parties and
the applicable law as determined in the contract. Also, hiring,
working and living on board conditions on a vessel registered in
the RIF can not be less favourable than the ones resulting from
the ILO conventions ratified by France. In the same way, social
protection can not be less favourable than the one resulting from
the ILO conventions applicable to seafarers and bi-lateral social
security conventions between France and the countries from
where the seafarers are originated.
Seafarers residing in a EU member state or EEA nationals or
citizens of a state having a bilateral social security convention
with France will have the benefit of a social security and pension
scheme as per the conditions of the European rules or the
applicable bilateral convention. Seafarers who are not residing in
a EU member state or who are not EEA nationals or citizens of
a state having a bi-lateral social security convention are insured
against disease, accident, maternity, invalidity and are included
in a pension scheme.
The wages for seafarers residing outside France can not be less
than the minimum fixed by the December 30, 2005 regulation of
the minister in charge of the merchant marine.
Seamen having their fiscal residence in France and sailing on
board RIF registered vessels for at least 183 days in a period
of 12 consecutive months are tax exempted on these wages.
Seamen without fiscal residence in France are submitted to
the law of their fiscal residence.
France*
Crewing requirements
At least 25% of the crew for ships registered in the RIF, based
on the minimum safe manning document (SMD), must be EU or
EAA nationals. This percentage may be higher in certain
circumstances (eg, in case of benefit from certain fiscal aid
scheme). The master and his relief, who may be the chief
engineer, must be French citizens. However, there are no
nationality or residence requirements for rest of the crew.
Besides the removal of the depreciation ceiling, the operations
concerned benefit from a one-point increase in the depreciation
coefficient and from an exemption from capital gains if the assets
are sold by the EIG to its user.
On December 20, 2006, the European Commission decided that
the French tax scheme for “fiscal economic interest groupings”,
a scheme intended to promote primarily maritime investment
following the example of the previous “quirat”, constitutes
incompatible State aid.
French tax framework
Ship owners wishing to register vessels in the RIF may benefit
of various tax advantages, the main ones being the Tonnage
tax regime.
Further to this decision and in order to comply with the European
State aid regulations, France has adapted its legislation as part
of its Amended Finance Act for 2006 dated December 30, 2006.
Section 39 C of the CGI (new version) still allows benefiting from
a favourable financing scheme for significant assets subject to
certain conditions.
Tonnage tax regime
The tonnage tax regime is an alternative method of calculating
corporation tax profits by reference to the net tonnage of the
ship operated applicable to companies having 75% at least of
turnover deriving from qualifying ships operations. The tonnage
tax regime is applicable upon election, to the profits deriving
from ships used for carriage, towage or other marine assistance
activity, strategically and commercially managed from France,
which gross capacity is higher than 100 units.
Moreover, upon application of this tax regime, gains on disposal
of tonnage tax assets are partially or totally tax exempt depending
on the duration of the owning period of the ship. Other profits of
a tonnage tax company are taxable in the normal way.
Fiscal aid scheme for purchasing a ship: “fiscal economic
interest groupings” (“fiscal EIGs”)
The French General Tax Code (“CGI”) provides (Art. 39C) that
the tax deductible depreciation of assets leased by an economic
interest grouping (“EIG”), a fiscally transparent structure, may
not exceed the amount charged for the leasing operation. As
an exception to this rule, however, financing operations involving
assets depreciable over a period of more than 8 years, subject
to ministerial approval, are not subject to the above restriction
(Art. 39CA CGI).
Other various tax advantages may benefit to ship owners such
as a favourable tax regime with respect to business licence
tax (section 310 HH of the FTC) or an exemption of some
social contributions with respect to the crew members as
above indicated.
Taking the opportunity
PricewaterhouseCoopers/Landwell provides industry-focused
assurance, tax and advisory services. More than 122,000 people
in 144 countries connect their thinking, experience and solutions
to build public trust and enhance value for clients and their
stakeholders. A dedicated team of industry experts focuses
on issues relevant for shipping industry.
Landwell in France (correspondent tax and legal practice of
PricewaterhouseCoopers- visit our website at www.landwell.fr)
consists of 9 offices of Landwell & Associés. With more than
400 professionals, we form the leading tax and business law
practice in France, benefiting from the PricewaterhouseCoopers
worldwide network. Our solutions are global and practical and
ensure that our clients acquire an excellent understanding of
the implications of tax and legal issues on their business.
Contacts
For more information, please contact:
Emmanuelle Veras
[email protected]
Tel.: +33 4 91 99 30 30
Michel Combe
[email protected]
Tel.: +33 1 56 57 56 57
Information in this leaflet was last updated in December 2007 and is presented in a summarised form and is intended for general guidance only.
Specific advice should be obtained before any action is taken.
© 2007 PricewaterhouseCoopers. All rights reserved. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International Limited,
each of which is a separate and independent legal entity.
www.pwc.com/fr
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TRANSPORT & LOGISTICS INDUSTRY NETWORK
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Germany*
Solutions for shipping companies
Opportunities in Germany
Predominantly registered within the business year in a German
ship register. Flying of the German flag is not mandatory;
The German tonnage tax system
Vessels mainly used during the business year for the
transportation of goods or passengers between foreign
ports, within foreign ports or between a foreign port and
the high seas for more than half of their operating time.
Combined with an outstanding infrastructure and a comprehensive
German network of tax treaties with more than 80 countries
worldwide, the tonnage system turns Germany into one of
the most attractive locations for the establishment of
shipping companies.
It was introduced in 1999 and gives enterprises and individuals
with seagoing vessels the opportunity to be taxed on the basis
of a deemed profit related to the ships tonnage instead of
the actual operating results. Basis for the calculation of the
deemed profit is an amount per net ton of the ships in operation.
According to the German tonnage tax system, taxable profit is
thus fixed at a certain amount and is much lower than the profit
calculated by reference to the actual business profit.
Entering German Tonnage Tax
The following requirements must be fulfilled in order to qualify
for the German tonnage tax system:
Operation of merchant ships in international traffic (see (a));
Qualifying presence in Germany (see (b));
lrrevocable application (see (c)).
(a) Operation of merchant ships in international traffic
Merchant ships are operated in international traffic if they are:
Owned or chartered (e.g. bareboat-, time-, voyage- or slotcharter) seagoing vessels. In the case where an equipped
vessel is chartered, both the charterer and the owner of
the vessel can qualify for the tonnage tax system provided
that the owner also operates own vessels or vessels he has
equipped by himself;
Index
Chartered vessels which are not registered in the German shipping
register can qualify for tonnage tax if at least one ship of the
company is registered in the German ship register. In addition,
the net tonnage of the ships not registered in Germany may not
exceed the triple total net tonnage of the ships registered in
Germany. Only owned or bareboat chartered ships are included in
the calculation base. Again, German flagging is not required.
(b) Qualifying presence in Germany
Requirements for the qualifying presence in Germany are:
The management of the business establishment has to be
located in Germany. However, unlimited tax liability of
the taxpayer in Germany is not required.
Moreover, the shipping company has to carry out almost all of
the strategic and commercial management in Germany, in
particular:
Conclusion of contracts concerning the ship engagement;
Crewing of captain and officers, and freighting;
Technical management (i.e. maintenance), fitting out and
provisions of the ship;
Conclusion of bunker and insurance contracts;
Accounting and book keeping.
Generally, management activities can be delegated to service
companies in Germany but in the case of a tax audit, the service
company should be able to prove that management has been
carried out in Germany. From a tax point of view the entire crew
can be of foreign nationality.
Germany*
There may remain very little day-to-day business for
the management of the business establishment located in
Germany, in cases where management activities are delegated
to service companies. Therefore, the manager should, at
the least, observe the current affairs and make the significant
decisions in Germany.
b) Tax Planning Reliability
Furthermore, beside the low deemed profit, the ship owner has
the advantage that he knows his tax burden beforehand and the
tonnage tax system simplifies the determination of the profit.
c) Other Benefits
(c) Irrevocable application
Election of the tonnage tax system is optional and binding
for a period of ten years (the application is irrevocable);
Application has to be filed in the business year during which
the ship is built or bought (year of commission). This will take
effect from the beginning of the respective business year;
otherwise companies can only opt in ten years later;
Profits generated before the merchant ship has been
commissioned through operating in international traffic
are not taxable. Losses cannot be deducted;
Your Advantages
a) Tonnage Tax Amounts
The main advantage of the application of the German tonnage
tax system is that the deemed profit of the operated ship is in
general much lower than the actual profit achieved. A profit for
each day a ship is operated by a company is calculated by
reference to the following table:
0.92
0.69
0.46
0.23
The system does allow the establishment of a fiscal unity,
where the requirements of the tonnage tax have to be met by
the subsidiary.
In the case where the ship management is delegated to a third
party located in Germany, the ship management fee paid for
the management services can be tax free income for the ship
manager, as long as the vessel operates in the tonnage tax
regime and the ship manager holds a share in the ship owning
company. It might therefore be advantageous for foreign
charterers to establish their own German shipping companies
or to enter into joint ventures.
Contact the Hamburg Maritime Competence Center
Business worldwide faces great challenges every day, which are
posed by the ever-changing regulatory and tax conditions.
The identification of risks and opportunities contributes
significantly to the success of your company and requires
professional advice of an interdisciplinary team of transport
and logistics specialists.
Amount per day per 100 net tons
EUR
EUR
EUR
EUR
The tonnage tax system covers the capital gains on disposal of
a vessel. The auxiliary business of a ship operator can also be
subject to tonnage tax and thus be taxed at a low level (e.g.
interest derived from a current account of the company).
up to 1,000 net tons
for the excess up to 10,000 net tons
for the excess up to 25,000 net tons
for the excess over 25,000 net tons
Basically, every day counts as a day of operation. Only days of
large reconstruction or repair works are excluded.
The management of opportunities and risks combined with an
intelligent proactive and innovative approach to developing
adequate investment strategies is an essential part of the
philosophy of PwC Hamburg Maritime Competence Center.
Our team of 60 highly specialised staff members in the transport
and logistics sector will be pleased to discuss all your questions.
Contacts
For more information, please contact:
Wolfgang von Hacht
[email protected]
Tel.: +49 40 6378-1317
Claus Jochimsen
[email protected]
Tel.: +49 30 2636-5251
Wilhelm Marcus Blömer
[email protected]
Tel.: +49 40 6378-8435
Information in this leaflet was last updated in January 2008 and is presented in a summarised form and is intended for general guidance only.
Specific advice should be obtained before any action is taken.
© 2008 PricewaterhouseCoopers S.à r.l. All rights reserved. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International
Limited, each of which is a separate and independent legal entity.
www.pwc.com/de
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TRANSPORT & LOGISTICS INDUSTRY NETWORK
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Greece*
Solutions for shipping companies
Opportunities in Greece
Organises and oversees the policing of ships, of the sea
area of the ports and of the sea borders in accordance with
the relevant internal and international legislation.
Shipping is one of the most vibrant sectors of the Greek
economy, contributing substantially to the economy’s well being.
Indeed, it is the only sector in which Greece is clearly a world
leader, and in a highly competitive sector which comprises
a significant share of world output, as freight turnover reached
USD 380 billion in 2005, reflecting the fact that over 95% of
world trade is undertaken by ship. In this competitive market,
Greek shipowners control 16% of the world’s seagoing fleet
(i.e. nearly 3,500 vessels) and 21.5% of the world’s tanker and
dry cargo fleet.
Management companies
A particular regime (“Law 89”) applies to Greek offices of
foreign shipping companies;
Such offices may act as agents, intermediaries or
managing entities for the related vessels, irrespective of
the latter’s register;
The said offices are exempt from any taxes and duties
already in force or to be levied in the future;
Administration of the merchant marine
Greece is presumably one of the few countries in the world that
has a dedicated specialised Ministry dealing exclusively with
all issues related to merchant marine. This Ministry, namely
the Ministry of Mercantile Marine comprises of 27 Directorates
with a wide domain of responsibilities:
Is responsible for the organisation, improvement, preservation
and development of shipping, its linkage with the national
economy, the support of tourism, the provision of sea
transport services, the protection of human life and property
at sea, search and rescue, the protection of the marine
environment, the safety of navigation, as well as the adoption
and implementation of the country’s maritime policy;
Organises and oversees maritime education, regulates and
solves issues of maritime labour oversees the administration
of Organisations and Insurance Foundations;
Oversees the administration, organisation, and operation of
the country’s ports, the organisation and administration of
the pilotage service and the implementation of the country’s
port policy;
Index
The exemption extends to ship owners or other operators
of the vessel.
Merchant shipping
Greek corporate law provides for the establishment of
an Ocean-going Shipping Investment Company (OSIC-EEΠN);
An OSIC must be listed on the Athens Stock Exchange
within 2 years from its inception;
Specific capital adequacy requirements and other minimum
requirements apply (e.g. number of vessels);
OSICs enjoy the minimal taxation scheme based on tonnage
and the VAT regime described below.
Greece*
Tax framework
Greek tax law has been, traditionally, favorable to shipping;
Income from shipping activities is taxed on the basis of the
vessels’ tonnage. Consequently, tax calculated in the above
matter is practically negligible;
No other corporate taxation applicable to shipping
income earned by Greek corporate entities or
the shareholders thereof;
The above reduced tax provisions apply to cargo and
passenger shipping;
Shipping income earned in Greece by vessels registered
in other countries are mostly exempt from Greek tax, on
the basis of the relevant Double Tax Treaties;
The import and/or delivery of merchant vessels, the chartering
thereof and supplies made thereto are exempt from VAT;
Similarly, no inheritance or donation taxes are associated
with merchant vessels in Greece.
Contacts
For more information, please contact:
Theodoros Anthropopoulos
[email protected]
Tel.: +30 210 687 4564
Konstantinos Karlis
[email protected]
Tel.: +30 210 687 4554
Information in this leaflet was last updated in September 2007 and is presented in a summarised form and is intended for general guidance only.
Specific advice should be obtained before any action is taken.
© 2007 PricewaterhouseCoopers. All rights reserved. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International Limited,
each of which is a separate and independent legal entity.
www.pwc.com/gr
Index
TRANSPORT & LOGISTICS INDUSTRY NETWORK
Global Network, Local Expertise, Individual Services
Hong Kong*
Solutions for shipping companies
Opportunities in Hong Kong
General Hong Kong tax system
Introduction
Hong Kong offers a non-discriminatory low tax regime which is
governed by the "territorial principle" under which Hong Kong
only taxes income sourced from within the jurisdiction.
Hong Kong is an international city where foreign investors gather
and seek business opportunities around Asia. Under the Basic
Law, the legal structure that governs Hong Kong, capital is free
to convey in and out of the economy which is in line with
the foreign regulation under the current government policy.
In addition, there are no capital gains tax, no withholding tax on
service fees or interest payments, no interest tax, no sales tax,
no VAT, no estate duty and no annual net worth tax in Hong Kong.
The shipping industry has always played an important role in
international trade, and the involvement by Asian countries has
grown substantially over the years. Strong expansion of the
Southern China cargo base is expected to provide long-term
growth of port traffic in Hong Kong. According to Hong Kong
Port – Master Plan 2020, Hong Kong’s total container
throughput is projected to reach 27.9 million TEUs in 2010 and
40.2 million TEUs in 2020.
In view of the above advantages, shipping industries should
consider setting up operations, registering and managing their
shipping businesses in Hong Kong.
Tax rates
Currently, the Hong Kong Corporate tax rate is 17.5% on
assessable profits.
Profits tax scope
Hong Kong is very successful in the maritime industry with
a comprehensive network of sizable ship-owners, ship
management companies and logistics companies providing
supporting services such as ship finance, insurance, brokerage,
surveying, repairing, arbitration and legal services to the
industry. According to the Hong Kong Trade Development
Council’s recent release, Hong Kong Port was one of the world’s
three busiest container ports during January to May 2007,
having handled 9.5 million TEUs during this period. Hong Kong’s
port is renowned for its efficiency. All container terminals are
privately owned and operated. Productivity enhancement
through new cargo management techniques has raised their
handling efficiency.
Moreover, Hong Kong possesses a world-class shipping
register. The Hong Kong Shipping Register is reputed for its
high quality and excellent services, making the registered
tonnage mark upward with a double-digit growth track over
the past few years. On the other hand, the Port State Control
detention rates for the Hong Kong registered ships remain well
below the world averages.
Index
Hong Kong Profits Tax is charged on every person (including
a company) carrying on a trade, profession or business in
Hong Kong in respect of his assessable profits arising in or
derived from such trade, profession or business.
Hong Kong profits tax rules application to ship owners
Based on Hong Kong tax provisions specifically for the shipping
business, a profits tax liability would be imposed on a ship
owner (defined as a person who is a ship owner or carries on
a business of chartering or operating ships in Hong Kong).
The same IRO (Inland Revenue Ordinance) provisions provide
that a ship owner is deemed to carry on a shipping business
in Hong Kong if:
The ship-owning business is normally controlled or managed
in Hong Kong; or
The owner of the ship is a company incorporated in
Hong Kong.
Hong Kong*
In addition, any ship owner that has its ships calling at any
location within the waters of Hong Kong (excluding calls of
a casual nature) shall be deemed to be carrying on a shipping
business in Hong Kong.
Computation of assessable shipping profits
The assessable profits of a ship owner are calculated according
to the following formula.
Assessable = Total shipping profits
profits
x
HK shipping income
Total worldwide
shipping income
use of Hong Kong as a location for a regional holding company
or regional headquarter.
Being a major international shipping centre, the Government
of HKSAR is aiming to reduce the overall tax burden of
ship-owners for those who have registered their ships in
Hong Kong by not double taxing income by virtue of the double
tax relief arrangements, which extend to those countries that
do not have reciprocal exemption in their tax laws.
These countries are Denmark, Germany, Netherlands, Norway,
the United Kingdom, the United States of America, Singapore,
Sri-Lanka, Belgium, Thailand, the PRC and Luxembourg.
Tax incentives
Salaries tax rules for ship crew in Hong Kong
In the hope of reducing the tax burden on Hong Kong shipping
companies, tax incentives are given for the shipping business
as follows:
Hong Kong salaries tax is imposed on a person who is in receipt
of income arising in or derived from Hong Kong from any office,
employment and pension.
For ships flying a Hong Kong flag uploading its cargo in
Hong Kong and navigating to international waters, the
relating freight income is exempt from Hong Kong profits tax;
An exemption clause is provided in the IRO to exempt ship
crew on salaries tax if they are absent from Hong Kong for
a substantial portion of time during a year of assessment.
For a taxpayer resident in any territory outside Hong Kong
but carrying on a shipping business in Hong Kong, it will
be tax exempted in Hong Kong if there is reciprocal tax
treatment in that country for a Hong Kong resident taxpayer.
Such countries include New Zealand and the Republic
of Korea.
The income of a ship crew member is not subject to salaries tax
if he or she was present in Hong Kong for no more than:
A total of 60 days in the basis period (i.e. from April 1 to
March 31 of next year) for a year of assessment; and
A total of 120 days falling partly within each of the basis
periods for two consecutive years of assessment.
Hong Kong double tax arrangements
Hong Kong investors benefit from the reduction of overall taxation
resulting from leveraging tax relief through Double Tax Treaties.
Hong Kong has entered into double tax avoidance agreements
with Mainland China, Thailand, Belgium and Luxembourg
which apply to all industries. These agreements mainly reduce
withholding tax rates on dividends, royalties, interest and capital
gains. With the capital gain exemption and elimination/reduction
of withholding tax, the double tax agreement will help boost the
Contact
For more information, please contact:
Reynold Hung
[email protected]
Tel.: +852 2289 3604
Information in this leaflet was last updated in December 2007 and is presented in a summarised form and is intended for general guidance only.
Specific advice should be obtained before any action is taken.
© 2007 PricewaterhouseCoopers. All rights reserved. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International Limited,
each of which is a separate and independent legal entity.
www.pwchk.com
Index
TRANSPORT & LOGISTICS INDUSTRY NETWORK
Global Network, Local Expertise, Individual Services
Ireland*
Solutions for shipping companies
Opportunities in Ireland
Key features of the Irish tonnage tax regime
Irish tax framework
All Irish tax resident companies and overseas companies with
a taxable presence in Ireland are subject to corporation tax on
their profits. The standard rate of corporation tax on trading
profits is 12.5%. Passive income, e.g. interest and rental
income, is taxed at 25%. Capital gains are taxed at 20%.
Tonnage Tax is an alternative method of calculating the taxable
profits of shipping companies. The taxable profits are calculated
by reference to the net tonnage of the ships operated. The
tonnage tax taxable basis replaces for tax purposes the income
and gains arising to a shipping company from certain shipping
activities.
There is no special legislation dealing with the taxation of ships
other than the tonnage tax rules which were introduced in 2003.
Ireland has Tax Treaties with most of the major countries within
the OECD. The Tax Treaties generally exempt from Irish tax
international shipping activities where the effective management
of the operations is in the treaty partner territory. If groups are
able to reorganise their shipping operations into Irish tax
resident companies, they may benefit from the protection
afforded by the Irish tax treaty network reducing or eliminating
"freight taxes" levied in a number of territories around the world.
Entry to the tonnage tax regime is by election and the general
rule is that a tonnage tax election remains in force until it expires
at the end of the period of 10 years beginning with the first day
on which the election has effect for the company. An election
can be made at any time within the first 3 years after a company
becomes a qualifying company for the purposes of tonnage tax.
If the company/group ceases to qualify during this period, the
election will end when it ceases to qualify. A renewal election is
a tonnage tax election that may be made by a single company
or group of companies further to a tonnage tax election already
in force. A company can make a renewal election at any time.
A renewal election supersedes an existing tonnage tax election.
Tonnage tax
Key requirements
Tonnage Tax was introduced as an encouragement to the EU
maritime business and to provide a number of real advantages
for companies, which enter the regime, such as:
The following are required in order for a company to qualify for
Irish tonnage tax:
it must be within the charge to Irish corporation tax,
Certainty: since the tax liability is known and minimal;
Flexibility: companies have more freedom to choose when
to buy ships and how to finance them;
Clarity: the tax position will now be more readily understood,
the company will become more attractive to potential
investors;
Compatibility and competitiveness with the fiscal regimes of
other countries.
it must operate qualifying ships, and
those ships must be strategically and commercially managed
in Ireland.
A qualifying group is a group containing one or more qualifying
companies.
There is no requirement for ships to be registered in Ireland.
There is no minimum training requirement.
Index
Ireland*
How do you calculate TT?
Other taxes
The net tonnage (rounded down to the nearest 100 tons) of each
qualifying ship operated by the company is obtained. The profit
attributable to each qualifying ship is found by multiplying the
daily profit by the number of days in the period. The daily profit
is determined as follows:
Value Added Tax (“VAT”) is typically due on supplies of goods or
services which are made in Ireland in the course of business.
The standard rate of VAT is 21%. Most international shipping
activities will not be subject to VAT. However, the company
supplying the services can recover VAT suffered on its costs.
for each 100 tons between
100 tons and up to 1,000 tons
for each 100 tons between
1,000 tons and 10,000 tons
for each 100 tons between
10,000 tons and 25,000 tons
for each 100 tons greater
than 25,000 tons
Companies operating in Ireland are potentially subject to
a number of other taxes such as stamp duties on certain capital
transfers (up to 9% on property and 1% on shares, though
transfers of ships are exempt), employers’ national insurance
(currently 10.75%) and business rates paid to local authorities in
respect of property.
EUR 1.00
EUR 0.75
EUR 0.50
EUR 0.25
If two or more companies are regarded as operators of a ship
because of a joint interest in the ship, the tonnage tax profits are
apportioned by the share of their interest. Otherwise they will
each be treated as the only operator.
Contact
For more information, please contact:
Deirdre Keegan
[email protected]
Tel.: +353 (0) 1 7926167
Information in this leaflet was last updated in September 2007 and is presented in a summarised form and is intended for general guidance only.
Specific advice should be obtained before any action is taken.
© 2007 PricewaterhouseCoopers. All rights reserved. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International Limited,
each of which is a separate and independent legal entity.
www.pwc.com/ir
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Italy*
Solutions for shipping companies
Opportunities in Italy
The registration in the International Register allows to benefit
from various tax exemptions.
Due to its strategic position in the middle of the Mediterranean
Sea and its considerable seacoasts, Italy has been an active
shipping nation for centuries.
Income deriving from registered ships is subject to IRES only
for 20% of the income amount (according to article 4 of
Decree 457/1997).
General Italian tax regime
Shipping companies are ordinarily subject to the same Italian
taxation system applicable to all commercial companies.
Regarding IRAP, the quota of the net production regarding
registered ships is subtracted from the total taxable base, as
this income is considered to be located outside Italy (according
to article 12 of Decree 446/1997).
In general, the taxation system in Italy is based on two main
direct taxes: Corporate income tax “IRES” (“Imposta sul Reddito
delle Società”) and Regional tax on productive activities “IRAP”
(“Imposta Regionale sulle Attività Produttive”).
The registration in the International Register also allows to
benefit from a tax credit. The amount of the tax credit granted is
equal to the withholding tax at source made on the salary of
seafarers sailing on board of registered ships.
IRES hits all income produced in Italy (which is taxable in
accordance with the rules contained in Decree 917 of
December 22, 1986). Currently, the rate is 27,5% of the taxable
income (determined as the difference between revenues and
costs admitted in accordance with fiscal law).
The Italian tonnage tax system
IRAP is a local tax which hits income coming from productive
activities as stated, in general terms, on the balance sheet (in
accordance with Decree 446 of December 15, 1997). Currently,
the rate is ordinarily 3,9% of the value of the net production,
excepting some particular rules fixed by the regional legislation.
Under IRAP rules are always not deductible: labour cost, loss on
credits, provision for risk and loss fund.
The Italian tonnage tax system is governed by articles 155 et
seq. of the Italian Tax Code (Decree 917 of December 22, 1986).
In order to retain the competitiveness of the national shipping
industry, the Italian Government introduced a tonnage tax
regime in 2003.
The regime substitutes the IRES ordinary rules and is applicable
upon request and the choice to be taxed under this regime shall
be valid for ten years.
Qualifying companies
The International Register (“Registro Internazionale”)
Italian fiscal law provides a special kind of taxation for income
produced by ships registered under the International Register. This is
a special registry introduced by Decree 457 of December 30, 1997.
All ships used for international traffic, in fact, are registered in
this International Register, further to a special authorisation from
the Ministry of Public Transport and Navigation.
Index
The following requirements should be met in order to qualify for
the Italian tonnage tax regime:
1. the company has to be resident in Italy or must operate in
Italy through a Permanent Establishment;
2. the resident company has to be a corporation and not a
partnership (starting from tax period 2008, also partnerships
could be admitted to this regime).
Italy*
Income from the following activities is included in the tonnage
based income calculation:
Qualifying ships
Ships having a net tonnage of more than 100 qualify for the
tonnage tax regime. Ships must be used for qualifying activities.
The other essential requirement is the registration of the vessel
in the International Registry (“Registro Internazionale”).
Starting from tax period 2008, the requirement concerning
international traffic no longer applies. This means that ships
used for coasting trade within Italy can be registered in the
International Registry and benefit of the Italian tonnage
tax system.
transport of goods;
transport of passengers;
salvage and towing;
other services that need to be performed on the high seas;
other operations performed in close connection with the
transportation operations (e.g. loading and unloading);
other minor activities.
No deduction is allowed from tonnage tax income. If the tax
payer carries out activities other than the ones that qualifies for
the tonnage tax regime, the income arising from non-tonnage
tax activities is taxed according to the general tax rules
concerning corporate income tax.
Charter
The following applies to ships that are chartered in or
chartered out:
1. the ships that are chartered out without crew (so called bare
boat charter) are not admitted to the tonnage tax regime;
2. the ships that are chartered in without crew are admitted;
3. the ships that are chartered in with crew are admitted in the
tonnage tax regime if the net tonnage is less than 50% of
the total net tonnage under the tonnage tax regime;
4. the ships that are chartered out with crew are admitted.
Capital gains or losses arising from the transfer of a ship subject
to the tonnage tax regime as from its acquisition, are deemed to
be included in the tonnage tax income (no separate taxation).
The tonnage tax regime does not allow to transfer assets
between a tonnage taxed company and a conventionally taxed
company at a price below market value.
“All in” clause
The choice to be taxed under the tonnage tax regime should be
made for all the qualifying vessels belonging to a company or to
a group.
Calculation of tonnage income
Tonnage income is calculated on the basis of the ship’s net
tonnage.
Training Requirement
The daily income is determined according to the following
scheme:
0 – 1,000 NT
1,001 – 10,000 NT
10,001 – 25,000 NT
25,001 –
EUR
EUR
EUR
EUR
0.0090
0.0070
0.0040
0.0020
per
per
per
per
There is a minimum training requirement that a company should
meet in order to enter the tonnage tax regime. Every ship should
embark a cadet naval officer. Please note that, instead of the
above mentioned provision, it is possible to pay a fee to some
training institutions, recommended by the Italian
Transportation Ministry.
NT
NT
NT
NT
In the taxable income calculation are not included the days in
which the ships are not in use due to maintenance or because
they are temporarily out of commission.
Contact
For more information, please contact:
Domenico Coldani
[email protected]
+39 027 78 54 35
Egidio Filleto
[email protected]
+39 081 71 61 41
Information in this leaflet was last updated in January 2008 and is presented in a summarised form and is intended for general guidance only.
Specific advice should be obtained before any action is taken.
© 2008 PricewaterhouseCoopers S.à r.l. All rights reserved. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International
Limited, each of which is a separate and independent legal entity.
www.pwc.com/it
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Luxembourg*
Solutions for shipping companies
Opportunities in Luxembourg
According to leading international competitiveness analyses,
Luxembourg is ranked among the top of competitive countries
for doing business. The main recognised advantages of
Luxembourg are: its geographical location, its international and
skilled labour force, its easy access to government bodies and a
very attractive and stable tax framework.
In order to develop maritime activities, the Luxembourg
Government implemented a maritime legislation back in 1990.
Nowadays, Luxembourg plays an important role in the shipping
industry, as it is demonstrated by some of the world’s leading
shipping companies that have decided to operate or locate
some of their activities in Luxembourg.
Luxembourg ship register
A ship should be registered in Luxembourg if it wishes to fly the
Luxembourg flag. Depending on the circumstances, it may be
registered in the “Registre public des bateaux de plaisance” or
in the “Registre public maritime”. Ships of at least 25 tons which
are carrying out commercial shipping activities, qualify for
registration in the “Registre public maritime”. To qualify for full
registration in this register, ships need to be majority owned by
EU nationals or by commercial companies established in a EU
Member State and need to be – for a significant part – managed
from Luxembourg. Where majority ownership is not in the EU,
the ship can still be registered and fly the Luxembourg flag if it is
operated or chartered by a commercial company established in
Luxembourg (bareboat-in registration).
Accreditation of shipping companies
Must be accredited before commencing activities in
Luxembourg any person or legal entity, whether of Luxembourg
or of foreign nationality, which carries on any of the following
activities: the buying and selling, the chartering in and out or the
management of seagoing vessels, and the financial and
commercial operations that relate directly or indirectly to such
activities.
Index
The choice of legal form for a shipping company is free. The
most common legal forms for shipping companies are the S.A.
(société anonyme) and the S.à.r.l. (société à responsabilité
limitée). Accreditation entitles the company (or person) to benefit
from the rules as provided by the Law of November 9, 1990
regarding the Luxembourg Shipping Register (as amended in
1994 and 2005) and its implementing Grand-Ducal Decrees.
Accreditation is flag neutral, i.e. it can be obtained regardless of
the flag of the vessel.
Accreditation of ship management companies
To be accredited as a shipping company, accreditation of
the shipping manager is compulsory. One can call upon the
services of one of the accredited ship management companies
which operate in Luxembourg and offer ship management
services. Services include: crewing, technical support and
advice, i.e. relating to ISM/ISPS, insurance, wage administration
and accounting.
Structuring and financing the acquisition of the vessel
For the financing of the ship, a tailor-made solution can be
found in Luxembourg. Solutions include leasing and tax
leveraged financing. A proper structuring through Luxembourg
can allow an optimal repatriation of the profits realised by the
maritime company to the investors.
Luxembourg labour law and Social Security
Crewmembers of a vessel flying the Luxembourg flag are subject
to Luxembourg labour law. From a benefit and welfare
perspective, seafarers can benefit from the Luxembourg Social
Security protection depending on the applicable EU regulation or
bilateral/multilateral Social Security agreements. Where no Social
Security agreements are in place, the Luxembourg law requires
that a satisfactory level of Social Security benefits be guaranteed.
It should be noted that labour costs (i.e. taking into account the
total package including Social Security contributions and taxes)
are very competitive in Luxembourg compared to other countries
in the EU.
Luxembourg*
Crewing requirements
Crewing requirements appear quite flexible as far as nationality
and residence of the crewmembers are concerned. The only
requirement is for the captain of a vessel flying the Luxembourg
flag to be EU national, and even there waivers are possible.
There are no nationality or residence requirements for the rest of
the crew but they should be STCW 95 certified regarding their
qualification.
Luxembourg tax framework
Luxembourg shipping companies are subject to the general tax
framework applicable to all commercial companies. They are
also subject to the tax provisions provided in the laws and
implementing Grand-Ducal Decrees relating to the Luxembourg
Shipping Register. Consequently these companies can benefit
from the large network of Double Tax Treaties that were signed
with Luxembourg and can pay and receive dividends, interest
and royalties in a tax efficient manner.
A Luxembourg entity operating a vessel is subject to Corporate
Income Tax (“IRC”) at a rate of 22.88% on its net taxable profits.
Income from and capital invested in the operation and
renting/leasing of vessels used in international traffic are not
subject to municipal business tax.
A Net Worth Tax (“NWT”) applies on the company’s net asset
value at January 1 of every year. However, this tax can, under
conditions, be reduced by setting up a reserve in the company’s
accounts.
Losses can be carried forward indefinitely.
Some of the main Luxembourg tax incentives include:
Vessels can be depreciated over their useful life with the
option (under conditions) for the accelerated depreciation
method that enables to depreciate the vessel at up to
3 times the linear rate, without exceeding 30%, to be applied
annually on the net book value over the useful life of
the asset;
Capital gains generated by accredited shipping companies
on the disposal of a vessel may benefit from an unlimited tax
deferral provided that the sale proceeds are fully reinvested
within a certain timeframe in long term assets. Nevertheless,
to benefit from the deferral, the company has to hold the
vessel for at least five years before selling it;
Investment Tax Credits (“ITC”) relating to the acquisition of
a vessel can be offset by an accredited shipping company
against the Corporate Income Tax (“Impôt sur le revenu des
collectivités”) liability during a period of 10 years.
The ITC is composed of a credit for increasing investment
(”bonification d’impôt pour investissement complémentaire”)
and a credit for “global” investment (“bonification d’impôt
pour investissement global”). As of 2008, the Luxembourg
government has increased the tax relief granted by the ITC
to up to 14% for investments in ships.
Under conditions, the ITC can also be obtained for second
hand vessels as long as the taxpayer can demonstrate that
the vessel has not benefited from the Luxembourg
investment tax credit in the past;
Non-resident crewmembers working on board a vessel
operated in international traffic can benefit from a lump-sum
taxation if they are employed by an accredited shipping
company, irrespective of whether such crewmembers are
resident of a country with which Luxembourg has signed
a Double Tax Treaty or not. The tax rate is minimum 8%
and maximum 10% applied on a reduced taxable basis;
Under conditions, the supply, chartering and hiring of the
seagoing vessel can benefit from a VAT exemption. Where
no exemption applies and the service is deemed to take
place in Luxembourg, the low Luxembourg VAT rate applies.
It should be noted that Luxembourg has the lowest VAT rate
in the EU (standard VAT rate of 15%);
It should be noted that the above tax rules apply regardless
of the flag of the vessel.
Contact
For more information, please contact:
Anne Murrath
[email protected]
Tel.: +352 49 48 48-2519
Alexandre Jaumotte
[email protected]
Tel.: +352 49 48 48-5380
Information in this leaflet was last updated in January 2008 and is presented in a summarised form and is intended for general guidance only.
Specific advice should be obtained before any action is taken.
© 2008 PricewaterhouseCoopers. All rights reserved. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International Limited,
each of which is a separate and independent legal entity.
www.pwc.com/lu
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Malta*
Solutions for shipping companies
Opportunities in Malta
Furthermore, no obligation is imposed on Maltese ship owners
to subject all “tonnage tax vessels” in the same company or
group of companies to the same tax regime.
The strategic location of the Maltese islands at the geographic
centre of the Mediterranean Sea coupled with its natural
harbours and the skills of its labour force have all contributed to
make Malta one of the foremost international maritime centers.
The Merchant Shipping Act, 1973 sought to consolidate Malta’s
maritime tradition by capitalising on Malta’s advantageous
geographic position and natural resources. The Act introduced
a tonnage tax regime which enabled the Maltese flag to flourish
by granting shipping companies the opportunity to elect whether
to be subject to the standard corporation tax regime or whether
to participate in the special tonnage tax regime.
On May 1st, 2004, the date of Malta’s accession to the European
Union, in the light of the Community guidelines on state aid to
maritime transport, new regulations governing the fiscal
treatment of shipping companies came into force.
The Maltese Tonnage Tax System
The Maltese tonnage tax model imposes on the ship owner
the obligation to pay an amount of tax that is linked directly to
the tonnage operated.
The Merchant Shipping (Taxation and Other Matters Relating to
Shipping Organisations) Regulations, 2004 (the “Tonnage Tax
Regulations”) stipulate, as a general rule, that, “no further tax
under (the Income Tax Act) shall be charged or payable on the
income, to the extent that such income is derived from shipping
activities, of a licensed shipping organisation”.
Ship owners may renounce (irrevocably) to the benefits and
privileges of the Maltese tonnage tax system and instead be
subject to the standard corporate tax rate. Nevertheless, ship
owners are still liable for a registration fee and for an annual
tonnage tax fee, irrespective of whether or not the ship owner or
charterer decides to be subject to the standard corporation
tax regime or if he decides to participate in the special tonnage
tax regime.
Index
Conditions for the application of the Maltese tonnage
tax system
The Tonnage Tax Regulations currently apply to licensed
shipping organisations that are engaged in the ownership or
chartering of a tonnage tax vessel. However, amendments to
the Tonnage Tax Regulations are in the pipeline which should
render the tonnage tax system applicable also to other shipping
companies (such as ship management companies and ship
operators).
For the Maltese Tonnage Tax Regulations to apply, the following
preliminary conditions must be satisfied:
The company must qualify as a “Shipping Organisation” as
defined in the Maltese Merchant Shipping Act;
The company must be licensed as a shipping organisation
(shipping organisations that own a Maltese ship are currently
automatically deemed to have been granted a licence);
The ship must qualify as a “tonnage tax ship”. A “tonnage
tax ship” is defined as either a ship declared to be a tonnage
tax ship by the Minister or a ship registered under the
Maltese Merchant Shipping Act (including bareboat charter
registration) of not less than 1,000 net tons which is owned
entirely, chartered, managed, administered or operated by
a shipping organisation.
If all of the above conditions are satisfied, then the income
derived by a licensed shipping organisation from shipping
activities should be exempt from income tax in Malta provided
that: (i) all registration fees and tonnage taxes have been duly
paid and (ii) separate accounts have been kept clearly
distinguishing the payments and receipts related to shipping
activities from payments and receipts in respect of any other
business. The exemption from income tax is however limited to
that income derived by a licensed shipping organisation from
“shipping activities”.
Malta*
The term “shipping activities” is defined in the Tonnage Tax
Regulations as “the international carriage of goods or passengers
by sea or the provision of other services to or by a ship as may
be ancillary thereto or associated therewith or as otherwise may
be prescribed”.
Flag Requirements
Distribution of profits
Distribution of untaxed shipping profits from a Maltese shipping
company should not be subject to any further tax in Malta
insofar as the shareholder is not resident in Malta and is not
owned and controlled, directly or indirectly, nor acts on behalf
of, an individual who is ordinarily resident and domiciled in Malta.
Transfer of shares in a Shipping Company
The Minister may declare any ship to qualify as a “tonnage
tax vessel”, but typically such vessels are registered under
the Maltese flag.
The transfer of any shares, securities or other interest held in
any licensed shipping organisation is exempt from tax on capital
gains and stamp duty in Malta both under:
Future developments
Amendments to the Tonnage Tax Regulations are currently being
discussed which should ensure that Malta grants the maximum
level of benefits and concessions envisaged in the Community
guidelines. Thus, the tonnage tax system is expected to be
extended and made available to ship management companies
and licensed shipping organisations which own vessels
registered in other EU Member States.
Other benefits of the tonnage tax system
A licensed shipping organisation that has no income or no
income other than income derived from shipping activities is
entitled to submit a declaration in lieu of a tax return required in
terms of the Income Tax Management Act.
Interest income derived by a licensed bank, credit or financial
institution shall be exempt from income tax in Malta provided it
relates to the financing of the operations of a licensed shipping
organisation or the financing of a tonnage tax vessel.
Disposal of vessel
Any gains or profits derived upon the sale or disposal of a vessel
should not be subject to tax on capital gains and stamp duty in
Malta unless capital allowances had been claimed in respect of
the particular vessel.
i.
the Tonnage Tax Regulations; and
ii. under the standard tax rules applicable to shipping
companies that have opted out of the Tonnage Tax
Regulations provided that (a) the assets of the shipping
company do not consist wholly or principally of immovable
property situated in Malta and (b) that the transferor (for the
purposes of capital gains) and transferee (for the purposes of
stamp duty) are not resident in Malta and are not owned and
controlled, directly or indirectly, nor act on behalf of an
individual who is ordinarily resident and domiciled in Malta.
Income tax regime benefits
In the event that the shipping company opts out of the Tonnage
Tax Regulations, any income derived by the said shipping
company should be subject to tax in Malta at the standard
corporate rate of 35%, subject to the possibility of claiming
double taxation relief.
Nevertheless, upon a distribution of the said shipping profits, the
shipping company’s shareholders should be entitled to claim a
refund of six-sevenths of the Malta tax suffered by the shipping
company and distributed to the shareholders. As a result, a tax
efficient regime should still be available in respect of the said
shipping operations even if the exemption contemplated under
the Tonnage Tax Regulations is not availed of.
Contact
For more information, please contact:
Neville Gatt
[email protected]
Tel.: +356 21 247 000
Mirko Rapa
[email protected]
Tel.: +356 21 247 000
Mark Lautier
[email protected]
Tel.: +356 21 247 000
Information in this leaflet was last updated in December 2007 and is presented in a summarised form and is intended for general guidance only.
Specific advice should be obtained before any action is taken.
© 2007 PricewaterhouseCoopers. All rights reserved. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International Limited,
each of which is a separate and independent legal entity.
www.pwc.com/mt
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Mauritius*
Solutions for shipping companies
Opportunities in Mauritius
Procedure for registration
The requirements to be observed for registration under the
Mauritius flag are as follows:
Introduction
Registration in the Mauritius Open Ship Registry is regulated by
the Mauritius Merchant Shipping Act 1986 and the Mauritius
Shipping (Amendment) Act 1992, which are modelled on the
English Merchant Shipping Act. Administration of the Registry is
in the hands of the Director of Shipping, Ministry of Trade and
Shipping. Port Louis is the Home Port of the Registry and
houses its Head Office. Provisional Certificates of Registry can
also be issued by Mauritian Embassies, Consulates and
Honorary Consuls worldwide.
Eligibility of owners and ships
Owners
The following persons can own and register ships or bareboat
charters lasting a minimum of 12 months:
Citizens of Mauritius;
Mauritian-registered companies controlled by Mauritian citizens;
Other companies whether or not Mauritian, subject to approval;
Mauritian “GBC1” and “GBC2” companies provided that
their activities are confined to the registering of ships under
the Mauritian flag and that their shipping activities are carried
out exclusively outside Mauritius.
Ships
Every type of vessel, lighter, barge, structure or launch, however
propelled, intended for use in navigation is eligible, but in order
to be registered, whether provisional or permanent registration,
it must also satisfy the following conditions:
Age: At the time of first registration, the ship must not have
more than 15 years of age since the date of its first construction.
Special application is needed to the Director for exemption
which can be given on such conditions as he thinks fit.
Class: Every ship seeking registration must maintain class with
one of the classification societies approved by the Director.
Other: Third party insurance must be evidenced, also
compliance with the major international maritime conventions.
Index
(a) Application for Registration
An application form is to be used or information as required
therein is to be supplied to the Director. In case of body corporate
there is the need to produce the following additional documents:
A copy of the certificate of incorporation certified to be
a true copy by the owner’s director or company secretary;
A copy of the resolutions of its board of directors, certified to
be a true copy by a director or the company secretary,
authorising a director or the company secretary, or an
original power of attorney signed by a director authorising
one or more named persons, to effect registration of the ship
in Mauritius.
(b) Declaration of ownership
An application form is to be used or information as required
therein is to be supplied stating:
That the ship is owned by a citizen of Mauritius or a body
corporate incorporated in Mauritius;
That the ship is seaworthy;
The name of the ship’s master and particulars of his certificate
of competency number;
Where the ship was previously registered in another country,
that the ship has been deleted from such register free and
clear of registered encumbrances. Where the ship was last
registered concurrently in more than one country (e.g under
dual or bareboat registry) this statement must be obtained
from the registry of every such country. A copy of the
deletion certificate(s) should be attached to such declaration.
(c) Title of Ownership
For new buildings the Builder’s Certificate is sufficient evidence
of ownership, for second hand tonnage the instrument by which
the ownership to the ship has been acquired must be supplied,
e.g. the Bill of Sale.
Mauritius*
On clearance of the documents by the Administration,
a Provisional Certificate of Registry will be issued to the ship.
The Provisional Certificate is valid for 6 months or such other
shorter period as may be specified in the Provisional Certificate
of Registry.
Transcript of register
Bareboat charter registration under the Mauritius flag
Registration process for ships owned/to be owned by GBC1
& GBC2 companies
Mauritius permits parallel registration in Mauritius of a ship
which is registered in a foreign register but is bareboat chartered
by a citizen of Mauritius or by a body corporate established
under the laws of Mauritius and having its registered office in
Mauritius subject to satisfaction of certain conditions.
The following information must be supplied to the Director and
must be attached to the application:
a certified copy (certificate to be given by notary public or
authorised officer) of the bareboat charter (in lieu of title of
ownership and declaration of ownership);
consent in writing of the registered owner of the foreign ship;
consent in writing of the maritime authorities of the country
of the foreign register and certificate of ownership mortgages
of that foreign register;
consent in writing of all of the mortgagees.
The applicant is also required to produce all other documents
required by the Act and the Regulations for a first permanent
registration, except that carving and marking is not required nor
is a new measurement of the tonnage of the ship.
On payment of the prescribed fee any interested person may
obtain a transcript of register of any Mauritius ship from the
Director of Shipping.
A GBC1 may be locally incorporated or may be registered as
a branch of a foreign company. The business of a GBC1
Company other than day-to-day transactions must be
conducted in foreign currency. GBC1 companies must not do
business in Mauritius, other than to take professional advice and
employ local labor.
A GBC2 is the Mauritian equivalent of the International Business
Company found in many offshore jurisdictions. It does not have
the right to do any business within Mauritius but must have a
Registered Agent in Mauritius.
The actual registration process is carried out through
the Financial Services Commission (FSC) and involves
the incorporation of a GBC1 or a GBC2.
All applications to the FSC for a GBC1 or a GBC2 must be
channeled through a licensed Management Company.
Taxation
The corporate tax rate is 15%. However, income from the
operation of local and foreign vessels registered in Mauritius is
exempt from tax.
Extension of the status of Mauritius parallel registry may be
sought as long as the conditions for such registry continue to
be fulfilled.
Mortgage registration
Registration and discharge of mortgages may be effected
immediately on presentation of the relevant documents to
the Director of Shipping.
Contacts
For more information, please contact:
Andre Bonieux
[email protected]
Tel.: +230 207 50 00
Didier Lenette
[email protected]
Tel.: +230 207 50 00
Ryan Allas
[email protected]
Tel.: +230 207 50 42
Ramesh Doma
[email protected]
Tel.: +230 207 50 00
Information in this leaflet was last updated in December 2007 and is presented in a summarised form and is intended for general guidance only.
Specific advice should be obtained before any action is taken.
© 2007 PricewaterhouseCoopers. All rights reserved. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International Limited,
each of which is a separate and independent legal entity.
www.pwc.com/mu
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The Netherlands*
Solutions for shipping companies
Opportunities in the Netherlands
Crewing requirements
The Netherlands has been an active shipping nation for a long
time. Due to its geographical situation, excellent infrastructure,
the port of Rotterdam as Europe’s biggest port and its highly
educated workforce, it is one of the main gateways to Europe.
The Netherlands is a favourable holding country with a 100%
participation exemption and no withholding tax on interest and
royalties. The Netherlands have an extensive treaty network of
over 80 Double Taxation Treaties.
The Dutch Government recognises the importance of the
shipping industry for the Dutch economy. Therefore the Dutch
Government is stimulating shipping activities with several tax
facilities for shipping companies.
Registration requirements
To fly the Dutch flag, a ship must be registered. To be able to
register a ship, certain conditions must be met:
The ship must be owned for at least two thirds by one or
more legal entities or private individuals who are resident or
citizen in/of an EU or EEA member state;
The owner has to manage the shipping company in
the Netherlands to a substantial degree. This requires
a branch or establishment in the Netherlands that exercises
at least three of the following types of management:
- strategic management (decisions regarding investments,
managing agreements etc.);
- commercial management (financing, freight management etc.);
- technical management (keeping the ship in actual operation);
- crew management (hiring and setting to work of seafarers).
The management must be performed by citizens of
EU member states.
Both owned ships and bareboat chartered ships can be
registered. Registration offices are in most major ports and on
several other locations in the Netherlands.
Index
The Netherlands has no requirements according to the
nationality of the seafarers aboard a ship that is flying the Dutch
flag. There are however some formalities for hiring personnel.
Seafarers for qualified employment from outside the EU may
only be hired if they have a certificate of registration with the
Marine Labour Office. Other seafarers from outside the EU can
be hired under standard contracts in their countries of origin,
but they must be hired through the maritime labour office.
Tax facilities for shipping companies
Dutch tonnage tax regime
This is one of the main features of the Dutch shipping legislation.
Dutch based shipping companies that are active in international
shipping can benefit from the favourable way to calculate the
taxable profit. The amount of taxable income is based on the net
registered tonnage of their vessels. This results in a fixed rate
profits tax instead of taxation on their actual operating results.
In general, taxable profits under the tonnage tax system are
significantly lower than actual profits. Furthermore,
the determination of the taxable profit is simplified.
The tonnage tax regime is applicable to qualifying shipping
activities only upon request. The taxpayer can elect for the
regime in the first year in which the shipping company starts
its Dutch shipping activities or in every ten years thereafter.
If the taxpayer opts for the regime, it will apply for ten years.
The regime applies to all ships that the Dutch shipping company
operates. The conditions that must be met to apply for the
tonnage tax regime include (1) the shipping company must
(co-)own a seagoing vessel or he must hold such a ship in
bareboat-charter; (2) the shipping company may not charter out
ships in bareboat himself; (3) the ship owner must exercise
certain management activities with respect to the ship in the
Netherlands; (4) and the ship must be used for international
shipping activities. The tonnage tax regime also applies to ship
managing companies, in case they perform the full technical and
crew management.
For the year 2008 there is no flag requirement for new ships
entering the tonnage tax system.
The Netherlands*
the tonnage tax regime, all the shipping companies in the
taxgroup should apply for the tonnage tax regime.
Wage cost deduction for seafarers
This is one of the major advantages of flying the Dutch flag.
The wage cost deduction is, under certain conditions, applicable
to vessels that fly the Dutch flag and are operating mainly at sea
in international (freight) traffic. Shipping companies that act as
withholding agents for Dutch wage tax purposes can deduct
40% of the wages of EU/EER resident seafarers liable to Dutch
wage tax or national insurance contributions from the total
amount of wage tax paid.
Reinvestment reserve
If certain conditions are met, profits of the sale of assets
(not subject to the tonnage tax regime) can be reserved for
the purchase of new assets.
Zero-rating for VAT purposes
The supply and leasing of seagoing vessels are zero-rated for
VAT purposes. In principle, businesses can recover Dutch VAT
that incurred on costs.
Other tax incentives for shipping companies
Accelerated depreciation of ships
Shipping companies which qualify for the tonnage tax regime,
but do not opt for it, are taxed at the normal CIT (corporate
income tax) rate. They pay for 2008 a maximum of 25.5% CIT.
These companies may apply for accelerated depreciation.
The annual rate for accelerated depreciation is 20% of the initial
cost less the residual value.
The Netherlands’ extensive treaty network, reducing
freight taxes
Freight taxes do not apply in the Netherlands, but they do apply
in some countries with which the Netherlands has concluded tax
treaties. In some cases this results to a partial or full exemption
of freight taxes.
Investment deduction
Other advantages
Shipping companies which qualify for the tonnage tax regime,
but do not opt for it, can request an investment deduction for
assets not benefiting from the tonnage tax regime. This means
that a taxpayer can deduct a percentage of the total amount
invested from the taxable income. This applies if between
EUR 2,100 and EUR 236,000 is invested in assets. Percentages
vary from 1% to 25% (2008).
Participation exemption
A variety of allowances is granted by the Dutch Government.
We will mention a selection:
The energy investment allowance: this encourages energy
conservation and the use of renewable energy. Investments
in energy efficient equipment are tax friendly. An extra
deduction of 44% on investment costs is granted. A list of
qualifying technologies is drawn up every year;
The environment investment allowance: basically the same
as the energy investment allowance, with a deduction of
15% to 60%;
All dividends and capital gains arising from a qualifying
shareholding are tax-exempt.
Possibility of fiscal unity
The CO2 reduction plan: this provides subsidy for the
reduction of greenhouse gasses related to the shipment
of goods.
A fiscal unity can be formed with other group companies.
This includes group companies without shipping activities.
If one shipping company within the taxgroup applies for
Contact
For more information, please contact:
Jeroen Boonacker
[email protected] or [email protected]
Tel.: +31 (0) 104075330
Information in this leaflet was last updated in January 2008 and is presented in a summarised form and is intended for general guidance only.
Specific advice should be obtained before any action is taken.
© 2008 PricewaterhouseCoopers. All rights reserved. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International Limited,
each of which is a separate and independent legal entity.
www.pwc.com/nl
Index
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Norway*
Solutions for shipping companies
Opportunities in Norway
New tonnage tax model in Norway
In the National Budget for 2008 the Norwegian Government
announced the introduction of an EU-model for the taxation of
Norwegian shipowning companies under the Norwegian tonnage
tax regime. The proposal implies substantial changes to
the taxation of shipping companies resident in Norway.
The proposal for a bill on the new tonnage tax regime was
submitted to the Parliament on October 5, 2007. It is likely that
the Government’s proposal will in general be approved by the
Parliament. The below summary of the new rules is based on
the proposed new legislation as presented in the proposal
submitted on October 5, 2007.
Other aspects of the existing tonnage tax model:
The company is not obligated to stay inside the model for
a certain period of time in order to claim the application of
the special regime.
It is prohibited for a company to issue loans/warranties to
related parties outside the model.
A company inside the tonnage system can not employ
personnel.
The new Norwegian tonnage tax model
The Government has stated that from fiscal year 2007 onwards
the current Norwegian tax tonnage model will be aligned with
the existing tonnage tax systems within the EU. This will imply
that, except for a tonnage tax to be paid, the shipping income
will be tax exempt on a permanent basis. This is the main
difference compared to the existing deferred tonnage tax model.
Existing Norwegian model
The existing tonnage tax system introduced in 1996 levies no
tax on ship operating profits unless dividends are distributed to
the shareholders, or the company exits the tonnage tax system
or liquidates. Financial income, is however, subject to ordinary
taxation at 28%. The purpose of introducing the 1996 tonnage
tax system was for Norway to promote shipping companies and
to remain a competitive shipping location. Companies choosing
the tonnage tax model pay an annual tonnage tax calculated on
the net tonnage of the fleet.
Qualifying legal entities are: Norwegian resident limited liability
companies such as “aksjeselskap”/”AS” (private) or
“allmennaksjeselskap”/”ASA” (public). The company has to be
incorporated under Norwegian law and request to be assessed
according to the special tonnage tax rules.
Assets/activities qualifying for application of the model:
Ships and other kind of vessels, including tugboat and
auxiliary vessels, newbuilding contracts and shares in other
tonnage taxed companies are all qualifying, legal assets.
Norwegian tonnage taxed companies are only allowed to
keep certain kind of assets inside the model (“legal assets”)
and are not allowed to have income from non-tonnage taxed
activities (except financial income).
Permitted activities include hiring out and/or operation of
ships/vessels (owned ships or hired in) transporting goods
and personnel in international waters.
Index
Entering into the model:
Entry into the new tonnage tax system is optional and can
take place with effect from January 1 every year provided
that the company has fulfilled the conditions for application
of the tonnage tax system from the beginning of the year.
Newly established companies will have direct entry.
The legal entities qualifying for the application of the model
will be the same as under the existing model (limited liability
companies, “AS”/”ASA”).
When a Norwegian registered shipowning company is
entering into the tonnage tax system later than
December 31, 2008 (after transition period as described
below), the difference between the market value and the tax
value of the company’s assets other than qualifying financial
assets (including vessels, newbuilding contracts and shares
in partnerships and CFC companies) will be taxed as capital
gain (subject to 28% tax). There will be continuity (no tax
upon entry) for financial assets and assets covered by the
participation exemption rules (shares and derivatives).
Permitted assets/activities:
Norwegian tonnage taxed companies are only allowed to keep
certain kind of assets inside the model (“legal assets”) and are
not allowed to have income from non-tonnage taxed activities
(except financial income). If the requirements are not fulfilled, the
company could fall outside the scope of the model and be taxed
at ordinary rates (28%).
Norway*
Permitted assets/activities include:
Shipping activities already covered by the existing model,
i.e. income from the maritime transport of goods and
persons. Financial income is permitted except for income
from shares in unlisted companies and partnerships that are
not taxed under the tonnage tax system, but subject to
taxation under the normal rules.
Related activities like sale of goods and services on board
ships, loading and discharging of vessels, leasing out of
containers and operation of ticket offices (a detailed list is
likely to be communicated by the Ministry of Finance)
Strategic and commercial management of the company’s
owned and chartered ships, as well as ships owned or
operated by group companies subject to tonnage taxation,
and ships operated according to a pool agreement.
At this point the Government will not require that the management
is performed from Norway (but this could be introduced as
a requirement with effect from 2009).
It is important to note however that pure management activities
and management of ships owned or chartered by other
companies are currently not permitted activities.
Leaving the (new) tax tonnage system:
A shipping company may exit the regime on a voluntary
basis or is obliged to do so if breaching specific
requirements for companies staying inside the tonnage tax
system. As the new model is introduced with effect
from 2007, the first time a company may voluntarily exit
the new system is January 1, 2008.
No separate income settlement will have to be made when
leaving the regime.
Upon exit from the tonnage tax system new tax bases must
be established for the company’s assets. The value will, as
a general rule, be based on market values in order to ensure
that profits accrued within the tonnage tax regime do not
become subject to taxation after the company has left
the tonnage tax system.
A shipping company that exits the model will not be allowed
to receive group contributions with tax effect in the year of
withdrawal or the two following years.
Other aspects of the tonnage tax model:
Like today’s model, the company will not have to stay inside
the regime for a certain period of time to claim the application
of the tax tonnage system (this in contradiction to other
EU-models).
It will still be prohibited for a company to issue loans/warranties
to related parties outside the model.
Unlike the existing model, a company inside the new
tonnage system may employ personnel (commercial,
technical and crewing people for instance).
Transition rules applicable in 2007 and 2008
The Government proposes that the existing tonnage tax regime
will be abolished from the fiscal year 2007 onwards. Companies
inside this regime may either exit the tonnage tax system entirely
or continue the shipping activity inside the new model with
effect as of January 1, 2007.
In the latter case, deferred tax under the current regime will be
calculated based on book value of the company’s assets (as
opposed to market value for companies that leave the system
in 2007). The gain includes tax on shipping income earned as
from 1996, when the current regime was introduced.
The tax must be paid over a ten year period. The company may
be exempt from 1/3 of the tax liability provided that qualifying
environmental investments have been made for an amount equal
to the tax. If not, the tax must be paid in year 10.
A company ordinarily taxed, may enter into the new system with
effect from January 1, 2007 or 2008. In order to allow these
companies to enter at equal terms as companies today being
inside the tonnage regime, the valuation of the company’s
assets (including vessels, newbuilding contracts, shares in
partnerships/CFC companies) will be based on book values at
the time of entry. If the company sells e.g. a vessel or exits the
model within three years after entry, the difference between
book value and market value will be subject to taxation.
Contacts
For more information, please contact:
Svein T. Sønning
[email protected]
Tel.: +47 95 26 10 71
Steinar Hareide
[email protected]
Tel.: +47 95 26 04 29
Rita Granlund
[email protected]
Tel.: +47 95 26 02 37
Information in this leaflet was last updated in September 2007 and is presented in a summarised form and is intended for general guidance only.
Specific advice should be obtained before any action is taken.
© 2007 PricewaterhouseCoopers. All rights reserved. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International Limited,
each of which is a separate and independent legal entity.
www.pwc.com/no
Index
TRANSPORT & LOGISTICS INDUSTRY NETWORK
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Poland*
Solutions for shipping companies
Opportunities in Poland
Other incentives resulting from tonnage tax law
As of January 1, 2007, new tonnage tax regulations were
introduced in Poland. Currently the regulations are subject to
the process of verification by the European Commission. Once
the European Union formally accepts them, shipping companies
will be able to benefit from the preferential tonnage taxation in
Poland. The Polish Government is also working on further
regulations which should encourage the development of
the Polish shipping industry.
New tonnage tax law
Once the Tonnage Tax Act is implemented, qualifying shipping
companies operating in Poland, which perform commercial
shipping activities in international traffic, will be entitled to
choose between conventional Corporate Income Tax (“CIT”)
taxation and preferential tonnage taxation, upon fulfillment of
specific conditions. This will concern shipping companies which
perform transport services (transport of cargo and/or of
passengers at sea) as well as certain offshore operations by
means of vessels of the minimum capacity of 100 gross register
tons each. The qualifying operations include also rendering a
number of related commercial services, such as, among others,
ship management services, leasing or chartering out of the
vessels or auxiliary transportation services.
Revenues of a shipping company (a company being subject to
tonnage taxation) resulting from the sale of a vessel may be
exempt from taxation in Poland, for the part corresponding to
the amount which is reinvested in the purchase, co-ownership,
modernisation, renovation or rebuilding of the shipping fleet
(within a 3-year period).
Polish ship registry
The Polish Register of Shipping (Polski Rejestr Statków S.A.) is
a classification institution acting on behalf of the Polish
Government, associating ships of Polish registry. Due to the lack
of tax and investment incentives for the shipping industry in
the past, the Polish Register of Shipping comprises currently
just a few ships sailing under the Polish flag.
Polish PIT incentives for seamen
Currently there are no Polish Personal Income Tax incentives
available for seamen. The Polish Government is planning to
introduce potential PIT incentives for seamen sailing under the
Polish flag. These may include fiscal and social preferences and
Polish PIT exemptions. Detailed regulations on this matter are
currently in the course of preparation.
Other currently applied incentives within the CIT system
Tonnage income will be calculated as the multiplication of a flat
day rate (dependent on the net capacity of a given vessel,
irrespective of its operations or of the generated income), and
the monthly exploitation period of all the shipping company’s
vessels subject to tonnage taxation. The tonnage income will
not be combined with other income of the shipping company
(e.g. subject to CIT). It will be taxed at the flat rate of 19%.
The shipping company’s choice to be subject to tonnage
taxation shall, with some exceptions, remain in force for the
minimum of 5 consecutive tax years. During this period the
change of form of taxation shall, as a rule, not be possible.
The Polish tonnage tax system will constitute a favourable
solution for shipping companies in comparison to the Polish CIT
system. It is expected that the new law will provide incentives for
both Polish and foreign ship owners to sail under the Polish flag.
Index
Currently applied incentives for shipping companies which do
not opt for the tonnage tax system include the possibility of
depreciation of the shipping fleet before its actual introduction
into the register of fixed assets. Shipping companies are entitled
to depreciation of the vessels ordered by them, but still under
construction, as soon as the costs borne by the shipping
company exceed 10% of the contract value of the vessel. In
such a case, standard depreciation rates apply, calculated upon
the costs incurred in connection with the ordered vessel.
Poland*
Contacts
For more information, please contact:
Marek Perkowski
[email protected]
Tel.: +48 (71) 356 1180
Andrzej Jacek Jarosz
[email protected]
Tel.: +48 (61) 850 5151
Dorota Skrzypczak
[email protected]
Tel.: +48 (61) 850 5155
Information in this leaflet was last updated in September 2007 and is presented in a summarised form and is intended for general guidance only.
Specific advice should be obtained before any action is taken.
© 2007 PricewaterhouseCoopers. All rights reserved. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International Limited,
each of which is a separate and independent legal entity.
www.pwc.com/pl
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Portugal*
Solutions for shipping companies
Opportunities in Portugal
Other (withholding) tax exemptions apply for shareholders of the
qualifying entities, other entities and crew members.
With a remarkable history as a maritime nation, Portugal has
been included in the 2006 Paris MOU White List in the
9th position, a rise of 11 places from its 20th position in 2004.
For the purpose of the MIBC tax regime, income derived from
the shipping activity shall qualify for the above-referred
corporate income tax exemption (1987 Madeira Tax Regime) or
reduction (2003 and 2007 Madeira Tax Regime) to the extent
that it does not derive from the transportation of people and
goods between national harbours.
In fact, Portugal has been steadily rising in the MOU Lists since
2002, consolidating its position as a credible and high quality
flag as a result of the excellent performance of the International
Shipping Register of Madeira – MAR.
S.D.M. – Sociedade de Desenvolvimento da Madeira, S.A. and
the Technical Commission of MAR are committed to maintaining
the safety culture of the MAR, contributing to its international
recognition as a high standard register and reinforcing quality
as one of MAR’s greatest assets.
Portugal – Shipping Tax Regime
From a tax perspective, there are currently in force two favourable
tax regimes for income derived from qualifying shipping activities
carried out within the Madeira International Business Centre
(“MIBC”). Accordingly, until 2011, qualifying shipping income may
be either exempt from corporate income tax (1987 Madeira Tax
Regime) or subject to a reduced rate of 3% from 2007 until 2011
(2003 Madeira Tax Regime). These beneficial tax regimes are
recognised by the European Commission as authorised regional
state aid under the EU Treaty.
Furthermore, the European Commission (“EC”) has recently
approved the extension of Madeira’s preferential tax regime until
the year 2020 (2007 Madeira Tax Regime). The new regime is in
force as of 1 January 2007 and applies to new companies which
are licensed and established in the MIBC from 2007 to 2013.
Shipping companies licensed to operate within the MIBC under
the previous regimes, i.e. 1987 and 2003 Madeira Tax Regime,
will fall under the new regime as of 2012.
Index
Madeira’s International Shipping Register (“MAR”)
The main characteristics of the MAR are the following:
All vessels registered in the MAR shall fly the Portuguese flag;
All International Conventions ratified by Portugal are part of
and are complied with by MAR;
Commercial vessels, including platforms, may be registered
in MAR;
Commercial vessels, including platforms, may be registered
in the MAR;
Registrations in the MAR benefit from the services of the
Notary Registry Office of Madeira, which assures a fast
process of registration without bureaucratic delays;
MAR allows the registration of vessels owned by companies
or partnerships, whether incorporated in Portugal or
established through branches, agencies or legal
representations, licensed or not to operate within the MIBC;
Mortgages benefit from a special regime, where the parties
are allowed to agree that the legal system of a given country
shall apply.
Fifty percent of the crew of the registered ships should be
citizens of any of the EU member States or of the countries
where Portuguese is the official language. However, under
special circumstances upon request and on a case-by-case
basis, this requirement may be softened upon authorisation of
the Portuguese government.
Portugal*
Shipping licenses
2007 Madeira Tax Regime for Shipping Companies
To benefit from the provisions of the 1987 Madeira Tax Regime
entities must have obtained a license to operate in the MIBC
before 31 December 2000. We understand that it is still possible
to acquire a company with a Shipping License issued before
31 December 2000.
Shipping companies engaged in the international transport of
people and goods, which are duly licensed between
1 January 2007 and 31 December 2013 to operate in the MIBC,
shall benefit, until 31 December 2020, from a reduced corporate
income tax rate of 3% between 2007 and 2009, 4% between
2010 and 2012, and 5% between 2013 and 2020.
To benefit from the provisions of the 2003 Madeira Tax Regime
entities should have obtained a license before 31 December 2006.
To benefit from the provisions of the 2007 Madeira Tax Regime,
entities must obtain a license before 31 December 2013.
The application of such reduced tax rates depends on
substance requirements, as the creation of new jobs and/or
the investment in fixed assets.
Regime for shareholders, crew members and other entities
Shipping companies may obtain a MIBC license which, besides
the international transport activities, also excludes from
corporate income taxation other activities, to the extent that the
profit income stems from transactions carried out with nonresidents. This means that the profit from other activities
performed or services rendered by the shipping company are
also eligible for the MIBC tax benefits.
1987 Madeira Tax Regime for Shipping Companies
Shipping companies engaged in the international transport of
people and goods and licensed up to 31 December 2000 to
operate in the MIBC, benefit, until 31 December 2011, from an
exemption from corporate income tax in respect of income
derived from qualifying shipping activities.
2003 Madeira Tax Regime for Shipping Companies
Shipping companies engaged in the international transport of
people and goods, which are duly licensed between
1 January 2003 and 31 December 2006 to operate in the MIBC,
shall benefit, until 31 December 2011, from a reduced corporate
income tax rate (3%). The application of such reduced tax rates
depends on substance requirements, as the creation of new
jobs and/or the investment in fixed assets.
Shareholders, crew members and other entities doing business
with shipping companies licensed under the 1987, 2003 or
the 2007 Madeira Tax Regime, will benefit, among others, from
the following tax exemptions:
for shareholders: dividends received shall be exempt from
taxation to the extent that they derive from qualifying income.
Exemption may also apply in case of interest paid in
connection with loans granted by non-resident shareholders,
to the extent that the loans are granted with the purpose of
financing the normal business activity of the shipping
company;
for crew members: crew members of ships registered in the
MAR shall benefit from Personal Income Tax exemption on
any income received, as well as from Portuguese Social
Security contributions, to the extent that they are covered by
a voluntary insurance or foreign social security system;
other entities: no withholding tax is levied on royalties and
services paid to non-resident entities.
Contact
For more information, please contact:
Leendert Verschoor
[email protected]
Tel.: +351 21 359 9642
Catarina Nunes
[email protected]
Tel.: +351 21 359 9621
Information in this leaflet was last updated in January 2008 and is presented in a summarised form and is intended for general guidance only.
Specific advice should be obtained before any action is taken.
© 2008 PricewaterhouseCoopers. All rights reserved. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International Limited,
each of which is a separate and independent legal entity.
www.pwc.com/pt
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TRANSPORT & LOGISTICS INDUSTRY NETWORK
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Singapore*
Solutions for shipping companies
Opportunities in Singapore
Introduction
Over the past decade, Singapore has grown as a global
shipping hub and an international maritime centre. Singapore
boasts a wide and comprehensive range of maritime services
that meets the varied and diverse needs of ship and oil rig
owners, operators and other players in the shipping supply chain.
The Singapore Registry of Ships is the largest registry in Asia.
Singapore is also the number one builder of oil rigs in the world.
With its strategic geographical position in Asia, first-rate
business environment and infrastructure, Singapore is in an
excellent position to serve as a gateway for maritime companies
looking to achieve maximum growth and reach out to the Asian
Market. The Maritime Port Authority of Singapore, which
oversees the development and promotion of the Singapore
maritime industry, works closely with the local tax authorities
to provide attractive tax incentives for the shipping and oil
rig industry.
Singapore tax regime
The taxation system in Singapore is based on a modified
territorial basis where Singapore-sourced income is subject to
tax in Singapore. Certain foreign-sourced income is also subject
to tax upon receipt/remittance to Singapore. There are also rules
in Singapore for tax exemption for specified classes of
offshore income. The applicable corporate tax rate on a
Singapore company’s profits is 18%. In maintaining Singapore’s
competitiveness as one of the world’s leading international
maritime centre, Singapore has attractive tax incentives
available to the shipping industry that exempt shipping income
from tax.
the vital role of the shipping industry in world trade and reliefs
are available to ensure that GST is neutral wherever possible.
As international movement of goods is zero-rated, the majority
of goods and services provided to ships for their provisioning,
repair and maintenance, crewing and management are also
zero-rated.
Tax incentives for the shipping and oil rigs industry
The attractive tax incentives available in Singapore include:
Automatic tax exemption for Singapore – flagged ships
Broadly, an owner or operator of Singapore-registered ships is
tax exempt on qualifying income derived from the operating or
chartering of such ships in international waters. There is no
expiry date for this incentive as long as the ships continue to be
Singapore-flagged and there is no requirement to apply for this
incentive.
Tax exemption for foreign – flagged ships
The Approved International Shipping Incentive (“AIS”) is a tax
incentive to be applied for and available to resident companies
which own or operate foreign flagged ships. To qualify for
the AIS scheme, a company must substantiate that the control
and management of its Singapore fleet will be based in
Singapore and meet other quantitative qualifying criteria like
fleet size, head count and Singapore business spending. Under
the AIS scheme, qualifying income from the international
operation and chartering of foreign ships is exempt from tax for
up to 10 years (with possibility of extension up to 30 years).
Withholding tax exemption is also available on charter payments
to non-residents.
Divestment gains
Other taxes
Goods and Services Tax (“GST”) is a tax on domestic
consumption and is chargeable on any supply of goods or
services made in Singapore where it is a taxable supply made
by a taxable person (i.e. a GST registered person) in the course
or furtherance of the business carried on by him. The applicable
GST rate is currently 7%. GST in Singapore clearly recognises
Index
As announced in the Singapore Budget 2008, gains arising from
the disposal of Singapore-flagged and AIS ships will be
automatically tax-exempt provided that the ships are disposed
of before December 31, 2013. This tax exemption will cover
gains on disposal of vessels, including those which are sold and
subsequently leased back, as well as gains from sale of shares
in a special purpose company holding the vessels.
Singapore*
As announced in the Singapore Budget 2008, foreign exchange
gains and gains from risk management activities derived by
companies in respect of Singapore-flagged and AIS ships will be
exempt from tax, provided that such gains are in connection
with and incidental to the core shipping operations.
companies to use Singapore as a base for the provision of
ancillary logistic services. Approved companies would enjoy
a concessionary tax rate of not less than 10% on incremental
income from qualifying activities. Tax exemption on dividends
(from qualifying profits) remitted to overseas network companies
is also available. With effect from 15 February 2007, the incentive
period for this scheme is extended from 5 years to 10 years.
Ships leasing company
Block Transfer Scheme
Leasing income received by a qualifying ship leasing company
will also be tax exempt. This incentive is meant to develop
the ship financing sector in Singapore and provide shipping
operators with more flexibility in managing their vessels.
To encourage the flagging of foreign flagged ships as a fleet
under the Singapore flag, the Block Transfer Scheme (“BTS”)
was introduced as a volume discount scheme for ship
registration fees, provided their primary registry elsewhere is
suspended. In addition to the tax exemption available for
income from chartering or operating Singapore flagged ships,
the BTS also provides for automatic exemption from withholding
tax on interest paid on an overseas loan taken to finance those
ships. This applies to ships registered during the period ended
November 1, 2003 to December 31, 2008.
Risk management activities
Maritime Finance Incentive
To further boost the ship financing sector, the Maritime Finance
Incentive (“MFI”) was introduced in 2006. The MFI will enable
the players involved in ship financing to package innovative
financing products which will benefit the shipowners (e.g.
cheaper sources of capital) and investors (e.g. alternative high
yield investments) alike. The MFI grants tax exemption on
qualifying income for the ship investment vehicle (such as a ship
leasing company, shipping fund or shipping trust), while the
qualifying fee income of the ship investment manager (such as a
fund management company or a trustee manager) will be taxed
at 10%. Dividends distributed by the ship investment vehicle to
both corporate and individual investors will be tax exempt. As
announced in the Singapore Budget 2008, with effect from
April 1, 2008, the MFI will be enhanced to cover container
leasing activities. Qualifying income for a container investment
vehicle will enjoy a concessionary tax rate of 5% or 10%,
depending on the level of business spending and headcount
commitments. In addition, the qualifying fee income of the
container investment manager will enjoy a concessionary tax
rate of 10%. Further, partnerships will now be allowed to apply
for the MFI with effect from April 1, 2008.
Approved Shipping Logistics scheme
The Approved Shipping Logistics Enterprise scheme was
launched in 2004 to encourage freight management and logistics
Oil rigs
Oil rigs involved in the exploratory work can now be registered
as Singapore-flagged ships, thereby entitling the income from
operating or chartering such rigs for tax exemption. Oil rigs to
be used for production work which cannot be Singapore-flagged
can benefit from the AIS tax incentive mentioned earlier for
foreign ships.
Double Tax Agreements
Currently, Singapore has comprehensive double tax agreements
(DTAs) with 63 countries (out of which 58 are currently in force)
as well as seven shipping and air transport agreements with
seven other countries which do not have a DTA with Singapore
such as USA and Hong Kong. Most of the DTAs provide for full
exemption for a non-resident company from tax on international
shipping profits sourced in Singapore. These DTAs granting a
full tax exemption do so by confirming the tax right to the
country in which the company is effectively managed or which
the company is resident in. The DTAs which do not provide for
full tax exemption would generally reduce the normal tax by half.
Contacts
For more information, please contact:
Lina Lew
[email protected]
Tel.: +65 6236 3787
Ho Mui Peng
[email protected]
Tel.: +65 6236 3838
Information in this leaflet was last updated in January 2008 and is presented in a summarised form and is intended for general guidance only.
Specific advice should be obtained before any action is taken.
© 2008 PricewaterhouseCoopers S.à r.l. All rights reserved. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International
Limited, each of which is a separate and independent legal entity.
www.pwc.com/sg
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Spain*
Solutions for shipping companies
Opportunities in Spain
Thanks to its privileged geographical situation, Spain is regarded
as one of the main gateways into Europe. The length of and the
generally accessible nature of its coastline, the strategic position
of the Canary and Balearic Islands (which are major ports of call
on Atlantic and Mediterranean routes) and its shipping history
have made Spain a point of focus for companies in the sector.
This is furthered by advantageous domestic legislation and a
privileged network of international treaties, which are exceptionally
advantageous in the case of the treaties concluded with Latin
America, making it a perfect link between both continents.
owned or chartered, for a minimum of ten years, and each of the
owner’s vessels must be commercially and strategically managed
in Spain or in an EU country. The tonnage tax is compatible with
the Special Registry of Ships in the Canary Islands (“REBECA”).
Qualifying tax payers
Shipping companies registered in the Spanish Register of
Ships and Shipping Companies or the Spanish Special
Register of Ships and Shipping Companies;
Companies carrying out jointly technical and crew management;
Companies must own their ships or charter them in. The net
tonnage of ships chartered-in cannot exceed 75% of the total.
Qualifying ships
From a legal perspective, shipping activity is subject to specific
legislation from both a mercantile and labour standpoint and
there is a special register which is governed by Law 27/1992.
Tax treatment of shipping companies
From the point of view of corporate taxation, the general rate
which is currently applicable is 32.5% (30% as from 2008).
Between other investments incentives we may highlight:
Tax deductibility of the provisions recorded in accordance
with accounting legislation by shipping companies to cover
major repairs;
Deduction for the reinvestment of extraordinary profits
resulting from the sale of assets and reinvested in other
assets. This tax credit reduces the effective taxation of
the income to 18%;
Possibility of negotiating special depreciation plans for ships
and other assets.
The following special schemes are also provided for:
Spanish tonnage tax
The Spanish tonnage tax regime is governed by articles 124 et
seq. of Royal Decree 4/2004, amended by Law 4/2006. Those
who opt for the scheme must apply it to all their vessels, whether
Index
The ships must be managed strategically and commercially
from Spain or from a different European Union country;
The ships must be suitable for navigation on the high seas
and must be used for any activity related to goods
transportation, passenger transportation, salvage and other
services necessarily rendered on the high seas except fishing
or sporting or recreational activities;
Towage ships and dredging ships should meet certain
requirements.
If the tax payer engages in two or more different activities
(exploitation of ships and other business), then the income
derived from non-tonnage tax activities is taxed according to
the general tax rules.
Tonnage tax calculation
The tonnage tax is calculated on a ship-by-ship basis by applying
the ordinary corporation tax to tonnage profits (“daily profit per
ship”) multiplied by the number of days that the ship is actually
operated by the company during the accounting period.
Spain*
Personal Income Tax: salaries, wages and any monies
received by the crew as compensation for their work on
the registered vessels will be 50% tax exempt.
Social Security contributions: the Social Security obligatory
contributions that must be satisfied by the Shipowning
Companies on behalf of the crew working at the registered
vessels will be reduced by 90%.
Calculation of tonnage income
The tonnage income or “daily profit” would be estimated by
reference to an amount of profit for each 100 net tons (NT),
as follows:
up to 1,000 NT
1,001 NT to 10,000 NT
10,001 NT to 25,000 NT
above 25,000 NT
EUR
EUR
EUR
EUR
0.90
0.70
0.40
0.20
Other competitive tax opportunities In Spain
Foreign Holding Companies (“ETVEs”)
Income and expenses from the following activities are included
in a company’s tonnage tax profits:
Income derived from the transport of goods or passengers,
salvage, towing and dredging activities, or other services
that need to be performed on the high seas;
Charges in connection with the above-mentioned activities;
General administrative expenses proportionate to the
turnover generated by the above-mentioned activities;
Gains or losses recorded on the transfer of a ship subject
to the tonnage tax scheme, based on whether the ship is
subject to the scheme as from the acquisition date or as
from a subsequent date; gains recorded on non-qualifying
ships should be included in the tax base subject to the
general regime (32.5% for 2007 and 30% as from 2008).
Spain offers an attractive tax scheme for holding companies
whose corporate purpose is the management of foreign
securities although this need not be their only business purpose.
The main benefits are:
Exemption of dividends and capital gains obtained by the ETVE
from its foreign subsidiaries provided that the subsidiaries are
subject to a tax similar to corporate income tax, are not resident
in a tax haven and carry on business activities;
Non-resident shareholders of the ETVE are not subject to tax in
Spain when they receive income relating to the income obtained
by the ETVE from the shareholding in foreign companies;
Deductibility of the depreciation of financial goodwill
resulting from the acquisition of non-resident entities.
Special Registry of Ships in the Canary Islands (“REBECA”)
The registration of vessels in the Special Registry of Ships
entitles to a series of tax advantages that have greatly enhanced
the competitiveness of the Spanish Shipowning Companies and
the Ports of the Canary Islands. The labour and tax advantages
that companies whose ships are registered at REBECA would
be able to enjoy are the following:
Corporate Income Tax: 90% deduction on the corporate tax
that relates to the taxable income deriving from the operation
of the vessels registered in REBECA.
Transfer Tax, Capital Tax, Stamp Duty: no taxation regarding
any acts or contracts entered into in relation to the registered
vessels.
Tax neutrality scheme for mergers, spin-offs, asset
contributions and share-for-share exchanges
Subject to conditions, the scheme enables tax neutrality
following EU Directives (in direct and indirect taxes) on
corporate restructurings, including special contributions of
assets (e.g. ships).
Major international tax treaty network
Spain has entered into many Double Taxation Treaties,
in particular with the Latin America countries.
Contact
For more information, please contact:
Oscar Alonso Albarran
[email protected]
Tel.: +34 (0) 915 684 276
Information in this leaflet was last updated in September 2007 and is presented in a summarised form and is intended for general guidance only.
Specific advice should be obtained before any action is taken.
© 2007 PricewaterhouseCoopers. All rights reserved. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International Limited,
each of which is a separate and independent legal entity.
www.pwc.com/es
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Sweden*
Solutions for shipping companies
Opportunities in Sweden
After the parliamentary elections
On February 24, 2006, the Tonnage Tax Committee submitted its
proposal to the Swedish government regarding standardised
taxation of shipping companies. The fundamental idea is that
shipping companies in Sweden are to pay tax based on the ships’
tonnage volume, rather than on income. Similar tax regimes exist
in several member states within the EU, with the member states’
expressed intention of supporting their own shipping industries
and of restricting competition with the so-called “flag of
convenience” shipping. According to the proposal, tonnage
taxation may come into effect retroactively. As late as for tax
assessment 2008, the shipping companies should be able to
apply for – for a ten year period – tonnage taxation, as from
a financial year beginning on January 1, 2005 or later.
Deferred tax
With the introduction of the tonnage taxation, the issue with
deferred tax liabilities as a result of excess depreciation on ships
(depreciation in excess of plan) arises. The proposal is that the
state’s claim on this tax liability be reduced over time, at a rate of
10% per year. Should a ship be sold, for example, within three
years after entering into the tonnage tax regime, then 70% of
the tax liability on the ship will be realised. The tax is avoided if
the shipping company acquires a replacement ship for a value
corresponding to at least the residual value according to plan of
the sold ship. However, tax is also charged on any profit which
can arise on the sale of ships. A profit is realised to the extent
that the sales price exceeds the residual value according to plan
of sold ship. Taxation of this profit is avoided if the replacement
acquisition corresponds to the sales price.
All of the Committee members have not agreed to all parts of
the proposal. Five of the nine experts, the majority of whom are
from the Ministry of Finance, are of the opinion that the shipping
companies should not be given the benefit of a retroactive
adoption of the tonnage taxation, nor should the state waive
its claim on the companies’ tax liabilities (calculated to
approximately SEK 2.4 billion). The Committee has, therefore,
presented an alternative proposal, based on the Danish model.
This alternative entails that a company’s accumulated excess
depreciation be taxed to the extent that the company reduces
its shipping operations.
Index
The Ministry of Finance is currently preparing the proposal.
As at October 1, 2007, the government had not yet presented
a proposal to the Swedish Parliament.
The Committee proposal has a number of detailed rules.
We describe some of them in the following.
The Tonnage Tax Committee proposal in further detail
The tax rules are based on a number of key terms, such as
qualifying ships, qualifying operations, tonnage income, tonnage
taxed income mixed operations, among others. Clarifications of
these terms, will, in turn, determine the part of the shipping
company’s income that should be exempted from the standard
tax rate of 28%, and instead be considered as taxed due to
taxation of the tonnage.
Qualifying ships
Ships with a net tonnage of at least 100 and with strategic and
economic management in Sweden qualify for tonnage taxation.
The following applies to ships that are chartered or chartered out:
Ships that are chartered without crew (so-called bareboat
charter) and ships that are leased with crew are deemed to
be owned by the shipping company;
Chartered ships with crew are covered by tonnage taxation
if the value of the net tonnage does not exceed 75% of
the company’s total average net tonnage. This limitation
does not apply to ships that are chartered between one and
five years and the charteror at the same time is granted
a call option to acquire, at the latest at the end of the charter
period, the ship for a price not exceeding market value at
the time when the option was acquired;
Income from a ship that is bareboat-chartered out is taxable
under the tonnage tax regime, if the ship is chartered out for
a maximum period of three years due temporary overflow
of capacity.
Companies shall maintain or increase their share of net tonnage
in qualifying ships that are registered within the EEA.
Sweden*
This requirement, however, does not apply if at least 60%
of the company’s net tonnage, including bareboat charters,
is registered within the EEA.
Qualifying operations
Operations qualifying for tonnage taxation are the transportation
of goods or passengers at sea with their own or chartered
qualifying ships or chartering out of such ships on the condition
that the operations are exposed to international competition.
Even certain types of operations that are necessary for and
executed in close connection to the company’s transportation
operations are also considered as qualifying operations.
Calculation of tonnage income
Tonnage income is calculated on basis of the ships’ net tonnage
per day regardless of whether the ship is in use or not according
to the following model:
0 – 1,000 NT
1,001 – 10,000 NT
10,001 – 25,000 NT
25,001 –
SEK
SEK
SEK
SEK
8.50
6.50
4.00
2.00
per
per
per
per
100
100
100
100
NT
NT
NT
NT
Tonnage taxation can be applied for fiscal years commencing
after the end of 2004, that is, earliest on January 1, 2005 for
companies applying the calendar year as financial year. The new
rules are proposed to come into force on December 1, 2006.
Companies that conduct qualifying operations at this date will
be able to apply for tonnage taxation, at latest, in the income tax
return for year of tax assessment 2008.
Groups
All companies which conduct qualifying operations within a group
shall choose the same taxation method for their operations.
It shall not be possible to transfer assets at a price below market
value without withdrawal taxation (Sw: uttagsbeskattning)
between a tonnage taxed company and a conventionally taxed
company. Moreover, the possibility to equalise profits through
group contributions is limited. Deductions for given group
contributions shall only be allowed from income other than
tonnage taxed income while received group contribution should
be considered as non-tonnage taxed income.
Deferred tax liability
To tonnage income is added taxable amounts from the sale of
ships and certain other assets. These items then constitute the
company’s tonnage taxed income. The tonnage taxed income
is thereafter added to the company’s other business income and
is taxed at the corporate tax rate of 28%. Deductions are not
granted from income of tonnage. Depreciation is, however,
calculated fictitiously during the tonnage tax period in order
for the assets to have a value when the company reverts to
conventional taxation. Companies whose operations only partly
qualify for tonnage taxation have mixed operations. Expenses
attributable to both qualifying and non-qualifying operations shall
be allocated in relation to the net sales in respective operations.
Application and duration
A company’s choice to be taxed under the tonnage tax regime
or to refrain from such taxation shall be valid for 10 years.
As a result of the depreciation rules for ships, many shipping
companies have incurred excess depreciation for tax purposes.
Such excess depreciation shall be taxed if ships which were
owned prior to entry into the tonnage tax regime are sold within
a certain period of time after such entry (the transition model).
The excess depreciation will not be taxed if the company
acquires ships that are used in the tonnage taxed operations for
an amount corresponding to, at least, the residual value of the
ship in the beginning of the fiscal year when the sale takes place.
Nominal profit
Profits gained from the sale of a ship at a price exceeding
the acquisition price, improvement expenses added, socalled
nominal profits, are taxable. Deductions from such profits are
granted for losses on a ship that has been acquired and
disposed of in the year in which the profit is realised. Taxation
is avoided if the company reacquires ships for an amount that
corresponds to, at least, the sales price.
Contacts
For more information, please contact:
Sven Erik Holmdahl
[email protected]
Tel.: +46 31 793 14 14
Mikael Möller
[email protected]
Tel.: +46 31 793 14 12
Ulrika Lund Ericson
[email protected]
Tel.: +46 31 793 14 17
Information in this leaflet was last updated in December 2007 and is presented in a summarised form and is intended for general guidance only.
Specific advice should be obtained before any action is taken.
© 2007 PricewaterhouseCoopers. All rights reserved. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International Limited,
each of which is a separate and independent legal entity.
www.pwc.com/se
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United Kingdom*
Solutions for shipping companies
Opportunities in the United Kingdom
Other taxes
Value Added Tax (“VAT”) is typically due on supplies of goods
or services which are made in the UK in the course of business.
The standard rate of VAT is 17.5% although the supply of certain
services is zero-rated – international shipping activities fall into
this category. Zero-rating means that the company supplying
the services may not have to add VAT to its sales, but can
recover VAT suffered on its costs.
Over the last two hundred years the United Kingdom has
established itself as one of the world’s greatest maritime
nations. The maritime business in London provides insurance
and brokering, finance and legal services to ship owners
the world over and alone contributes GBP 1 billion to the UK
economy. The city is renowned as the maritime capital of
the world.
In order to retain global competitiveness, in July 2000, the UK
introduced the tonnage tax regime for British shipping. This
formed a key part of a long term strategy to reverse a trend
which may otherwise have seen the collapse of the British
shipping industry. Since its introduction in July 2000, the United
Kingdom’s tonnage tax regime has helped to achieve a 250%
increase in the UK registered fleet and a doubling of the UK
based fleet.
United Kingdom tax framework
All UK tax resident companies and overseas companies with
a taxable presence in the UK are subject to corporation tax
on their profits. The standard rate of corporation tax is 30%
although relief is available for small companies, which can
reduce the effective rate of tax to 19%.
There is no special legislation dealing with the taxation of ships
other than the tonnage tax rules introduced in 2000. The UK
does, however, have an extensive network of double taxation
treaties which generally exempt from UK tax international
shipping activities where the effective management of the
operations is in the treaty partner territory. If groups are able
to reorganise their shipping operations into UK tax resident
companies, they may benefit from the protection afforded by
the UK tax treaty network reducing or eliminating “freight taxes”
levied in a number of territories around the world.
Index
Companies operating in the UK are potentially subject to
a number of other taxes such as stamp duties on certain capital
transfers (4% on property and 0.5% on shares), employers’
national insurance (currently 12.2%) and business rates paid
to local authorities in respect of property.
Key features of the UK tonnage tax regime
UK shipping companies are ordinarily subject to the same UK
taxation framework applicable to all commercial companies.
However, the UK tonnage tax regime provides an alternative
way of calculating the taxable profits of companies that operate
qualifying ships which are strategically and commercially
managed in the UK. The measure of taxable income is based
on the tonnage of the vessels the company operates, and
equates to an annual tax liability of approximately GBP 22,000
per 100,000 ton vessel.
Whilst some shipping companies may benefit by way of
a permanent cash tax saving, the non tax advantages include
increased flexibility when making investment decisions given
that UK tax is no longer a key decision factor for consideration.
Entry to the tonnage tax regime is by election and the general
rule is that the election remains in force for the period of ten
years from the date it first came into effect. If the company/
group ceases to qualify during this period, the election will end.
A renewal election can be made at any time when an election is
in place. This supersedes an existing election and remains in
place for ten years (subject to the normal conditions continuing
to be met).
United Kingdom*
Key requirements
The minimum training requirement
The following are required in order for a company to qualify for
UK tonnage tax:
There is a minimum training requirement which a company/
group must meet to enter tonnage tax or renew a tonnage tax
election. The company must produce an initial training
commitment and an annual plan setting out the minimum
training obligation (“MTO”) and how it is to be met, for approval
by the UK Secretary of State. The MTO is to recruit and train
one officer trainee for every 15 officer posts. Alternatively,
payments in lieu of training may be able to be made to meet
training commitments. Failure to meet the training commitment
may result in fines or, ultimately, exclusion from tonnage tax.
The company’s board must also undertake to consider
the feasibility of including ratings within the MTO although
specific inclusion is not mandatory.
The company must be within the charge to corporation tax;
It must operate qualifying ships; and
Those ships must be strategically and commercially managed
in the UK.
A qualifying group is a group containing one or more qualifying
companies.
EU flag requirement
The impact of tonnage tax
There is currently no requirement for ships to be registered in
the UK. However it is proposed that where a tonnage tax
company or group starts operating a new vessel, it must be
flagged under an EU flag if the following conditions are met:
The introduction of the tonnage tax regime in the UK has been
key to the recovery of the British shipping industry. Since it was
introduced, over 76 shipping businesses with over 800 vessels
have joined the regime.
Less than 60% of the tonnage tax company or group’s fleet
is flagged under an EU flag; and
The proportion of the company or group’s EU member state
registered tonnage is less than that compared with the first
period it entered tonnage tax; and
The financial year in which the ship is first operated is not an
“excepted year”.
Contact
For more information, please contact:
Christopher Goddard
[email protected]
Tel.: +44 (0) 1293 566686
Information in this leaflet was last updated in September 2007 and is presented in a summarised form and is intended for general guidance only.
Specific advice should be obtained before any action is taken.
© 2007 PricewaterhouseCoopers. All rights reserved. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International Limited,
each of which is a separate and independent legal entity.
www.pwc.com/uk
Index