Shipping tax overviews: Attention all shipping

Shipping tax overviews: Attention all shipping

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This global Transportation services publication explains the most effective way of structuring the taxation of shipping income for 50 countries. The aim of the study is to explain the tax incentives available to shipping companies in a country and to help company select the most effective tax regime to operate in, around the globe. The study contains information on a particular countries, plus shipping tax contacts.

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Shippingtax overviews 2009 Attentionall shipping
Transportation
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Contents
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Country shipping tax contacts
Country tax overviews
Shipping tax overviews
About Deloitte
Contacts
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Airports, Ground Handling Air Traffic Control, Civil Aviation Authorities
Aviation Airlines
Scope of Deloitte’s Global Shipping & Ports Group
Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in 140 countries, Deloitte brings world-class capabilities and deep local expertise to help clients succeed wherever they operate. Deloitte’s 165,000 professionals are committed to becoming the standard of excellence. The Deloitte Global Shipping & Ports Group specialises in providing professional services to the water transportation industry including cruise lines, ferries, cargo shipping, ports and harbour authorities. Our main objective is to develop solutions to assist our clients resolve the issues affecting them and the complex industry environment in which they operate.
Roads, Bridges & Highway Operators Road Authorities & Dept. of Highways
Passenger & Freight Transport Rail Road Passenger & Buses, Car Rental, Trucking, Freight Services Logistics, Postal Services
Transport Services
Infrastructure Operators Ancillary Services & Regulatory Authorities
Ports Shipping Authorities & Harbour Authorities
Water Cruise Lines, Ferries, Cargo Shipping
Track, Stations & Signal Operators Rail Authorities
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AboutDeloitte
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Shippingtaxoverviews
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This document serves as an introduction to the comprehensive study of each country. Detailed tax overviews have been completed for 50 countries. For more information on a specific country, please contact the shipping tax practitioners for that particular country.
These experts can help with your questions regarding the taxation of your shipping business. Whether it is a sole question on how a certain shipping activity is taxed in another country, or a complex study of the tax structure in your international organisation. If you would like to receive an in-depth analysis of some tax regimes, please contact Sander Wortelboer.
The Deloitte Shipping & Ports Group has conducted a comprehensive study of shipping tax incentives. The aim of the study is to explain the tax incentives available to shipping companies in a country and to help companies select the most effective tax regime to operate in, around the globe.
There are countries in the world where special tax incentives apply. Some general tax regimes could also be attractive. For example, tax incentives could be in the form of tonnage tax in several countries (e.g. Germany, India, Ireland, Netherlands, USA, etc.), or special tax regimes (e.g. Cyprus, Malta, Singapore, etc.). Tonnage tax is the tax levied on the tonnage of shipping companies, as opposed to the normal corporate tax, which is based on the profits earned by them. It is an alternative method of calculating corporation tax on the profits earned by companies which operate ships and elect to join the tonnage tax regime. Tonnage tax companies pay tax based on the net tonnage of the ship operated rather than by reference to the profits earned from such operations.
For example, since the introduction of tonnage tax in the UK, there has been a 250% increase in the UK registered fleet and a doubling of the UK based fleet.
For any country today, a growing shipping sector is an essential transportation medium in a world where prosperity is often tied to international trade. Ships and ports handle 90% of the world’s cargo and provide a highly efficient and flexible means of transport for a variety of goods. World maritime trade is at the threshold of a new era. Governments who would like to grow their countries into major shipping centres have put in place new taxation options which could transform the viability of many shipping companies. Special tax benefits and the introduction of tonnage tax regimes have been vital to achieve aggressive growth objectives. By offering advantageous tax regimes and relatively relaxed vessel ownerships, the so-called ‘flags of convenience’ or ‘open registries’ have attracted about half of the world’s tonnage.
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Shipping tax overviews 2009
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The aim of the study is to explain the tax incentives available to shipping companies in a country and to help companies select the most effective tax regime to operate in, around the globe.
Tax regime Special tax benefits Special tax benefits Tonnage tax regime Special tax benefits Tonnage tax regime Special tax benefits Tonnage tax regime Special tax benefits Special tax benefits Special tax benefits Tonnage tax regime Tonnage tax regime Tonnage tax regime Tonnage tax regime Tonnage tax regime Special tax benefits Tonnage tax regime Tonnage tax regime Tonnage tax regime Special tax benefits Special tax benefits Tonnage tax regime Tonnage tax regime Tonnage tax regime Tonnage tax regime Special tax benefits Special tax benefits Special tax benefits Special tax benefits Tonnage tax regime Tonnage tax regime Special tax benefits Special tax benefits Tonnage tax regime Tonnage tax regime Tonnage tax regime Special tax benefits Special tax benefits
Country Argentina Australia Belgium Brazil Cayman Islands Chile China Colombia Croatia Cyprus Denmark Finland France Germany Greece Hong Kong Iceland India Ireland Isle of Man Israel Italy Japan Korea (Republic of) Latvia Luxembourg Malta Mexico Monaco Netherlands Netherlands Antilles New Zealand Nigeria Norway Pakistan Poland Portugal Romania
mribet@deloitte.com fiomurphy@deloitte.com.au icrisp@deloitte.com.au bverhelst@deloitte.com elinogueira@deloitte.com william.walmsley@rawlinson-hunter.com.ky amecklenburg@deloitte.com angelazhang@deloitte.com.cn maandrade@deloitte.com sifkovic@deloittece.com ataliotis@deloitte.com soeandersen@deloitte.dk eija.kuivisto@deloitte.fi maferreira@taj.fr srunge@deloitte.de itentes@deloitte.gr gfung@deloitte.com.hk gudbjorg.thorsteinsdottir@ deloitte.is hbhattbhatt@deloitte.com piburger@deloitte.ie acardwell@deloitte.co.uk zfriedman@deloitte.co.il alualdi@deloitte.it kazunori.iwamoto@ tohmatsu.co.jp jeiryu@deloitte.com alasmane@deloittece.com eloquet@deloitte.lu scachia@deloitte.com.mt emagos@deloittemx.com jh_croci@dca.mc swortelboer@deloitte.nl flagerwaard@deloitte.com ababbage@deloitte.co.nz uerobu@deloitte.com kjohnsen@deloitte.no zsattar@deloitte.com kwojtowicz@deloittece.com lbelo@deloitte.pt evansteenderen@ deloittece.com
Shipping tax contacts Mercedes Ribet Fiona Murphy Ian Crisp Bart Verhelst Elisangela Nogueira William Walmsley Alvaro Mecklenburg Angela Zhang Mario Andrade Perilla Sonja Ifkovic Antonis Taliotis Søren Reinhold Andersen Eija Koivistu Marie Danielle Ferreira Charvat Stefan Runge John Tentes Gary Fung Gudbjorg Thorsteinsdottir Hemant Bhattbhatt Pieter Burger Andrew Cardwell Zvi Friedman Alessandro Lualdi Kazunori Iwamoto Jei Young Ryu Aija Lasmane Erwan Loquet Steve Cachia Erik Magos Jean-Humbert Croci Sander Wortelboer Fulko Lagerwaard Andrew Babbage Uche Erobu Knut Johnsen Zubair Sattar Krzysztof Wojtowicz Luís Belo Everard van Steenderen
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Country shipping tax contacts
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Shipping tax contacts Alexander Bragin Low Hwee Chua Boris Princl Mark Freer Ignacio Medina Magnus Larsson Al Chang John Cifor Sebahattin Erdoğan Ian Brown Miguel A. Fonseca Larry Orenstein Romina Siblesz
abragin@deloitte.ru hwlow@deloitte.com bprincl@deloittece.com mfreer@deloitte.co.za igmedina@deloitte.es maglarsson@deloitte.se alchang@deloitte.com.tw jcifor@deloitte.com serdogan@deloitte.com ianxbrown@deloitte.co.uk mifonseca@deloitte.com lorenstein@deloitte.com rsiblesz@deloitte.com
Shipping tax overviews 2009
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Country Russia Singapore Slovenia South Africa Spain Sweden Taiwan Thailand Turkey United Kingdom USA Venezuela
Tax regime Special tax benefits Special tax benefits Tax free regime Tonnage tax regime (planned) Special tax benefits Special tax benefits Special tax benefits Special tax benefits Special tax benefits Tonnage tax regime Tonnage tax regime; Special tax benefits Special tax benefits
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Belgium Belgian companies or Belgian branches of foreign companies active in the maritime sector can opt for a special tonnage tax regime, whereby the taxable basis is determined on a lump sum of the net tonnage of the vessels. In order to apply for the Belgian tonnage tax regime, the company should explicitly file a request with the Belgian tax authorities. Upon approval of the request, the tonnage tax regime will apply for a period of ten years. The qualifying profit for the Belgium tonnage tax is defined as: ‘the profit resulting from the exploitation of a sea-going vessel, which is navigating the flag of a Member State of the European Union, for the transport of goods or persons, as well as for all activities which are directly linked with this exploitation on international sea routes and on routes from and to installations at sea used for the exploration or exploitation of natural sources’. The European Union flag link can be waived if the beneficial company, which also has vessels flying a non-EU flag, commits itself to increase or at least maintain its tonnage fleet flying the flag of one of the European Union Member States.
Countrytaxoverviews
Argentina The income earned on the conduct of international traffic, shipping and related activities between Argentina and foreign countries by shipping companies organized outside Argentina, and the income earned by foreign ship owners on the time charter or on the round trip/voyage charter of vessels is considered as Argentine-source income and such income is subject to a 3.5% withholding. Income earned by foreign companies on the rental of containers for transportation of goods within Argentina or from the latter on to foreign countries is considered as Argentine-sourced income and such income is subject to a 7% withholding. Agents or representatives in Argentina of the aforesaid companies are to be jointly and severally liable for payment of income tax. The abovementioned withholding tax rates may not apply in the case of companies established in third countries with which Argentina has concluded international treaties. The income earned by shipping companies organized in Argentina is fully subject to payment of income tax in Argentina. The starting point for assessing taxable income is the profit or loss shown in the financial statements, which is then adjusted by adding up non-deductible expenses and deducting non-taxable or exempt income and/or allowable deductions not accounted for in the accounting records. Treaties to avoid double taxation have been signed with several countries.
Australia Australian resident companies who undertake shipping operations in Australia are generally subject to tax in Australia as normal taxpayers on their net taxable income at the corporate tax rate of 30%. Section 129 of Australia’s Tax Act is a concessional provision for shipping companies which have a principal place of business outside Australia and are undertaking carriage of goods services shipped in Australia. Section 129 provides a favorable tax outcome where the shipping company’s net profit margin under the shipping contract is more than 5%. The taxation of shipping arrangements in Australia is complex and the tax outcomes can depend upon a range of different factors. There have been recent significant changes to the way in which the Australian tax authorities view the taxation of shipping arrangements, specifically under hire purchase and bareboat charter arrangements, which can create tax planning opportunities for certain shipping entities.
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Brazil With the intent of attracting foreign investments and consequently, increasing the Brazilian shipping sector, the Foreign Trade Brazilian authorities grant benefits for foreign companies that act in this segment by the implementation of special regimes. Some possible regimes, such as Special Regime of Capital Asset Acquisition (‘RECAP’) may be evaluated according to the situation. In the detailed country overview, eight possible regimes are described.
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Chile According to Chilean VAT law, shipping services except for international shipping and domestic passenger transport are VAT taxable. Shipping companies which transport freight and passengers to and from Chile will be considered exporters for the chartering and for the temporary possession of ships under the Chilean flag, in their commercial transactions to non-domiciled persons or entities. The importance of being considered exporter under the Chilean VAT law lies in the fact that exporters are entitled to recover the VAT surcharged on the acquisition of property or services or imports connected to their exports activity. Payments and amounts credited to account made to non-domiciled persons or entities for services related to the main line of business of the payer, could be exempted from the Additional Withholding Tax. Income deriving from services rendered in Chile by foreign non-domiciled companies or individuals, in connection with: 1) sea freights, commissions or participation in sea freights to or from Chilean ports, and also services for ships and cargoes in national or foreign ports necessary to execute such transport; and 2) chartering, sub-chartering, freight, usufruct or any form of assignment of the use or possession of foreign ships, designed or used for coastal traffic trade services, is taxed with the Additional Withholding Tax at a rate of 5% and 20%, respectively.
Cayman Islands Special tonnage tax rules apply to ships registered in the Cayman Islands. The Cayman Islands government has constructed a regulatory regime that is highly favorable to offshore operations, especially since there is no taxation in Cayman other than stamp duty and import duties.
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Croatia The statutory basis for the Croatian shipping business regulation changed in May 2006 when shipping business incentives were removed from the Corporate Income Tax Act. The only statute that now regulates the fiscal aspects of shipping business is the Maritime Code. The Maritime Code prescribes that a company registered for and engaged in shipping shall not pay corporate income tax on profit derived from using ships in international navigation. The Code also exempts profit derived from boat sales, stock sales or company shares sales and dividend income from taxation, for shipping companies that conduct business in international navigation. Shipping companies are required to keep financial records and financial statements for both local and international navigation activity to qualify for the international shipping tax advantages.
Colombia The treaties entered into by Colombia with other countries to avoid double taxation have been confined to the area of ocean navigation and air navigation and the treatment of income tax in respect to these economic activities. These treaties have been entered into with Germany, Argentina, Chile, United States of America, Brazil, Italy, Venezuela and Panama. Generally, in these agreements the tax power of each one of the signatory countries is limited in respect to the taxable object. So if a shipping company of a certain nationality earns profits from its business, it will only be taxed on its income generated from the business in its country of origin, regardless of the fact that it may perform part of its activity in another country.
China PRC business tax (‘BT’), enterprise income tax (‘EIT’) and vessel tonnage tax are the major corporate taxes applicable to shipping companies. BT is generally imposed at 3% on the gross transportation revenue received for providing shipping services within Chinese territory, or transporting goods or passengers from the Chinese territory to outside Chinese territory. Effective from January 1, 2009, the new BT rules stipulate that a foreign shipping company is subject to BT as long as the revenue generates from providing shipping services to entities or individuals located within Chinese territory. For a foreign shipping company, according to the treaties to avoid double taxation or ocean shipping agreements entered into by China with other countries, it may be entitled to BT and EIT exemption on its income of international ocean shipping services. Otherwise, a foreign shipping company is subject to BT and EIT at 3% and 1.25% respectively on the gross revenue for international transporting goods, passengers or postal articles from Chinese ports. The above rules may be subject to the State Administration of Taxation’s further review.
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Denmark The tonnage tax regime was introduced in 2002. This special tax rule has introduced a fixed profit tax for seagoing shipping business and sometimes for related businesses. This tax is determined on the basis of net registered tonnage in order to arrive at the taxable profit. The Danish tonnage tax regime provides a low effective tax rate on income of qualifying shipping companies. The tonnage taxation is optional, and the choice made by the shipping company will be binding for a period of ten years. Recent changes mean that the profit on the sale of ships also qualify under tonnage tax.
Cyprus One of the main factors expected to drive the shipping industry forward in Cyprus is the country’s favourable tax regime which has been maintained even after the accession to the European Union. Registration fees in Cyprus are low and compare favourably with those in other registries. The current tax regime for shipping companies was introduced in 1963 for the first time and will expire in the year 2020 (unless it is renewed). The regime offers a ship owner (including a bareboat charterer) complete tax exemption on all profits and dividends arising from the operation of Cyprus flag ships. No corporation tax is payable on the income of a ship owner of a Cyprus flag ship from the operation of such ships in any shipping activity between Cyprus and ports abroad or between foreign ports. Profits distributed by ship owning companies operating Cyprus flag ships are not considered as ‘dividends’ for special contribution for defence purposes and they are not subject to the 15% special contribution for defence which normally applies. No stamp duty is payable on bills of sale and mortgages on ships and related documents. No capital gains tax is payable on the sale or transfer of a ship or shares in a shipping company. Any income arising from the provision of ship-management services is subject to a special ship-management tax calculated at 25% of the tonnage tax rates. Ship managers, at their option, may elect to be taxed under corporation tax at a special tax rate of 4.25%. Dividends distributed out of profits generated from ship-management activities are totally tax exempt and are not subject to the 15% special contribution for defence which normally applies.
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