Tonnage tax – maintenance of prescribed levels of Community-flagged vessels
Dec 14, 2015
The Merchant Shipping (Fees and Taxing Provisions) Law, commonly known as the tonnage tax law, requires that, in order to qualify for the tonnage tax scheme, Community-flagged ships (ships registered in and flying the flag of an EU Member State or any other contracting party to the European Economic Area Agreement) must account for at least a specified minimum percentage (“the Reference Share") of the taxpayer's fleet. The Reference Share is calculated at the date of entry to the tonnage tax scheme.
Any company or group of companies whose Community-flagged Share at the time of assessment has fallen below its Reference Share and is not greater than 60% may not introduce any additional non-Community ships into the tonnage tax system until it increases its Community-flagged Share back to at least the level of its Reference Share. However, owners, charterers or managers may introduce additional non-Community vessels if the aggregate share of Community-flagged ships in their individual sector has increased compared with the reference date. Taxpayers taking advantage of this provision are subject to a surcharge of 10 per cent on the total amount of tonnage tax payable for all the qualifying non¬Community ships in the fleet.
The tonnage tax law requires the Department of Merchant Shipping (“DMS”) to assess the Community-flagged share of each participant in the tonnage tax scheme at the third year as from the date of opting to be taxed under the tonnage tax system. The DMS has recently announced the arrangements for the review as at 31 December 2015, which will cover companies that entered the tonnage tax system on 1 January 2013 or during the 12 months preceding that date.
According to the calculations carried out by the Department of Merchant Shipping the global share of Community-flagged ships has decreased for all categories of tonnage tax payers, namely owners, charterers and ship managers. This means that for the fiscal year 2016 the option of introducing additional non-Community vessels and paying the surcharge is unavailable to any category of tonnage tax payers.
Any company or group of companies whose Community-flagged Share at the time of assessment has fallen below its Reference Share and is not greater than 60% may not introduce any additional non-Community ships into the tonnage tax system until it increases its Community-flagged Share back to at least the level of its Reference Share. However, owners, charterers or managers may introduce additional non-Community vessels if the aggregate share of Community-flagged ships in their individual sector has increased compared with the reference date. Taxpayers taking advantage of this provision are subject to a surcharge of 10 per cent on the total amount of tonnage tax payable for all the qualifying non¬Community ships in the fleet.
The tonnage tax law requires the Department of Merchant Shipping (“DMS”) to assess the Community-flagged share of each participant in the tonnage tax scheme at the third year as from the date of opting to be taxed under the tonnage tax system. The DMS has recently announced the arrangements for the review as at 31 December 2015, which will cover companies that entered the tonnage tax system on 1 January 2013 or during the 12 months preceding that date.
According to the calculations carried out by the Department of Merchant Shipping the global share of Community-flagged ships has decreased for all categories of tonnage tax payers, namely owners, charterers and ship managers. This means that for the fiscal year 2016 the option of introducing additional non-Community vessels and paying the surcharge is unavailable to any category of tonnage tax payers.
