With the presence of one of the largest ports in the world, the Port of Rotterdam, the Netherlands is a very attractive country for shipping companies. With the “Tweede Maasvlakte“, Rotterdam provides access to the world’s largest containerships and is home to a large number of shipping companies from all over the world. Not only the shipping companies, but also their suppliers and customers are located in and around the Port of Rotterdam, some for generations long. The Dutch favourable maritime tax regime is another important reason why shipping companies have a presence in the Netherlands. Specifically for shipping companies, the regime contains certain tax incentives, such as the tonnage tax regime, and an accelerated depreciation facility.
Shipping companies can take advantage of the VAT zero rated supplies of goods for the provisioning of specific vessels used for navigation on the high seas and the provisioning of offshore oil rigs. The VAT zero rate also applies for the acquisition of these specific vessels. Suppliers of the aforementioned goods do not have to charge VAT, but are still able to deduct input-VAT related to the goods.
The VAT zero rate can only be applied on supplies of or for vessels with certain purposes. Examples are passenger transport, industrial activities and/or assistance at sea. Supplies of goods for the provisioning of inland vessels and the supply of inland vessels are excepted from the VAT zero rate.
Another tax incentive that is available for shipping enterprises, is a labour cost subsidy. By using this facility, the shipping company is able to reduce its labour costs. A shipping company is allowed to retain a part of the wage taxes withheld from the salaries paid to “seafarers”, such as captains, ship officers and shipmates. The shipping company may retain up to 40% of the salary of the employee, depending on the country of residence of the employee.
Dutch shipping companies are allowed to choose the way their profits are taxed. Besides the regular system of taxation, based on actual profits made, they have the option to apply for a tonnage-based taxation. When applying for this tonnage tax regime, the shipping company’s taxable profits are calculated over a fixed profit per 1000 net ton per day (per vessel). According to this regime, the higher the net tonnage of a ship, the lower the fixed profit. The taxable profits thus calculated, are subject to the Dutch corporate income tax rates. To make use of the tonnage tax regime, the shipping company has to file a request with the Dutch tax authorities.
In order to be eligible for application of the tonnage tax regime, the shipping enterprise must derive its profits from the operation of seagoing vessels, which have to be active in international sea traffic. The regime also applies to, for example, cable and pipe laying vessels, crane vessels and research vessels. To “operate” a vessel, the management and control of the vessel has to be performed by the shipping company to a significant extent. This includes commercial, strategic and crew management. Furthermore, the shipping company has to (co-)own the vessel for at least 5%, or hold the vessel under a bareboat charter. Another important condition is that the vessel should, with some exceptions, in principle have an EU member state or an EEA registration.
The tonnage tax regime will be applied for a period of ten years, whereafter the shipping company can decide to continue or to terminate the regime. We recommend to take the regime in good consideration before applying for the tonnage tax regime. Under the tonnage tax regime, tax depreciation of vessels is not allowed, a capital gain or loss realised on the vessels has no tax consequences and shipping activities cannot lead to tax losses.
If a shipping enterprise chooses not to opt for the tonnage tax regime, a qualifying shipping enterprise may be allowed to use a special depreciation scheme: accelerated or random. The conditions for applying for this depreciation scheme are almost identical to the conditions required for the tonnage tax regime. For application of the accelerated depreciation facility- in case of a new vessel -, the residual value is 15% of the vessel initial cost and the expected lifetime is set at 15 years. Under the random depreciation facility, seagoing vessels may be depreciated straight-line over five years. The depreciation charges (in case of random depreciation) have to be covered by profits derived from operating the vessel. It is possible to carry forward any remaining depreciation to the following year. The company has to comply with the requirements for ten years after the purchase of the vessel.
Shipping companies which invest in environmentally friendly technology, might be eligible for the Arbitrary depreciation of environmental investments (Vamil) scheme. Investments in assets which are related to, for example, sustainable transport and circular economy could qualify as investments in environmentally friendly technology. Whit the Vamil tax scheme, shipping companies are allowed to decide when to write off 75% of the investment costs. Applying for Vamil could lead to a possible tax benefit of 12% of the initial investment.
In order to apply for the Vamil tax scheme, a shipping entrepreneur has to meet certain conditions. Amongst other conditions, it has to be established in the Netherlands, Aruba, Curaçao, Sint Maarten or one of the BES islands. As a shipping entrepreneur you have to pay income tax or corporation tax and invest in a business asset that is listed on the special Environment List. This Environment List contains all products (for shipping companies these products mainly consist of ship parts) for which shipping companies could potentially apply the Vamil, if the company meets the set conditions. Besides the Vamil, the Dutch tax regime also offers other tax schemes (EIA, MIA, ISDE & SDE+), companies might be eligible for.
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