The Dutch tonnage tax scheme

07 September 2020

The Netherlands is home to one of the most prestigious ship registers in the world. Dutch law provides special advantages to shipowners and ship managers. Dutch tax advisors are internationally renowned for their in-depth knowledge of the maritime industry and hands-on advice.

Connie Roozen - Director at C&B More - elaborates about the Dutch tax climate and the tonnage scheme. The team of C&B More consists out of experienced tax advisors with affinity with the maritime industry.

Connie, what are the benefits of the Dutch tax climate for foreign shipowners who are considering to register their vessels in the Netherlands? And which relevant developments do you see in the foreseeable future?

The Dutch fiscal climate offers various advantages that are beneficial for international shipowners and ship managers. The Netherlands has international tax treaties with many jurisdictions for example. Because of these treaties double tax bills are prevented. Which is interesting for companies that operate globally. Thus highly relevant for an international industry such as shipping. Even though Dutch rules and regulations might be somewhat stricter than in other countries, the Dutch political climate is stable and predictable. So if you choose to register your vessel under the Dutch flag you don’t need to anticipate on sudden policy changes that might conflict with your long term strategy. I consider these to be major advantages of registering your vessel under the Dutch flag and doing business from the Netherlands.

Compared to other European systems, Dutch tax law grants a broad participation exemption (100 per cent exemption for qualifying dividends and capital gains) for holding foreign subsidiaries, which is vital for European headquarters.

Furthermore, the Dutch tax authorities have a more open attitude to communicate about individual arrangements. This growing trend to publicise and motivate decisions increases transparency and understanding to and by shipowners, or society for that matter. 

Also a substantial wage tax decrease is provided for employing seafarers working on board Dutch flagged vessels. For expats coming to work in the Netherlands a 30% tax exemption can be obtained.

What is your experience with serving shipowners in respect to Dutch tax regulations and how do these contribute to the attractiveness of registering a vessel under the Dutch flag?

Based on my experience I believe our system adds to the attractiveness of the Dutch ship register. The tax authorities have a dedicated shipping team for example. This team is highly knowledgeable, approachable and holds an open attitude towards deliberation. Decisions are carefully drafted and subject to peer review by multiple tax inspectors. Leading to uniform and predictable decisions as well as policies.

In addition there is a tendency for countries to demand local presence to use their tax scheme, which makes the quality of infrastructure and reputation more important. Because the Netherlands is renowned for both, it becomes more and more interesting for international shipowners to register a vessel under the Dutch flag.

Another contributing factor is the quality and reputation of Dutch banks in the global shipping industry. This also makes it more attractive to register your vessel here. Opening a local subsidiary also provides them access to a cluster of knowledgeable maritime business services providers (represented by the Rotterdam Maritime Services Community) and high-quality infrastructure. Personally I believe the close cooperation between shipowners, fiscal experts, and trade associations adds to the attractiveness of the Dutch flag. Joint lobby efforts have led to improved rules and regulations as well as a better business climate for shipping companies for example.

The Netherlands was one of the first countries to introduce the tonnage tax regime. This favourable tax regime, known as the Dutch tonnage tax scheme, has resulted in an effective tax rate comparable to that of open registers. How does the tonnage tax scheme work and what are the benefits for shipowners to use it?

Indeed, the Netherlands introduced this special tax facility for shipping companies in 1996. In brief, the facility encompasses a system in which shipowners can choose to be taxed lump-sum on the net tonnage of ships operated or on actual profits being made. The potential significant impact of the scheme on a company’s net yield makes it a very interesting tax facility. In absolute numbers the Dutch scheme results in the lowest tax bills compared to arrangements in other countries. When you also take the reliability and predictability in account, the Dutch tonnage tax regime is a good choice.

How can shipowners make full use of the Dutch tonnage tax scheme and is it always the best option apply tonnage-based taxation?

Usually my biggest advice to clients is to open a local subsidiary and move part of the operation to the Netherlands. By doing so shipowners can not only make full use of the scheme. But also benefit from many international tax treaties I mentioned before.

The decision is valid for 10 years. Whether you choose to apply it or not. Since companies have to be profitable in such a timespan to be able to survive it is safe to say that from an economical perspective it is always a good idea for shipowners to apply the Dutch tonnage tax regime.