Eligible activities and flag requirements
To be eligible for application of the tonnage tax scheme, profits must be derived from the operation of seagoing vessels for the following shipping activities:
- The international transport of people or goods overseas.
- The transport of people or goods overseas for the purpose of the exploration or exploitation of natural resources at sea. This category includes transport ships, supply ships and stand-by ships used in the offshore industry.
- Towing activities or the provision of general assistance to ships at sea. Ships eligible are those whose operational activities are carried out for more than 50% at sea in any one year.
- Sea-dredging services. Ships eligible are those whose operational activities are carried out at sea and for more than 50% consist of transportation at sea.
- Exploration of the seabed (research vessels).
- Cable and pipe-laying on the seabed.
- Tackle and lifting activities at sea (crane vessels).
Profits from ancillary activities directly related to these qualifying shipping activities are included in the tonnage-tax scheme (1). These include loading and unloading (stevedoring), as well as ship-brokering activities carried out by the shipping company itself. Directly related activities of this kind fall within the scope of the regulations insofar as they are performed on behalf of ships operated by the company.
In the situation of a company that also generates profits from other activities, the profits of the other activities will be determined based on the regular system of taxation. Hence, all assets, liabilities and turnover related to the qualifying shipping activities, should be separated from those related to the shipping company’s other operations.
The following activities can be carried out under the tonnage tax scheme:
- The company conducts the management of the vessel to a significant extent and the vessel flies the flag of one of the member states of the European Union (EU) or of the European Economic Area (EEA) and the vessel is owned or co-owned by the company, and is not chartered out under bareboat agreement;
- The company mainly conducts the commercial management of a ship owned by another company, provided that the company conducts the management of one or more other ships in the manner as described in point a) above, whereby co-ownership means the company’s share in the vessel is at least 5%;
- The company operates the vessel by time charter or voyage charter, provided that the company conducts the management of one or more of its ships in the manner as described in point a) and provided that the company’s share in the vessel (co-ownership) is at least 5% (1);
- The company conducts the entire crewing and technical/ nautical management of the vessel in the Netherlands on behalf of a third party (1).
A decision every 10 years
The decision to opt for the tonnage tax scheme has to be made in the first year that taxable profit from shipping operations is made, or in every tenth year thereafter. Upon approval of the application by the tax authorities, the tonnage tax scheme will be applicable for 10 years. After each 10-year period, a company may continue in the scheme for another 10 years or revert to the regular system of taxation.
(1) Please note that, due to the recent decision of the European Commission SA 51263 (2019/N), the Dutch tax law has to be amended as per 1 January 2020 These changes are with respect to i) the introduction of a 50 % cap for non-transport activities, ii) time or voyage charter and iii) flag conditions.