Tax Update Shipping & Offshore - January 2023

Dear reader,

This is the first Tax Update for the Shipping & Offshore sector for 2023.

Ernst-Jan Bioch

Meijburg & Co, January 2023

Inhoud

1. The Netherlands
2. Belgium – tightening of tonnage regime payments to tax haven now constitute tax base
3. Hong Kong
4. Greece (various)
5. The Dominican Republic
6. Scotland / Deal agreed to establish Green Freeports
7. Switzerland: Tonnage tax regime approved by National Council

-------------------------------------------------------------------------------------------------------------------

1. The Netherlands

Evaluation of maritime tax measures

The report includes six key findings that address the parliamentary questions raised previously. The most important consideration is the level playing field that the measures should create for the Dutch maritime sector in the European and global market in which ships operate. As other countries have tighter tax regulations, the level playing field for Dutch shipping companies is coming under pressure. A key focus of the report is the consideration of possibly extending the regulations to ship types other than cargo-carrying vessels such as offshore working vessels for wind farm construction. According to the decision memorandum, there is currently no budget for an extension, but considerations, including non-tax ones, to make the Dutch register more attractive can be discussed with the sector.

The evaluation report, the decision memorandum and the relevant letter to the Lower House of Parliament from Deputy Minister Harbers (Infrastructure and Water Management) can be accessed via this link. Evaluation of maritime tax measures | Lower House of Parliament

Dutch windfall tax

On November 1, 2022, the government presented draft legislation to the Lower House of Parliament that introduces a temporary solidarity contribution on the 2022 profits of companies engaged in crude oil, natural gas, coal and petroleum refining activities. This legislative proposal has been enacted and applies the solidarity contribution retroactively for 2022. For 2023 and 2024, the temporary 65% “windfall profit tax” on sales of natural gas, as proposed in the memorandum of amendment to the Tax Plan 2023, would apply. Please see the earlier KPMG update. For the windfall tax bill, follow this link.

2. Belgium – tightening of tonnage regime payments to tax haven now constitute tax base

The Belgian legislation on various tax provisions introduces a tightening of the tonnage regime insofar as it includes payments made directly or indirectly to persons, permanent establishments or bank accounts in countries classified as tax havens. The amendment of the law entails a reporting obligation. This legal amendment may sometimes (including in cases of non-reporting) lead to an increase in the fixed taxable amount under the tonnage regime, unless a rebuttal provision can be successfully invoked. This new tax could have far-reaching consequences for companies established in Belgium that derive taxable profits from maritime shipping and receive financing from specific jurisdictions. See the following link for the bill that has now been adopted.  

3. Hong Kong

The draft legislation on the revised foreign-sourced income exemption (FSIE) regime in the Hong Kong SAR (Hong Kong) and its subsequent amendments proposed by the government were passed by the Legislative Council on December 14, 2022.

The FSIE regime will be effective from January 1, 2023. Link

4. Greece (various)

• The Greek government has proposed to increase the tonnage tax surcharge and Marine Retirement Fund (NAT) special levy for Category A vessels from 4% to 6% for 2024 and 2025. Link
• Greece Reduces Voluntary Contribution Rate on Shipping Dividends, Broadens Base to Include Capital Gains. The ratified agreement is included in Bill 5000/2022, which was published in the Official Government Gazette. The bill is available here as a PDF and in Greek only.

5. The Dominican Republic

The Dominican Republic modified (by Decree) the taxation of companies involved in the re-export of fossil fuels and hydrocarbons via cargo ships and aircraft. The Decree is effective from May 1, 2022. The modifications include:

• USD 0.22 tax rate per barrel on gasoline and diesel, up to USD 500;
• USD 0.09 tax rate per terameter of liquefied petroleum gas (LPG), up to USD 500
• USD 0.02 tax rate per British Thermal Unit on natural gas, up to USD 500;
• USD 0.05 tax rate per barrel on petroleum bitumen, up to USD 500; and
• the procedure for physical review and inspection by the Customs Agency (“DGA”). See Decree

6. Scotland / Deal agreed to establish Green Freeports

The term ‘Green Freeports’ reflects the Scottish Government’s distinctive net zero aspirations. The UK Government will continue to use the term ‘Freeports’ for its program in the rest of the UK.

The Scottish Government will support the significant tax reliefs that will be made available to Green Freeports through devolved tax levers, including rates relief. HMRC will also provide support via reserved levers including enhanced tax allowances, Employer National Insurance relief and customs duty reliefs. Background

The Forth Green Freeport bid aspires to deliver up to an additional 50,000 jobs across the UK, generate GBP 6 billion in investment and contribute over GBP 4 billion in GVA across sites in Grangemouth, Rosyth, Leith, Burntisland and Edinburgh Airport. Its activities will focus on renewables, advanced manufacturing, alternative fuels, carbon capture utilization and storage, shipbuilding, logistics and the creative industries.

The Inverness and Cromarty Firth bid aims to build a world-beating floating offshore wind manufacturing sector, with sites in the Cromarty Firth, Invergordon, Nigg, and Inverness. It expects to create up to 25,000 new jobs and attract GBP 2.6 billion in inward investment. In addition to offshore wind manufacturing, it will focus on green hydrogen and the creation of a new innovation cluster.

The bidding prospectus set out the requirements for applicants as well as the assessment and selection process. The Scottish Government will publish more information on the outcome of the assessment and selection process in due course. 

7. Switzerland: Tonnage tax regime approved by National Council

The draft legislation will now be considered by the Council of States, which is expected to take place in February 2023.

Read a January 2023 report prepared by the KPMG member firm in Switzerland.

                                                                  *******