Introduction

The Netherlands has an excellent infra-structure for shipping activities. 

With Rotterdam as one of the largest ports in the world, many shipping companies have a presence in the Netherlands. Nevertheless, most of the foreign managed shipping companies do not become subject to Dutch tax.  

Easy access to the Dutch capital market is a relevant factor for shipping companies to come to the Netherlands. It includes tax facilitated fund raising from the Dutch private market (the so-called CV-structures), but the main factor is the presence of specialised shipping banks, which belong to the most sophisticated in the world.

The Dutch tax regime contains specific tax incentives for qualifying shipping companies.

These incentives will be briefly described below. We will only provide a general overview of the incentives as the underlying legislation is quite complex and detailed.

If you consider to use one of these tax incentives, please contact us for a more detailed review of the exact conditions and the tax consequences. 

The following incentives will be described below: 

1. The corporate tax exemption for foreign based shipping companies;  
2. The Dutch VAT exemption for shipping within the European Union;  
3. The levy of corporate taxation on the basis of the net tonnage of the vessels (tonnage tax regime) rather than on the basis of the profit actually made; 
4. Accelerated tax depreciation for corporate income tax purposes (if the tonnage tax regime is not applied); 
5. Labour cost subsidy in the form of a reduction of wage taxes

The Dutch Corporate Income Tax Act regulates the third and fourth incentives. There is an overlap in the legislation, in the sense that there are cross references made and that certain conditions are imposed for both facilities.

The labour cost subsidy is regulated by the Wage Tax Act. The wage tax is an advance tax for the personal income tax due by the employee over his total income, that has to be withheld by Dutch employers.

We will conclude with an overview of what we can do for you.

The corporate tax exemption for foreign based shipping companies

Foreign shipping companies will in most cases not be taxed in the Netherlands on income, profits and capital gains from the operation of ships in international traffic travelling to and from Dutch harbours. Specific rules apply to inland transportation and the storage of goods.  

This will in particular be the case if either: 

• The Netherlands has concluded a tax treaty with the country from where the ships are managed; or 
• The foreign country that manages the shipping company is being managed does also not tax the income, profits and capital gains derived from the operation in international traffic of ships by shipping companies that are resident of the Netherlands.

Most general tax treaties allocate the shipping profit to the country from where the shipping company is being managed. For an overview of the tax treaties concluded by the Netherlands we refer to the page Overview of tax treaties concluded by The Netherlands. It is noted that the exact wording of the shipping article in the tax treaties might differ per country as it is not a standard article. Hence, it should be verified on a case by case basis whether a treaty exemption can be applied.

Apart from the general tax treaties, the Netherlands has concluded specific shipping treaties (sometimes combined with aircraft) with a number of countries, such as Argentina, Estonia, Greece, Hong Kong, Panama, USA and Venezuela.    

In case there is no treaty applicable, there is a safety clause in Dutch law for shipping companies established in countries which on the basis of their own domestic legislation do not tax Dutch shipping companies (reciprocity). This procedure has in the past been applied to for example:

• Chili
• Cuba
• Iceland
• Iraq
• Iran
• Peru 
• Taiwan 

For obtaining this exemption an application must be filed with the Dutch tax authorities, followed by a similar procedure in the foreign country. 

Before you apply an exemption we strongly recommend that you consult us to determine the accurate tax status and the proper procedures for your specific situation. If you require our follow up, you can contact us via e-mail or call us at our office in Rotterdam at  + 31 (0) 10 2010466 or our office in Amsterdam + 31 (0) 20 5709440    

The Dutch VAT exemption for shipping within the European Union

According to Dutch VAT law, the international transport of goods outside the European Union is not subject to Netherlands VAT, while input-VAT is refundable. Moreover the supply of the following goods and services is zero-rated in the Netherlands while the input-VAT relating to these goods and services remains refundable.

1. seagoing vessels;
2. goods intended as stores for outward bound seagoing vessels used to carry out some economic activity;
3. services supplied in connection with goods which are exported outside the European Union or stored in a bonded warehouse;
4. services supplied in connection with goods referred to in 1 and 2.

The exemption also applies to the delivery of ships themselves.

Tonnage tax regime

The basic requirement to qualify for the tonnage tax regime is that the shipping company's profits must be derived from the operation of seagoing vessels, which are active in international sea traffic (specifically defined in the legislation). The tonnage tax regime ialso includes cable and pipe laying vessels, research vessels and crane vessels.

A shipping company is considered to "operate a vessel" if the shipping company conducts the (commercial or technical) management and control  of a vesse lin the Netherlands and  the company:

• owns or co-owns the vessel, with the exception of ships chartered out on a bareboat charter basis, or
• holds the vessel under a bareboat charter.

If the shipping company conducts the commercial management of a ship owned by another company or if it operates a ship in time or voyage charter it may still qualify for the tonnage tax regime, provided that the shipping company also owns a certain volume of net tonnage itself through ownership or co-ownership of the vessels or ships under bareboat charter. Management and control in principle includes strategic, commercial and technical-nautical and crew management.

For the tonnage tax regime to apply, the ship has to be registered in one of the EU Member States, which means that it should sail under an EU/EEA flag (exceptions are available for ships under "third flag" that will join an existing fleet).

If a shipping company elects to be taxed on the basis of the net tonnage of the qualifying vessels (rather than on the basis of the taxable profits actually made) the taxable profit generated by each individual vessel is calculated for a book year according to the following sliding scale.

The taxable profits calculated on the basis of this schedule are subject to the normal Dutch corporate tax rates.

Application of the tonnage tax regime will amongst other imply that qualifying shipping activities can basically never result in tax losses, tax depreciation of the vessels is not allowed and a capital gains or losses incurred on the vessels are tax neutral. It should be noted however that ceasing the Dutch shipping activities within the first ten-years might have adverse tax consequences.

For applying the tonnage tax regime a request must be filed with the Dutch tax authorities. If granted, the tonnage tax regime will in principle apply for a period of ten years. Newly established shipping companies, or existing foreign shipping companies moving the effective place of management to the Netherlands should file the request during the first year in the Netherlands. It is possible, and in many cases recommendable, to obtain an advance ruling on the basis of the intention to start up shipping activities in the Netherlands, thus before the shipping activities are actually conducted in the Netherlands.

Every tenth year a shipping company may decide to opt for or to continue the application of the tonnage tax regime. Alternatively, they may decide to return to the normal tax regime. If during the ten-year period the requirements mentioned above are no longer satisfied, the tonnage tax regime will cease to apply.

Accelerated depreciation

If it is decided not to opt for the tonnage taxation regime, a qualifying shipping company may be allowed to apply a method of accelerated depreciation. The conditions for applying this facility are basically the same as for the ones described above which apply for the tonnage tax regime.

This facility allows an annual depreciation of a maximum of 20% of the cost price of the vessel, minus the estimated residual value. Accelerated depreciation replaces the normal rules. The tax depreciation can however only be effectuated to the extent that the depreciation charges for that year are covered by profits from operating the vessels. If the profit for a year is not sufficient to absorb the full 20% depreciation, the part that is not used can be carried forward to the subsequent year.

If a shipping company no longer complies with the requirements of the accelerated depreciation method within a period of ten years after the year in which the investment in the vessel was made, the book value of the vessel will be set at a value which would have been reached in case the shipping company had not applied the accelerated depreciation method but had applied the normal depreciation rules.

Labour cost subsidy: reduction of wage tax

In addition to the above mentioned corporate income tax incentives a labour cost subsidy is available. This facility reduces the labour costs for an employer engaged in the shipping business.

Under this regime the employer is allowed to retain a part of the wage taxes withheld from the salaries paid to qualified maritime staff ("seafarers"). A "seafarer" is defined as captain, ship's officer or ship's mate.

The part of the wage tax which may be retained by the employer amounts to:

• 40% of salary (for wage tax purposes) for employees living in the Netherlands and who are subject to Dutch wage tax;
• 10% of salary (for wage tax purposes) for employees not living in the Netherlands but who are subject to Dutch wage tax;
• 10% of salary (for wage tax purposes) for employees who are only subject to Dutch social security.

This reduction may be applied in combination with partial tax exemptions for which the employee may be eligible in view of his working days outside the Dutch territory.

The employer is eligible for the reduction if the seafarers are employed on a see going vessel registered in the Netherlands i.e. (sailing the Dutch flag). Dredging companies operating at sea may also benefit from this labour cost subsidy. The labour cost subsidy however does not apply to a vessel used for pilotage services or for sailing.

What we can do for you ?

If you are interested in our services, please feel free to contact us via e-mail or to call us at our office in Rotterdam on the number +31 (0) 10 2010466 or + 31 (0) 20 5709440.

We make time for you!