Most Read Contributor in South Africa, September 2016
A welcome introduction of an internationally-competitive
international shipping tax regime is proposed in terms of the draft
Taxation Laws Amendment Bill, 2013 ("Bill").
Currently, international shipping transport conducted by South
African companies is subject to a corporate income tax rate of 28%,
with limited incentives such as a depreciation allowance for
capital investments. Internationally, the trend is towards
reduced taxation for shipping companies through a tonnage tax or a
total exemption for shipping activities. In light of these
trends, a new shipping tax regime is proposed by the Bill to
provide tax relief for qualifying South African shipping
The proposed relief will apply to an "international
shipping company", being a South African resident company that
holds share(s) in one or more ships that are registered in South
Africa in terms of the Ship Registration Act, 58 of 1998 and
utilised in the international transportation of passengers or goods
for reward ("South African ship").
The receipts and accruals derived by the international shipping
company from the operation of a South African ship will be exempt
from income tax. Furthermore, capital or revenue gains or
losses realised from the sale of a South African ship engaged in
international shipping will be disregarded. However, as a
result of the income and capital gains tax exemptions, South
African ships will no longer be depreciable. Other ships will
remain depreciable over a five-year period at a rate of 20% per
Any dividend paid by the international shipping company will be
exempt from dividends tax, provided that the dividend is derived
from income generated from the operation of a South African
ship. Similarly, any interest paid to a foreign person by the
international shipping company in respect of a debt used to fund
the construction or improvement of a South African ship will be
exempt from the withholding tax on interest (the 15% interest
withholding tax will become effective on 1 January 2015).
The officers and crew of a South African ship will further be
exempt from tax on their salaries, irrespective of the number of
days spent abroad.
In respect of a foreign company which constitutes a controlled
foreign company ("CFC") (by virtue of the extent of its
South African resident shareholders), it is proposed that a South
African ship engaged in international traffic will specifically
constitute a "foreign business establishment" for
purposes of that exemption in the CFC rules. Income
attributable to such a ship will therefore effectively not be
taxable in the hands of the South African resident
In summary, these amendments will effectively provide
international shipping companies operating South African ships with
exemptions from income tax, capital gains tax, dividends tax and
the cross-border withholding tax on interest. In terms of the Bill,
the proposed amendments will come into operation on 1 January 2014
and will be effective for years of assessment beginning on or after
that date. It should be noted that the Bill is subject to
change and that the proposals outlined above may still be amended
before being tabled in the National Assembly, which is scheduled to
take place on 23 October 2013.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Attractive new shipping provisions in South Africa’s new Taxation Laws Amendment bill go some way in showing that the government is serious about taking steps to revive South Africa’s rather sleepy international shipping sector.
This paper considers the recent developments in Nigerian Ship
Arrest Law – the Admiralty Jurisdiction Procedure Rules
(AJPR) 2011 for the Federal High Court of Nigeria (FHC), and its
effect on ship arrest practice.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).