The Norwegian parliament has introduced new tax legislation for qualifying shipping companies. The new tax regime only applies to Norwegian registered joint stock companies which elect to be taxed under the new deferred tax regime. The main consequence of this tax regime is that income from qualifying shipping activity is not taxed during the current earning of income. Thus, the profits are as a point exempted from taxation. However, finance income will be taxed continuously as ordinary income (28%).
Taxation of profits will be triggered when the company distributes dividends exceeding the previous taxed finance income. The taxation is imposed at the corporate income tax rate on the grossed-up amounts of distribution. For example, a dividend of NOK 72 triggers a tax of NOK 28.
Through the implementation of quite comprehensive interim legislation the new tax regime for shipping companies was effective from the income year 1996. Transition to the new tax regime for ordinary organised shipping companies often requests a reorganisation of the company through i.e. merger, demerger, sale or other transition in order to separate the shipping related activity from the other activity.
The deferred tax regime only applies to the possession of ship in business and certain moveable assets used in the offshore Petroleum activity. Hiring of ship is allowable if the company also owns at least one ship. Companies under the regime may own finance assets, exempt shares in joint stock companies not quoted on a stock exchange marked or shares in partnerships which not by theirselves are under the deferred tax regime. Qualifying companies cannot employ personnel and carry out other activities other than operating, hiring out or subleasing of ships.
Companies electing deferred taxation must pay a tonnage excise tax. The tax base for this tonnage tax is the net tonnage of a ship times the number of days a year the ship is owned by the company. The rates used for the different net tonnage thresholds will generally entail a moderate tax level.
2. TAX RATES/DUTY - FROM THE INCOME YEAR 1998
2.1 The owner of the ship (company, partnership etc) / profit - TAX RATE: 0
When dividend is distributed - TAX RATE: 28%
2.2 The shareholder/dividend received - TAX RATE: 0
2.3 Duty based on Tonnage per Ship is suggested to be for each day:
NOK 0 first 1,000 net ton, then
NOK 18 each 1,000 net ton up to 10 000 net ton, then
NOK 12 each 1,000 net ton up to 25 000 net ton, then
NOK 6 each 1,000
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.
For further information contact Unni Bjelland, Ernst & Young, Tel: +472 203 6000 or Fax: +472 203 6370.
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