Tax Update Shipping & Offshore - August 2024
Dear reader,
A new update from the Shipping & Offshore team covering various worldwide updates from a tax perspective within this industry.
Starting with some good news after the summer break: The OECD found Bulgaria's and Croatia's tonnage tax regimes not to be harmful. Jurisdictions have made further progress in addressing harmful tax practices through the implementation of the international standard under BEPS Action 5. The total number of regimes reviewed by Forum on Harmful Tax Practices (FHTP) has now reached 326, with over 40% of those regimes being (or in the process of being) abolished. Learn more about BEPS Action 5 on harmful tax practices.
Please reach out if you have any questions/remarks.
Ernst-Jan Bioch
Content
1. Netherlands
2. Singapore
3. United Kingdom
4. Suriname
5. Fiji
6. India
7. Italy
8. Australia
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1. Netherlands
1.1 Dutch tax authorities take a position on the scope of Article 24 of the Netherlands-Belgium Treaty (offshore activities)
The knowledge group of the Dutch tax authorities has considered whether the removal and disposal of decommissioned mining installations fall under the scope of Article 24 of the Netherlands-Belgium Treaty. The answer is: yes. The removal and disposal of mining installations are related to the exploration and exploitation of natural resources and thus fall under the scope of Article 24 of the Netherlands-Belgium Treaty. It is not relevant that the work is carried out by a different company than the one that operated the mining installation.KG:041:2024:10 Belastingverdrag Nederland-België: reikwijdte toepassing artikel 24 – werkzaamheden buitengaats – verwijderen mijnbouwinstallaties | Kennisgroepen (belastingdienst.nl)
1.2 Dutch VAT: Updated rules for zero VAT-rated supplies
On April 1, 2024, the new "Explanatory Notes to Table II" came into effect. This decree contains rules and policies on the application of the zero rate for VAT purposes, which are also relevant for the maritime and offshore industry. The decree is an updated version of the Table II Regulation of 1994, which was due for replacement after several decades and various updates, including the new rules for the zero VAT rate in relation to seagoing vessels (for example, see our earlier news update from 2019: link and 2021: link). The new Explanatory Notes that came into effect on April 1, 2024, have also been modified or updated in various respects. For the maritime sector, the most relevant update concerns the supplies to seafarers (crew and captain of seagoing vessels). The old Regulation explicitly confirmed that the zero rate applies to the supply of goods to seafarers on board a ship upon receipt of a valid export certificate. In the 2024 Explanatory Notes, this confirmation has been removed, but it is noted that supplies of goods for personal use to seafarers may fall under the zero rate if they are supplied in the context of export. Therefore, this will now have to be assessed on a case-by-case basis and must be sufficiently substantiated with documentary evidence. Especially with goods that can already be used before the ship leaves Dutch territory, proving this can lead to problems. For a more detailed overview of all policy changes related to the Dutch zero rate for VAT purposes, see our news update on the New Explanatory Notes to Table II.
2. Singapore
Alternative basis of tax for selected Maritime Sector Incentive (“MSI”) sub-schemes (Tonnage Tax Regime)
The Singapore Budget 2024 introduced an alternative basis of tax where the qualifying income of qualifying shipping entities is taxed by reference to the net tonnage of their ships and will be made available to the following MSI sub-schemes from the Year of Assessment 2024:
- MSI-Shipping Enterprise (Singapore Registry of Ship);
- MSI-Approved International Shipping Enterprise; and
- MSI-Maritime Leasing (Ship).
The alternative basis of tax will apply to all qualifying ships of MSI entities that are subjected to it. For MSI entities that are not under the alternative net tonnage basis of tax, the existing tax treatment under the relevant MSI sub-schemes will continue to apply.
On 10 June 2024, Singapore’s Ministry of Finance (“MOF”) issued the Draft Income Tax (Amendment) Bill 2024 (“the Draft Bill”) which outlines the draft legislation for the Singapore Tonnage Tax Regime under Section 34K of Singapore Income Tax Act 1947. As of 12 August 2024, the Draft Bill has yet to be enacted.
The Maritime and Port Authority of Singapore (“MPA”) will provide further details on the tonnage tax regime by 30 September 2024.
Do keep a look out for KPMG in Singapore’s article and seminar (hybrid event) on the proposed Singapore Tonnage Tax Regime in September / October 2024.
Should you have any questions with regard to the proposed Singapore Tonnage Tax Regime, please feel free to contact us at jiahaoyong@kpmg.com.sg and matthewkwok@kpmg.com.sg.
3. United Kingdom
Changes to the Energy (Oil and Gas) Profits Levy
Announced on 29 July, Windfall tax (EPL) to increase to 38% from 1 November 2024, bringing the headline rate to 78%. EPL is also extended by a year to March 2030. Investment allowance to be scrapped but the decarbonization allowance retained. Critically, changes to capital allowances are unclear with detail not due to emerge until the budget on 30 October. This uncertainty will not be welcomed by those wanting or needing to make long term investment decisions. Changes to the Energy (Oil and Gas) Profits Levy - GOV.UK (www.gov.uk)
4. Suriname
Tax treaty between Suriname and Curacao signed
On July 1, 2024, representatives from Curacao and Suriname signed a tax treaty concerning income and capital taxation. This agreement marks the first such treaty between the two nations and will become effective following the exchange of ratification documents. It is the third tax treaty that Curacao signed with another country. The treaty contains an article 8 provision for international shipping and air transport. trb-2024-90.pdf (officielebekendmakingen.nl)
5. Fiji
Fiji Removes fiscal duty on Importation of raw materials, machinery and packaging Materials in budget 2024-2025. A 5% fiscal duty will be levied on imports of ships, boats and floating structures. Budget-Summary-2024-2025.pdf (frcs.org.fj)
6. India
Budget 2024 shipping reforms
The budget 2024 contains several reforms relevant for shipping companies. Among others a new taxation regime for foreign cruise-ships businesses is set to enter into effect with a tax exemption for lease rentals. Among others, if enacted, this will introduce an exemption for income from renting ships to a related firm that operates cruise services in India. In addition, customs duties are planned to be removed for components and consumables for vessel manufacturing as well as technical documentation and spare parts for warship construction. Furthermore, a variable capital company structure is proposed for financing leasing of aircraft and ships. Budget 2024: Reforms flow to put wind in shipping industry's sails (indiatimes.com)
7. Italy
Italy extends tonnage tax benefits
With two decrees the Italian Ministry of Infrastructure and Transport (MIT) extended the tax benefits of the optional tonnage tax regime. Based on the decrees the tonnage tax regime will apply to resident and non-resident entities with permanent establishments in Italy that use vessels exclusively for international commercial traffic which are registered in the registries of EU and EEA countries. Furthermore, a list of activities ancillary to maritime transport will be eligible to tonnage tax provided that the related revenues do not exceed 50% of the total revenues generated by the use of the ship. Decreto Interministeriale numero 299 del 21/11/2023 | Ministero delle infrastrutture e dei trasporti (mit.gov.it) Decreto Interministeriale numero 302 del 22/11/2023 | Ministero delle infrastrutture e dei trasporti (mit.gov.it)
8. Australia
The Australian government has introduced the Petroleum Resource Rent Tax Assessment Regulations 2024, registered on August 6, 2024, as part of a broader review of the PRRT. These new regulations update the gas transfer pricing rules to align with OECD guidelines, adjust the advance pricing arrangement rules, and introduce specific rules for tolling arrangements. Key amendments include requiring projects to choose asset life formulas irrevocably, standardizing treatment of upstream and downstream entities, and valuing LNG facilities based on historical costs with GDP deflator adjustments. These changes are designed to enhance tax integrity, increase offshore LNG industry tax contributions, and ensure policy certainty. The reforms are projected to boost tax receipts by AUD 2.4 billion over the forward estimates. Explanatory statement: Petroleum Resource Rent Tax Assessment Act 1987 / Petroleum Resource Rent Tax Regulations 2024 (treasury.gov.au). Australia: “Exploration of petroleum” - KPMG United States
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