This is the second edition of our new Tax Update for the Shipping & Offshore sector, in which we inform you about national and international developments, various court decisions, bills and practical experience, which are both current and relevant to the sector.
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Shipping & Offshore Market Group
KPMG Meijburg & Co
Customs law - classification of ship hulls
In dispute in this case, after referral, is whether ship hulls should be classified as seagoing or non-seagoing for customs clearance purposes. The classification as a seagoing vessel refers only to vessels designed and built for navigation on the high seas. The Amsterdam Court of Appeals applies for a preliminary ruling on what should be understood by navigation on the high seas in this context. For more information click here (in Dutch).
On May 10, 2019, the Supreme Court rendered an interesting judgment on the State’s share of profit. The Supreme Court ruled that, in principle, interest charges arising from a loan can only be attributed as costs to an extraction license if the loan was contracted to finance assets used in the extraction operations. However, circumstances are conceivable where a loan, which at the time it was contracted was not (yet) used to finance assets used in the mining operations, will fulfill that function at a later date. This judgment is relevant to mining companies/oil companies in relation to the Mining Act, but possibly also to other areas of tax law, including the tonnage tax regime. For more information click here (in Dutch).
VAT seagoing vessels 0%
The Dutch tax authorities replied to a letter about the application of the zero VAT rate to seagoing vessels, which was changed on January 1, 2019. The letter also contains an example of a pro forma statement. The replies provide a better picture of the application of the zero VAT rate to seagoing vessels.
The Act of November 29, 2017 amended the VAT Code. The term ‘seagoing vessel’ has been replaced by the term ‘vessel for navigation on the high seas’. A recently published circular has clarified how this new term is applied.
If you have any questions about the letter with replies or circular, please contact one of our VAT specialists.
Zero VAT rate not applicable to jackup offshore drilling rigs
The Court of Justice of the European Union ruled that the VAT exemption for seagoing vessels does not apply to GSP’s jackup offshore drilling rigs (the national courts still have to finally verify the facts). These are not to be regarded as ‘vessels for navigation on the high seas’, but as floating installations that are predominantly used in a stationary position for the exploitation of offshore hydrocarbon fields. An interesting question here is: where should the line be drawn in this context (vessel for navigation on the high seas versus floating installations)? For more information click here (in Dutch).
The Netherlands - ruling policy (in relation to the Dutch tonnage regime)
In November 2018, the Dutch Deputy Minister of Finance announced plans to revise the Dutch ruling practice. He recently elaborated these plans in a draft decree. The purpose of the reform is to design a more transparent ruling practice and to further guarantee the quality of the ruling practice for businesses with activities of substance. In order to achieve this, the draft decree includes stricter requirements for rulings to be agreed as from July 1, 2019.
The draft decree applies to international rulings applicable to corporate income tax, dividend withholding tax and bilateral treaties for the avoidance of double taxation and rules for double tax relief in respect of these taxes. This includes, for example, advance pricing agreements (APAs), rulings on the participation exemption, the Innovation Box, the tonnage regime, whether there is a permanent establishment and agreements about the attribution of assets and profit to a permanent establishment. For more information click here.
Directive for Saudi Arabia: VAT implications in the oil and gas sector
The Saudi General Authority of Zakat and Tax (GAZT) recently published a Directive on VAT implications for transactions in the oil and gas sector (‘the Directive’). The Directive addresses the following issues: the applicability of VAT registration, the country’s territorial scope, supplies of oil and gas, activities in the sector, input VAT, VAT obligations and penalties.
The chapter on supplies of oil and gas clarifies the place of supply of goods, including supply through pipeline distribution systems, import, export, supplies after customs clearance on export and supply in the event of suspension of a customs duty.
For more information click here.
On April 5, 2019, Normative Ruling RFB no. 1880 was published in the Brazilian Official Gazette. This describes the amendments to the Special Tax and Customs Procedure for the temporary admission of oil and gas equipment (the “Repetro-Sped”), governed by Normative Ruling RFB no. 1871/2018. With the new normative ruling, Normative Ruling RFB nos. 1600/2015 and 1415/2013 have also been amended. For more information click here.
Roundtable session on social security/Court of Justice of the European Union judgment: Latvian sailor insured for social security purposes in Latvia
The first roundtable session of the Shipping & Offshore group took place on Friday June 7. The subject was the judgment of the Court of Justice of the European Union concerning the Latvian sailor. The Court held in this case that in the event of an EU employer and an EU-resident employee on board a non-EU flagged seagoing vessel, it is not the legislation of the employer’s Member State that should be applied, but the legislation of the employee’s country of residence. During the meeting, this case law was discussed at length and the practice, in particular the difficult practical implications, was shared in detail with the participants. Daida Hadzic also presented interesting examples and background information based on her experience at the Danish government and the European Commission. In addition to the mutual agreement procedure, various ways of responding to relevant developments were discussed. It was clear that these are mostly communicating vessels and that careful thought is given to how to deal with them.
Extra roundtable session
Given the enthusiasm for this roundtable session, we are considering holding another one. If you are interested in this, please send an email to:Nederstigt.Krista@kpmg.com
Roundtable session: Norway
We are also working on another roundtable session, which is currently planned for October this year, dealing with tax aspects relating to offshore activities on the Norwegian continental shelf. Special guest will be Torstein Jansen-Vistnes. A highly valued guest, given his experience with the Norwegian tax authorities and KPMG. Should you be interested, please let us know by email:
Nederstigt.Krista@kpmg.com of Verlee.Milene@kpmg.com
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