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24 October 2012
The Norwegian tonnage tax regime stands out as one of the most favourable and competitive in the world today. As a result, international ship owners, operators, financers and market makers have shown an increased interest the regime. Over the past two years an increasing number of Norwegian and international ship owners have entered or re-entered the regime, including many large and well-known international players.
Following the improvements made to the tonnage tax regime in 2007 and a subsequent Supreme Court ruling prohibiting retrospective taxation (for further details please see "The comeback of the Norwegian tonnage tax regime"), the regime has provided a stable and attractive option for ship owners and operators. The growing confidence is demonstrated by the fact that the Norwegian tonnage tax regime currently has more vessels registered than any other regime.
The tonnage tax regime offers full tax exemption on shipping income, including bareboat charter income, gains from the sale of vessels and new building contracts, as well as related management activities. Under certain conditions the tonnage tax regime also encompasses companies that indirectly own at least 3% of a company owning a qualifying vessel. There are no requirements as to the ratio of owned versus chartered-out vessels, and no restrictions on chartering out on bareboat terms. Furthermore, strategic and commercial management, as well as day-to-day technical operations for group related companies outside the tonnage tax regime, may also be included.
Unlike some EU regimes, the Norwegian tonnage tax regime is open to a range of offshore vessels. This includes platform supply vessels, anchor handling tug supply vessels, seismic vessels and more 'entrepreneurial' vessels, such as intervention vessels, inspection, maintenance and repair vessels, crane vessels and cable and pipe-laying vessels. Tugs are also included, although special rules apply.
Overall, the regime offers flexibility on holding structures and financing. In addition, Norway also has a broad set of double tax treaties that creates a good framework for international shipping activities. A significant competitive advantage is the Norwegian participation exemption. This exemption enables dividends to be distributed without being taxed to Norwegian and European Economic Area (EEA) shareholders. Since January 1 2012 capital gains paid to Norwegian and EEA shareholders are now fully tax exempt. There is no withholding tax imposed on interest payments.
The Norwegian tax system, with its beneficial tonnage tax regime and participation exemption, is very competitive in comparison with tax regimes and incentives available to ship owners and operators in other jurisdictions. Norway also has one of the largest and most comprehensive maritime clusters in the world and is a world leader in the provision of ship financing, broking, insurance and legal services. Norway must now be considered to be one of the most attractive locations for international shipping activities. To add to its well-developed hub of ship owners, yards, equipment suppliers, banks, lawyers, insurers and other service providers, it has sophisticated infrastructure and a tax regime that few other countries with beneficial tax regimes can outshine.
For further information on this topic please contact Gaute Gjelsten, Anders Myklebust or Are Zachariassen at Wikborg Rein'by telephone (+47 22 82 75 00), fax (+47 22 82 75 01) or email (firstname.lastname@example.org, email@example.com or firstname.lastname@example.org).
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