Shipping Industry Almanac - Ernst & Young

476 Pages·2014·3.71 MB·English

Shipping Industry
Almanac
2014
Shipping Industry
Almanac
2014
Shipping Industry Almanac 2014
About EY
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Table of contents
Introduction i
Argentina 1
Australia 11
Barbados 33
Belgium 39
Brazil 59
Canada 73
China 91
Curaçao 103
Cyprus 111
Denmark 117
Dominican Republic 125
Estonia 137
Finland 145
France 151
Germany 163
Greece 173
Hong Kong 183
India 191
Indonesia 205
Ireland 213
Isle of Man 223
Italy 233
Japan 239
Luxembourg 245
Malaysia 260
Malta 267
Mexico 279
The Netherlands 285
New Zealand 297
Norway 305
Panama 315
Philippines 331
Poland 353
Portugal 357
Russia 379
Singapore 379
Spain 389
Sri Lanka 397
Sweden 403
Taiwan 409
Thailand 417
Turkey 423
United Arab Emirates 433
United Kingdom 441
United States of America 453
Ernst & Young shipping industry network 459
Shipping Industry Almanac 2014
Introduction
The Shipping Industry Almanac (the “Almanac”) is published annually by
EY’s global shipping industry network, which comprises of shipping industry
professionals in more than 50 EY member firms.
The Almanac has been keeping you informed and updated for the last 17 years
since our first edition was published in 1998. It provides a summary of the local
shipping industry infrastructure and regulatory, corporate and tax environments
for more than 40 countries. The information in each country chapter was
researched and prepared by resident EY shipping industry professionals.
A directory of EY shipping industry executives across our four service lines of
Assurance, Tax, Transactions and Advisory is located at the back of the Almanac,
and highlights our in-depth local knowledge and our global reach.
The content is based on information current as of 1 January 2014, unless
otherwise indicated.
For more information, please visit us at ey.com or contact us
at [email protected] or call your local EY office.
This material has been prepared for general informational purposes only and is
not intended to be relied upon as accounting, tax, or other professional advice.
Please refer to your advisors for specific advice.
Shipping Industry Almanac 2014 i
Argentina
1. Tax
Argentina does not have a specific tax law for shipping companies. Shipping companies must comply with
general tax regulations. In Argentina, companies are subject to federal taxes (such as income tax and
value-added tax, among others), provincial taxes (such as turnover tax and stamp tax) and municipal taxes.
However, some guidance regarding shipping activity may be found in the federal and provincial legal systems.
1.1 Income tax
For Argentine residents, income tax is levied on all income earned in Argentina or abroad. Income tax paid
on income from activities abroad may be claimed as a tax credit. For nonresidents and foreign beneficiaries,
income tax is levied exclusively on Argentine-source income. Nonresidents become residents if they have a
permanent establishment in Argentina.
In general, Argentine-source income arises from assets located, placed or used in Argentina, from the
performance of any act or activity in Argentina and from events occurring within Argentina.
The income tax rate is 35% and is applicable to the net income of companies residing in Argentina and the net
presumed income of foreign beneficiaries (in some cases, net-income basis applies).
The following items may be deducted from gross income to assess taxable income:
• In general, all expenses necessary to earn it or to maintain and keep its source
• The amortization or depreciation of construction, equipment and other assets, in general, based on their
estimated useful life
• The net operating losses (NOLs) from previous fiscal years (carryforward is allowed for five years; there
is no carryback system)
The Income Tax Law has many specific requirements regarding tax deductions for foreign loans when the
lender is a related company.
Section 18 of the Income Tax Law establishes the timing of the deduction of interest on foreign intercompany
loans. Interest derived from loans granted by foreign related parties or from tax havens (i.e., non-cooperative
countries) may only be deducted in the same tax year the payments are made or in the period of accrual,
but only if actual payment takes place before the due date for filing the tax return for the tax year in
consideration.
If the lender is not a related company, then the deduction of interest is allowed on an accrual basis. If the
lender is a related party, thin capitalization rules must also be considered.
Thin capitalization rules are applicable when interest is paid to a foreign lender that controls the Argentine
borrower company, except for those cases when interest payments are withheld at 35%. Interest paid where
the liabilities exceed two times the amount of the company’s equity at year-end becomes nondeductible and
are taxed like dividends. In other words, the excess interest will become a permanent difference between the
book and tax basis.
Transfer pricing rules follow Organisation for Economic Co-operation and Development (OECD) guidelines
and apply on transactions with related parties or with entities in tax havens (i.e., non-cooperative countries).
Additionally, there is no tax consolidation system in place.
Dividends paid in excess of net income, which is assessed using the general provisions of the Income Tax Law
and accumulate as of the prior fiscal year-end through the date of payment, are subject to a 35% withholding
rate. The 35% rate may be reduced if the foreign beneficiary is a resident of a country with which Argentina
has entered into a double taxation agreement, as long as applicable treaty requirements are met. Per the last
Income Tax Law modification (September 2013), dividend distribution is taxed in Argentina at a rate of 10%
when the payment is made by a local company to a foreign company or individual or local individuals.
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Earnings from the sale of shares of an Argentine company owned by a foreign shareholder are taxed at a
15% rate. Taxation is made through withholding, which can be calculated by applying the tax rate to the real
income or to the presumed income (90% of the sale price).
1.1.1 Shipping industry considerations
The Income Tax Law establishes that, for Argentine shipping companies, all income related to transportation,
either in Argentina or abroad, is considered Argentine-source.
For foreign shipping companies, Income Tax Law presumes (without admitting evidence to the contrary) that
any company providing transportation or carriage between Argentina and foreign countries has Argentine-
source net income equal to 10% of the total amount of freight and passenger transport earnings from such
trips (with a 3.5% effective rate).
Further, 10% of all payments made by local companies to foreign shipowners for charter services are also
considered Argentine-source net income.
Foreign companies in the container business that provide transportation in Argentina or from Argentina to
other countries are presumed to have Argentine-source net earnings equal to 20% of the gross income for
this activity (with a 7% effective rate).
These presumptions are relevant because when an Argentine company makes any kind of payment to a
foreign company providing any of the services mentioned above, it must withhold 35% of the Argentine-
source presumed income and submit it to the fiscal administration.
1.2 Double taxation treaties
In order to avoid double taxation, Argentina has entered into treaties with the following countries: Australia,
Belgium, Bolivia, Brazil, Canada, Denmark, Finland, France, Germany, Italy, the Netherlands, Norway, Russia,
Spain, Sweden, United Kingdom and Uruguay. A
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In all of these treaties, except for the one signed with Uruguay, Section 8 establishes the provisions related to e
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navigation and shipping, as well as air transportation. tin
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According to these treaties, international shipping income may only be taxed by the country where the
company is located, established or where its Board of Directors is located, as appropriate. Some treaties also
include charter activities among the company’s benefits, subject to these provisions.
Argentina has also entered into other treaties (or exchanged notes) exclusively related to international
transportation (by sea, air and/or land, depending on the country). The following are the signatory
countries: Chile, Colombia, Cuba, Ecuador, France, Greece, Iran, Israel, Italy, Japan, Malaysia, Mexico, the
Netherlands, Norway, Panama, Paraguay, Peru, Portugal, United Kingdom, United States and Venezuela.
Each treaty determines whether double taxation on sea, air or land transportation may be avoided. Although
there are some variations among the countries, the main implication is that international transportation
income will only be taxed by the country where the company is established.
In these cases, the presumptions used to determine Argentine-source net income (refer to section 1.1)
would not apply, due to the treaties in force.
1.3 Minimum presumed income tax
The minimum presumed income tax is complementary to income tax. The minimum presumed income tax
base comprises the asset value of certain taxpayers (for example, Argentine artificial persons, branches of
foreign companies) in compliance with the law in force. This tax rate equals 1%.
Applicable exemptions include:
• Investments in shares of other entities subject to the minimum presumed income tax
• Taxpayers’ assets located in Argentina when the value thereof (according to regulations) does not exceed
ARS200,000 (if assets exceed ARS200,000, the total asset value is subject to taxation)
Investments in new fixed assets are not computable — except for automobiles — and investments in real estate
Shipping Industry Almanac 2014 2
construction are not subject to the minimum presumed income tax during the fiscal year the investment is
made and its immediately subsequent year.
The annual income tax may be offset against the minimum presumed income tax for the same year. However,
if in any given year the minimum presumed income tax is assessed and it is not fully absorbed by that year’s
income tax, the tax effectively paid could be credited against income tax —subject to certain conditions — over
the subsequent 10 years.
Tax credits resulting from the payment of similar taxes abroad on taxable assets may be computed.
1.4 Tax on personal assets for corporations
Based on the presumption regarding indirect ownership by foreign individuals, foreign companies holding
business interests in Argentine companies are subject to taxation on personal assets. Taxes on personal
assets are also levied on the branches of foreign companies established in Argentina.
The personal assets tax should be calculated and paid by an Argentine company as a substitute taxpayer.
However, it is entitled to claim tax reimbursement from related shareholders.
The taxable base is assessed on the value of the local entity’s equity as disclosed in the last financial
statement as of December 31. The applicable tax rate is 0.50%.
1.5 Value-added tax
Value-added tax (VAT) is a general tax that applies to the sale of goods, the provision of services and the
importation of goods within Argentine territory, including:
• Sales of personal property
• Services provided by any natural or artificial person performing business activities
• Final import of goods for consumption
• Services provided from abroad to be used in Argentina, provided the beneficiary is a registered VAT payer
VAT is applied to the goods or services net sales price (tax debit). It is assessed on a monthly basis, and at
present, the tax is computed by including it in the purchase invoices of the different vendors (tax credit),
deducting it from the amount of tax debits in order to assess the payment amount.
If tax credits exceed tax debits, it results in a technical tax credit, which may be used to offset future tax debits
or, as the case may be, a freely available tax credit that may be recovered through cash reimbursement, used
against other taxes or transferred to third parties.
Applicable VAT rates are:
• 21% for general goods and services
• 27% for certain services, such as telecommunications, electricity, gas and water supply
• 10.5% for particular transactions, such as the final purchase or import of certain capital assets
Exports are VAT exempt, but exporters may compute the tax amount they were billed by vendors as a
tax credit to offset the tax amount owed for other transactions subject to VAT at the local market. If such
computation results in an unabsorbed tax credit surplus, that amount is eligible for reimbursement, may be
used to offset other federal taxes or may be transferred to third parties.
Shipping industry considerations
In connection with the shipping industry, the VAT law includes some tax exemptions for international shipping
and related activities. Specifically, under the VAT law, international passenger and freight transportation is
tax exempt and must be considered an export. This means that any tax credit may be recovered, transferred
or used to offset other taxes.
Charter services are also tax exempt when the vessels are used for international transportation. This
exemption only applies if the lessor is an Argentine shipowner, and the lessee is a foreign company. These
operations will also be considered exports.
There is also a tax exemption for aircraft built for passenger or freight transportation, as well as the those
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envisaged for defense and national security (in the latter case, its parts and components are also tax
exempt). Ships and vessels are also VAT exempt, as well as their parts and components, as long as the
purchaser is the Argentine government.
1.6 Tax on bank account transactions
This tax is levied on bank account transactions, equivalent transactions, on cash, and generally on all
movement of funds made on one’s own account and/or on third-party accounts within the Argentine territory
at a general rate of 6%.
An amount equaling 34% of the tax withheld over credit transactions in levied accounts may be computed as
a credit against income tax or minimum presumed income tax (prepayments and/or tax return amount).
1.7 Turnover tax
Turnover tax is a provincial tax charged by tax authorities in each of the 24 jurisdictions (including the 23
provinces and the autonomous city of Buenos Aires). This tax is levied on revenue resulting from traditional
profit-making activities, such as business, industry, professional activity, employment or service contracts,
regardless of the outcome, the nature of the service provider or the place where the activities are carried out.
The following exemptions, inter alia, may vary according to the jurisdiction involved:
• Transactions with securities, certificates and other documents issued by the federal, provincial or
municipal governments
• Transactions with shares and dividends
• Interest and/or indexation on savings accounts and fixed-term and checking account deposits
• Sale of fixed assets
• Exports
Turnover tax rates vary according to the jurisdiction and the activity involved — 4% is the average rate A
applicable to the services rendered. rge
n
Companies subject to turnover tax that perform activities in more than one province have to allocate the tax tin
a
base among the respective jurisdictions pursuant to an agreement they have entered into for this purpose.
Shipping industry considerations
With regard to the shipping industry, the turnover tax is a jurisdictional tax, and therefore, the operations
taxability will depend on each jurisdiction. Some jurisdictions, such as Buenos Aires or Mendoza, include a tax
exemption for international transportation in their fiscal codes.
In many other jurisdictions, although shipping activity is taxed, there is a provision in the fiscal codes that
foreign companies from countries with double taxation treaties with Argentina will not be taxed on income
derived from this kind of activity (international transportation).
When performed within Argentina’s boundaries, freight and passenger transportation can only be taxed by
the jurisdiction where the trip originates.
1.8 Stamp tax
According to the respective provincial regulations, the stamp tax is levied on public or private instruments
granted within the provincial territory or, if the instruments are executed abroad, the tax is paid insofar as the
agreement has effects in Argentina.
Conversely, as stated by the respective provincial laws, if the transactions are formalized using the offer
letters set by one party and then tacitly accepted by the other party (i.e., without actually stating the
legal implications of such document), the tax may not be triggered, regardless of the jurisdiction where
it may be executed.
In general, the applicable rate is 1%, with certain exceptions listed in the respective provincial tax codes.
Depending on the arrangement of the agreements entered into for the transactions analyzed, the stamp tax
may be levied in the jurisdiction where the mentioned agreements are entered into and/or in the jurisdiction
Shipping Industry Almanac 2014 4