The United Kingdom Tonnage Tax Regime:
Compatibility with Relevant European
Union Tax Law and Policy
Yinan Yin
Abstract The maritime heritage of the United Kingdom speaks for itself. Over a
substantial part of the last century as well as in the nineteenth century, the United
Kingdom had the distinction of having the largest tonnage in the world. However,
over the last decades the size of the United Kingdom fleet on the world scale had
diminished considerably down to some 7 million tonnes deadweight tonnes (DWT)
in 1999 from a high of 50 million DWT in 1975. Faced with competition from
vessels registered in third countries, in 2000, the United Kingdom adopted tonnage
tax regime to reverse the flow of UK registered ships flagging out. This scheme was
classified as a state aid for maritime transportation within the EU and the commission has defined its first guidelines on this subject to ensure a certain convergence
between the action of the Member States since 1989. Indeed, the concept of tonnage
system has its roots in the so-called open ship registry system, which is adopted by
third countries and radically different from the traditional closed registry system of
ship registration. This project aims to examine the effectiveness of this scheme in the
United Kingdom, its compatibility with EU law and policy; and the potential impact
of Brexit on the United Kingdom shipping registry.
1 Introduction
1.1 Background
The phenomenon of tonnage tax as a taxation regime is peculiar to the shipping
industry. Basically, it is an alternative method for the computation of the taxable
profits of a shipping entity which is different from normal corporate taxation in a
given jurisdiction. A company’s profit based on tonnage tax is a replacement for both
tax adjusted commercial profit or loss on shipping trade as well as chargeable gains
or losses made on tonnage tax assets. It is obvious that the notion of “tonnage tax” is
based on the tonnage of a ship and how the two interrelate will unfold in this work.
Y. Yin (*)
Liverpool John Moores University, Liverpool, UK
© Springer Nature Switzerland AG 2020
P. K. Mukherjee et al. (eds.), Maritime Law in Motion, WMU Studies in Maritime
Affairs 8, https://doi.org/10.1007/978-3-030-31749-2_35
713
Compatibility with Relevant European
Union Tax Law and Policy
Yinan Yin
Abstract The maritime heritage of the United Kingdom speaks for itself. Over a
substantial part of the last century as well as in the nineteenth century, the United
Kingdom had the distinction of having the largest tonnage in the world. However,
over the last decades the size of the United Kingdom fleet on the world scale had
diminished considerably down to some 7 million tonnes deadweight tonnes (DWT)
in 1999 from a high of 50 million DWT in 1975. Faced with competition from
vessels registered in third countries, in 2000, the United Kingdom adopted tonnage
tax regime to reverse the flow of UK registered ships flagging out. This scheme was
classified as a state aid for maritime transportation within the EU and the commission has defined its first guidelines on this subject to ensure a certain convergence
between the action of the Member States since 1989. Indeed, the concept of tonnage
system has its roots in the so-called open ship registry system, which is adopted by
third countries and radically different from the traditional closed registry system of
ship registration. This project aims to examine the effectiveness of this scheme in the
United Kingdom, its compatibility with EU law and policy; and the potential impact
of Brexit on the United Kingdom shipping registry.
1 Introduction
1.1 Background
The phenomenon of tonnage tax as a taxation regime is peculiar to the shipping
industry. Basically, it is an alternative method for the computation of the taxable
profits of a shipping entity which is different from normal corporate taxation in a
given jurisdiction. A company’s profit based on tonnage tax is a replacement for both
tax adjusted commercial profit or loss on shipping trade as well as chargeable gains
or losses made on tonnage tax assets. It is obvious that the notion of “tonnage tax” is
based on the tonnage of a ship and how the two interrelate will unfold in this work.
Y. Yin (*)
Liverpool John Moores University, Liverpool, UK
© Springer Nature Switzerland AG 2020
P. K. Mukherjee et al. (eds.), Maritime Law in Motion, WMU Studies in Maritime
Affairs 8, https://doi.org/10.1007/978-3-030-31749-2_35
713