competition or tax avoidance, the European Commission has issued certain Guidelines on state aid. Measures and combinations of measures have been identified that
impact on the fiscal treatment of ship-owning entities which operate under tonnage
tax regimes or benefit from other incentives and allowances. The advantages are
counterbalanced by requirements, as in the UK, by shipping companies undertaking
crew training enhancement schemes and the like.
56
Using net tonnage of a ship for calculation of the tonnage tax is in essence an
alternative way of dealing with or computing corporate taxation. Thus, taxation
based on ship tonnage is a replacement of both the tax-adjusted commercial profit or
loss of a shipping entity as well as the chargeable gain or loss arising out of a sale of
tonnage tax assets. Any other profits of a tonnage tax entity are subject to the
ordinary taxation regime of the UK. As a final word, it must be mentioned that
provision of training facilities for seafarers is a condition under the tonnage tax
regime, the object of which is to boost national seafaring as a career. This is among
other peculiar factors which include management, the proportion of UK national as
employees in the company and their residency.
5.2 Tax Avoidance and the CFC Rules
The scheme of the Controlled Foreign Corporation (CFC) Rules has been designed
to minimize opportunities for tax avoidance. It is recognized that this is only one
device among others for dealing with tax avoidance in situations where an entity
established in a EU member state has a subsidiary in a foreign jurisdiction which is
controlled by it, and that jurisdiction has a zero tax or low tax regime.
Trade remains the lifeblood of every state aspiring to better its economic condition and shipping is the indisputable vehicle through which international trade is
conducted. Indubitably the situation is not about to change. Shipping incentives are
needed more than ever to boost shipping. Despite the allegations that in fiscal terms
shipping may be deriving an unfair advantage and stealing a march over other
industries, without incentives not only does shipping suffer, but along with it all
allied industries and associated ventures and activities including the plight of the
seafaring profession.
57
A shipping company can, and often does, carry out business through a company
in a foreign jurisdiction which it controls. The foreign company which is usually the
registered owner of a ship or ships entered in the ship registry of that jurisdiction may
be a subsidiary of the parent corporation. The “controlled” foreign corporation may
be incorporated in the foreign jurisdiction or it may be simply registered there
without the need for separate incorporation.
58 In other words, it remains registered
56 Ibid.
57 OJ C 205,5.7.1997, p. 5.
58 Mayr and McGrath (1997), p. 270.
732
Y. Yin
impact on the fiscal treatment of ship-owning entities which operate under tonnage
tax regimes or benefit from other incentives and allowances. The advantages are
counterbalanced by requirements, as in the UK, by shipping companies undertaking
crew training enhancement schemes and the like.
56
Using net tonnage of a ship for calculation of the tonnage tax is in essence an
alternative way of dealing with or computing corporate taxation. Thus, taxation
based on ship tonnage is a replacement of both the tax-adjusted commercial profit or
loss of a shipping entity as well as the chargeable gain or loss arising out of a sale of
tonnage tax assets. Any other profits of a tonnage tax entity are subject to the
ordinary taxation regime of the UK. As a final word, it must be mentioned that
provision of training facilities for seafarers is a condition under the tonnage tax
regime, the object of which is to boost national seafaring as a career. This is among
other peculiar factors which include management, the proportion of UK national as
employees in the company and their residency.
5.2 Tax Avoidance and the CFC Rules
The scheme of the Controlled Foreign Corporation (CFC) Rules has been designed
to minimize opportunities for tax avoidance. It is recognized that this is only one
device among others for dealing with tax avoidance in situations where an entity
established in a EU member state has a subsidiary in a foreign jurisdiction which is
controlled by it, and that jurisdiction has a zero tax or low tax regime.
Trade remains the lifeblood of every state aspiring to better its economic condition and shipping is the indisputable vehicle through which international trade is
conducted. Indubitably the situation is not about to change. Shipping incentives are
needed more than ever to boost shipping. Despite the allegations that in fiscal terms
shipping may be deriving an unfair advantage and stealing a march over other
industries, without incentives not only does shipping suffer, but along with it all
allied industries and associated ventures and activities including the plight of the
seafaring profession.
57
A shipping company can, and often does, carry out business through a company
in a foreign jurisdiction which it controls. The foreign company which is usually the
registered owner of a ship or ships entered in the ship registry of that jurisdiction may
be a subsidiary of the parent corporation. The “controlled” foreign corporation may
be incorporated in the foreign jurisdiction or it may be simply registered there
without the need for separate incorporation.
58 In other words, it remains registered
56 Ibid.
57 OJ C 205,5.7.1997, p. 5.
58 Mayr and McGrath (1997), p. 270.
732
Y. Yin