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Taiwan To Change Its Maritime Transport Taxation

Monday, February 15, 2010

Taiwan’s government has approved a provision within the income tax law that would allow shipping companies engaged in international maritime transportation to change the basis of their taxation.

The government believes that, once implemented, the new tax provision would be highly beneficial to large shippers and could be expected to encourage vessels to re-register in Taiwan, as well as to stimulate the development of ship maintenance and other connected industries.

The provision would allow Taiwanese companies to re-base the taxation of their marine transport income, from the normally applicable corporate income tax, to a lump sum tax calculated on the tonnage of their fleet.

The draft bill sent to the parliament divides the tonnage tax into four brackets. For ships with a net tonnage of 1,000 tons or less, assumed profit would be fixed at TWD57 (USD1.80) per 100 tons per day; for ships with a net tonnage of 1,001 to 10,000 tons, daily assumed profit per 100 tons would be TWD42; for ships of 10,000 to 25,000 tons, it would be TWD27; and for ships over 25,000 tons, it would be TWD12.

In regard to the applicability of the tonnage tax, the government is also discussing the setting of a ratio of the tonnage of Taiwan-registered ships owned by a shipping company to the total tonnage of all ships under the company’s ownership, as the threshold of applicability.

Shipping companies that qualify would be able to choose between corporate income tax or the tonnage tax. Once the choice was made, however, it would be binding for 10 years. In addition, shipping firms that choose to enter the tonnage tax regime would not be eligible to apply offsetting between profits and losses or other tax incentives.