LOGBOEK   - JOURNAL DE BORD

Dutch tax concessions stimulate growth

Similar to many areas in Europe, since the mid 1990s, the Dutch government has targeted the maritime cluster as an area for growth.

With the growth of Rotterdam and to a lesser extent Amsterdam as major world ports, a huge service industry has grown up in Holland. The Dutch were large shipowners until the advent of the high European cost regime in the 1960s and 1970s, which led to a move away to more 'accommodating' countries.

While the Netherlands retained its strength in coastal and inland shipping, it lost most of its deepsea fleet. However, several companies now have operations and management divisions in Holland, including Stolt Nielsen, Odfjell plus others.

This is mainly because most of their fleets call regularly at Dutch ports, so can easily be accessed by the shore staff. Holland is also the home to the Paris MOU Port State Control organisation and much of Shell and Unilever, apart from having one the world's largest ports.

According to official statistics there are 11,800 maritime related companies in Holland creating Eur10.6 bill in added value.

They in turn support nearly 200,000 jobs.

The Dutch register has undergone something of a resurgence, since the new shipping policy came into effect in 1996.

The revamped Dutch tax system has many features that make the Netherlands an attractive location for businesses. Important elements include the treatment of profits, the participation exemption, the absence of withholding taxes on outgoing royalties and interest, and the large number of bilateral tax conventions that the Netherlands concluded with other countries.

Corporation tax on business profits is 34.5% (29% on the first Eur22,689 of taxable profits). The profits must be determined according to sound business practice and consistent accounting methods. The government claimed that this system allowed for a profit determination that is best fitted to a company's circumstances.

The Dutch tax system is unusual in that advance agreements can be made with the tax inspector with regard to the determination of taxable profits. The tax authorities are also usually willing to issue advance opinions on the application of Dutch tax law on other matters than taxable profits.

For example, among them is the question of the valuation of assets to be transferred to the Netherlands. Business people therefore know where they stand even before commitments are made, the government said.

One of the pillars of the Dutch Corporation Tax Act is the 'participation exemption'. This exemption was prompted by the desire to protect companies from double taxation in the event that a subsidiary channels its profits back to the parent company.

To prevent double taxation on other sources (income from labour, net wealth, inheritance and gifts or on profits) in case the participation exemption does not apply, the Netherlands concluded bilateral conventions for the avoidance of double taxation with some 60 countries.

The double taxation conventions apply both to residents of the Netherlands and to those countries bound by the treaty.

 

Maritime tax climate

Until some years ago the Netherlands was regarded as being expensive in a world where taxation for maritime activities was low, resulting in many shipping companies deciding to set up their business elsewhere.

In order to reverse this trend, and to make the Netherlands more attractive, competitive and profitable for shipping companies, a number of important changes in the fiscal laws were introduced on 1 st January 1996.

Since then tax on profits from shipping activities under Dutch fiscal law now offers shipping companies a choice between either the regular system of taxation on the basis of actual profits made, or a lump sum taxation based on the net tonnage of the ships operated by the shipping company, regardless of the actual profits made. The flag under which the ships sail is also immaterial. However, once made, the choice cannot be changed for a period of 10 years.

If the regular system is chosen, the shipping company can make use of an accelerated depreciation of 20% per year for sea-going vessels. The condition is that taxable profits from the exploitation of sea-going vessels can compensate the accelerated depreciation.

On the question of seafarer wages, the tax concessions over and above the corporate tax option offered to the owners offer another bonus, which can yield considerable savings to shipowners in wage costs irrespective of the crew's nationality.

In order to apply for this tax concession the crew must be signed up to a ship sailing under the Dutch flag and the shipowner must be obliged to withhold Dutch wage tax and/or social security premiums on the salaries paid to the crew (PAYE). The advantages offered by this concession do not affect the wages received by the crew, and the entire benefits accrue to the company.

It works like this - The shipowner or employer still transfers the PAYE tax to the Dutch treasury, but this amount is reduced by 40% of the fiscal income of the master, the officers and the ratings who are liable to Dutch wage tax.

The government gave an example, but said that the actual figures depend on the specific circumstances of the personnel involved.

A seafarer resident in the Netherlands earns Eur45,378 gross, over which about Eur15,882 PAYE tax would normally be due. The employer (shipowner) withholds this sum. The reduction to which he is entitled in this instance is 40% of Eur45,378 (Eur18,151).

Since the reduction may not be greater than the tax assessment itself, the actual reduction is Eur15,882. In other words, the shipowner is not liable for any PAYE tax for this employee at all. The 'remaining' Eur2,269 of tax reduction can be used to lower the PAYE tax of other personnel liable within the same company to Dutch wage tax and/or social security premiums.

Labour costs

As a result, the labour costs for seafarers resident in the Netherlands are reduced by about 30%. For seafarers that are only liable to Dutch social security premiums (thus not for wage tax), 10% of the fiscal income can be deducted from the PAYE tax bill. This applies to seafarers who are not domiciled in the Netherlands and the applicable social security treaty stipulates that Dutch social security premiums have to be paid.

The total deduction may not exceed the total amount of wage tax and/or social security premiums that should be withheld by the shipowner for all his employees (including shore staff) in the Netherlands.      TO  

“ The Dutch tax system is unusual in that advance agreements can be made with the tax inspector with regard to the determination of taxable profits.      ”

 

Dutch growth

 

Through August and by the end of September, Netherlands controlled shipping companies ordered another 23 vessels, on top of the 390 inked in previously. Thus, as of 27 September 2007, a total of 413 ships were on order for Dutch account at yards worldwide.

Nearly 40% of the newbuildings for the Dutch are on order from domestic yards (158 ships).

The total gross tonnage of the current Dutch fleet exceeds 3.1 mill and total deadweight is over 9.4 mill tonnes. There are nearly 170 shipping companies in the Netherlands.The largest five are Wagenborg Shipping, Seatrade Groningen, Vroon, Spliethoff and Feederlines, who together control 323 ships.

Elsewhere, the wholly-owned subsidiary of Norway's Stolt­Nielsen, Stolt-Nielsen Transportation Group, is Netherlands based and manages nearly 60 vessels, which would give it third place.

The total gross tonnage and deadweight on order for all Dutch shipowners is over 2.4 mill and 4.1 mill, or 77% and 43% of the existing fleet respectively.

About 85% of the buildings on order for Dutch concerns will fly the Dutch flag, while 5% will fly the Cypriot flag, UK (3%) and Netherlands Antilles (2.2%).

The remainder will be registered in Vanuatu, United Arab Emirates, Cayman Islands, Antigua & Barbuda, Panama, Marshall Islands, and Italy.

Although tankers do not feature highly, compared with the heady days of Royal Dutch Shell, there are 42 tankers on order and around 160 in service in the Dutch fleet.

Among the companies owning tankers flying the Dutch flag are Brostrom, Broere, Clearwater, Anthony Veder, Jo Tankers, Koole Tanktransport, Tarbit and Erik Thun. Despite managing its vessels from Rotterdam, Stolt Nielsen has no vessels under the Dutch flag except inland waterway barges. Broere is now a subsidiary of Hamburg-based Essberger group.

A newcomer to Dutch shipping, Farmsum-based Management Facilities Group and its shipman­agement subsidiary Marin Ship Management, will take delivery of five oil and chemical tankers.

Two will be of 7,100 dwt each, while the other three will be of 17,000 dwt. The larger tankers are in the final stages of being built at a Turkish shipyard. The tankers will fly the Dutch flag.

Boasting a fleet of 50 vessels including oil, chemical and multi­purpose vessels, mainly trading in northern Europe and the Mediterranean, the company recently said that its aim was to grow to 60 by 2012.

The group used to be just a shipmanagement and crewing office. It now consists of three independent divisions, responsible for the entire management of the group, including supporting newbuilding, crew management, and technical and financial management. They are Marin Ship Management and Flagship Management Company.

A classic example of a traditional Dutch shipping company which is still in operation is the Anthony Veder Group Veders’ Netherlands Antilles subsidiary manages the gas ships, giving them the prefix 'Coral' after the Caribbean coral reefs.

Expansion of the gas tanker fleet occurred during the 1970s and 1980s, including the introduction of the company's first ethylene carrier in 1989. In 1994 it was back to the core business with a full focus on gas shipping. Fleet expansion included five newbuilding gas tankers from China plus secondhand purchases.

In 1999, the Rotterdam-based group took delivery of the world's first CO2 tanker and last year ordered its first combined LNG/LPG/Ethylene carrier.

The multi-purpose 7,500 cu m capacity gas carrier will be built by Polish shipyard Remontowa and will enter a long term charter contract with Gasnor of Norway when delivered during the fourth quarter of 2008. TO