The Portuguese tonnage tax and seafarer scheme was approved by the European Commission on 6 April 2018. This was in line with EU State aid rules, in particular the Guidelines on State aid to maritime transport. The Portuguese measures will enhance the competitiveness of the Portuguese shipping sector. Simultaneously, they will protect know-how and jobs in the EU maritime transport sector.
The law proposal had been presented by the Portuguese Government to Parliament before this date, and enactment is anticipated in the near future.
Portuguese Tonnage Tax System: Eligibility
The tonnage tax is not a tax but rather a means to determine relevant taxable income.
Entities liable to corporate income tax, carrying out eligible shipping activities, with a registered head office or place of effective management in Portugal, may opt to be taxed under this new tonnage scheme.
Application to the tonnage scheme will be subject to certain legal requirements as follows:
- at least 60% of the respective net tonnage must fly a flag of a European Member State (EU) or an Economic European Area State (EEA) and be managed from an EU or EEA State;
- in terms of chartering, the net tonnage of the ships under a charter cannot exceed 75% of the total fleet of the charterer and must comply with the flag and management requirements detailed above;
- at least 50% of the crew of the relevant ships must be nationals from EU, EEA or Portuguese-speaking countries, except for very limited exceptional cases.
Tax Details: Portuguese Tonnage Tax Regime
Taxable income is calculated as a lump sum, depending on the size (net tonnage) of the ships, independent of the actual earnings (profit or loss), as per the schedule below:
|Net Tonnage||Daily taxable income for each 100 net tonnes|
|Up to 1,000 net tonnes||€ 0.75|
|1,001 – 10,000 net tonnes||€ 0.60|
|10,001 – 25,000 net tonnes||€ 0.40|
|Over 25,001 net tonnes||€ 0.20|
The tonnage tax can be applied to a shipping company’s:
- core revenue from maritime transport activities, such as cargo and passenger transport;
- certain ancillary revenue closely connected to shipping activities (which is capped at a maximum 50% of a ship’s operating revenue); and
- revenue from towage and dredging, subject to certain conditions.
For more environmentally-friendly ships, companies can achieve an additional reduction of 10% to 20% of tax under the tonnage tax scheme.
Taxable profit assessed, as per the above schedule, is then subject to the standard rate of 21% corporate income tax (municipal surtax and state surtax also apply). No deductions can be offset against the taxable profit assessed under this scheme.
The proposed tonnage tax regime will be optional. However, participation in the scheme must be for a minimum 3 years, if commenced within the first 3 fiscal years of the introduction of the tonnage regime. After this initial period, subsequent participation must be for a minimum 5 years.
Scheme to Support Crew
The scheme exempts crew members employed on vessels eligible under the tonnage tax regime from paying personal income tax (IRS). A minimum of 90 days on board the vessel is required in each tax year, as well as meeting a number of other conditions.
The new scheme also allows the crew to pay reduced social security contributions; total rate of 6%, 4.1% paid by the employer and 1.9% by the member of the crew.
MAR – Madeira International Shipping Register
MAR is the fourth largest EU international shipping register. Ships registered with MAR qualify for the tonnage scheme. Madeira is an integral part of Portugal. In other words, Companies registered there enjoy a number of tax benefits which are guaranteed until at least the end of 2027.
MAR also permits bareboat charter registration. Therefore, MAR is very likely to be the preferred option for ship owners wishing to reflag their fleet in order to benefit from this new tonnage system.
In addition, the Madeira International Business Centre, of which MAR is a part, also offers several tax advantages to shipping companies, which can be combined with the benefits of this new scheme.