Global maritime news: all you need to know for Q1 2023

The shipping sector has navigated numerous changes across multiple regions and jurisdictions. So, what’s new? Join us as we sail you through all the latest updates!

In the 2023 Budget Law, the Luxembourg government changed the annual filing deadline from 31 March to 31 December for all individual tax returns, as well as corporate income tax, municipal business tax and net wealth tax returns. For individual, corporate and municipal business tax this change applies for FY 2022, and FY 2023 for net wealth tax.

What could this change in deadline mean? Potentially that the 31 December deadline will be much stricter, with possible automatic late-filing penalties if the deadline is missed. 

On 15 December 2022, the Council of the EU reached a unanimous agreement to implement the EU Minimum Tax Directive. 

The agreed compromise text (PDF, 2.5MB) (25 November 2022) requires member states to transpose the rules into domestic law by 31 December 2023 and to start applying the Income Inclusion Rule (IIR) for fiscal years beginning on or after 31 December 2023. The Undertaxed Profits Rule (UTPR) will be applied for fiscal years beginning on or after 31 December 2024. 

In addition, the agreed compromise text provides the option for member states with a maximum of 12 UPEs to implement a qualified domestic minimum top-up tax (QDMTT) and to defer the IIR and UTPR applications to 31 December 2029.

Details surrounding the transposition of a directive like this in Luxembourg are still not clear, particularly when it comes to shipping exclusion in a country that does not have a tonnage tax system and it remains to be seen how Pillar 2 will affect the Luxembourg investment tax credit. 

In December 2022, negotiators at the EU Council and Parliament reached a provisional agreement on the Carbon Border Adjustment Mechanism (CBAM). 

CBAM is part of the EU Green Deal / Fit for 55 package — the EU’s plan to reduce greenhouse gas (GHG) emissions by at least 55% by 2030 compared to 1990 levels. CBAM targets imports of products in carbon-intensive industries. In compliance with international trade rules, CBAM’s objective is to prevent GHG emission reduction efforts by the EU from being offset by increasing emissions outside its borders as a result of production relocation to non-EU countries (where policies applied to fight climate change are less ambitious than those of the EU), or increased imports of carbon-intensive products.

CBAM is designed to function in parallel with the EU’s Emissions Trading System (EU ETS), to mirror and complement its approach to imported goods.

So, what does the provisional agreement say?

• Implementation: The EU CBAM would be gradually implemented starting with a transitional phase from 1 October 2023 onwards where affected organizations/importers will only be required to fulfill reporting obligations. The aim for this first phase is to collect data. From 2026, financial obligations will take effect and importers will have to start purchasing CBAM certificates. It would be phased in gradually, in parallel to a phasing out of the free allowances under EU ETS (which still needs to be agreed).
• Scope: CBAM covers imports of goods from six emissions-intensive sectors: electricity, iron and steel, cement, aluminum, fertilizers and hydrogen. Indirect emissions (under certain conditions), certain precursors, as well as some downstream products (e.g. screws, bolts and similar articles in iron or steel) also feature in CBAM’s scope. Watch this space for a detailed list of products.  
• Review: By the end of the transitional period (i.e. before 2026), CBAM will be reviewed to assess whether to extend the scope to other goods including organic chemicals and polymers. The ultimate aim is that all goods covered by the EU ETS will be included in CBAM’s scope by 2030. The review will also include an assessment of the methodology for indirect emissions and the possibility to include more downstream products.
• Governance: CBAM governance will be now more centralized, with the Commission in charge of the majority of tasks.

This provisional deal is dependent on an agreement on the reform of the EU ETS, concerning the treatment of exports and the reduction in free allowance allocations. The EU Council and Parliament will have to formally approve the agreement before the new law can come into force which will be 20 days after its publication in the EU Official Journal.

In February 2023, the EU List of non-cooperative jurisdictions for tax purposes (or EU blacklist) was updated. Four countries (with strong ties to maritime companies with offshore structures/ships) were added to the blacklist :

• British Virgin Islands
• Costa Rica
• Marshall Islands
• Russia

The blacklist now includes 16 countries:

• American Samoa
• Anguilla
• Bahamas
• British Virgin Islands
• Costa Rica
• Fiji
• Guam
• Marshall Islands
• Palau
• Panama
• Russia
• Samoa
• Trinidad and Tobago
• Turks and Caicos Islands
• US Virgin Islands
• Vanuatu

It is important for taxpayers to keep an eye on this list in light of defensive measures that are being applied by EU Member States against listed jurisdictions — for example, non-deductibility of costs, CFC rules, increased WHT or limitation of participation exemption.

More details can be found in KPMG’s summary (PDF, 3MB) of defensive measures against non-cooperative jurisdictions for tax purposes.

The EU blacklist is also relevant for the purposes of the EU mandatory disclosure rules under DAC6, where recipients of cross-border payments are residents for tax purposes in a jurisdiction that is included in Annex I. Under Hallmark C1b(ii)) of DAC6, such payments may trigger a reporting obligation irrespective of whether the transaction is aimed at generating a tax benefit (i.e. the main benefit test does not apply). Get more information on DAC6 reporting requirements here.

The EU blacklist has a direct impact on EU public Country-by-Country Reporting (CbCR) obligations that generally apply in relation to financial years starting on or after 22 June 2024. Based on the EU Public CbCR Directive, relevant data points should be made publicly available on a country-by-country basis for each EU member state. Furthermore, country-by-country information must be separately reported for each jurisdiction listed on Annex I of the EU blacklist or for each jurisdiction that has been on the grey list (Annex II) for a minimum of two years (i.e. as opposed to disclosure of aggregated amounts, which is the requirement for the rest of non-EU jurisdictions). Access more information on EU Public CbCR here.

An evaluation report including six key findings that address the parliamentary questions raised previously was published by the Dutch Lower House of Parliament drafted by Mark Harbers, Minister of Infrastructure and Water Management.

The most important consideration is the level playing field that the measures should create for the Dutch maritime sector in the European and global market in which ships operate. As other countries have tighter tax regulations, the level playing field for Dutch shipping companies is coming under pressure. A key focus of the report is the consideration of possibly extending the regulations to ship types other than cargo-carrying vessels (e.g. offshore working vessels for wind farm construction). According to the decision memorandum, there is currently no budget for an extension, but considerations — including non-tax related ones — to make the Dutch register more attractive can be discussed with the maritime sector.

On 1 November 2022, the government presented a draft legislation to the Lower House of Parliament that introduces a temporary solidarity contribution on the 2022 profits of companies engaged in crude oil, natural gas, coal and petroleum refining activities. This legislative proposal has been enacted and applies the solidarity contribution retroactively for 2022. For 2023 and 2024, the temporary 65% “windfall profit tax” on sales of natural gas – as proposed in the memorandum of amendment to the Tax Plan 2023 — would apply. Don’t miss last year’s KPMG update and a closer look at the windfall tax bill (PDF, 0.5MB).

The Belgian legislation on various tax provisions has introduced a tightening of the tonnage regime insofar as it includes payments made directly or indirectly to taxpayers, permanent establishments or bank accounts in countries classified as tax havens. This legal amendment entails a reporting obligation, and may sometimes (including in cases of non-reporting) lead to an increase in the fixed taxable amount under the tonnage regime (unless a rebuttal provision can be successfully invoked).

This new tax could have far-reaching consequences for companies established in Belgium that derive taxable profits from maritime shipping and receive financing from specific jurisdictions. 

The draft legislation on the revised foreign-sourced income exemption (FSIE) regime in Hong Kong SAR and its subsequent amendments proposed by the government were passed by the Legislative Council on 14 December 2022.

The FSIE regime will be effective from 1 January 2023. 

• The Greek government has proposed to increase the tonnage tax surcharge and Greek Merchant Seamen’s Pension Fund (NAT) special levy for Category A vessels from 4% to 6% for 2024 and 2025.
• Greece reduces voluntary contribution rate on shipping dividends and broadens base to include capital gains. The ratified agreement is included in bill 5000/2022 (PDF, 2MB), which was published in the Official Government Gazette. 

The Dominican Republic modified (by decree) the taxation of companies involved in the re-export of fossil fuels and hydrocarbons via cargo ships and aircraft. The decree is effective from 1 May 2022. The modifications include:

• US$0.22 tax rate per barrel on gasoline and diesel, up to US$500
• US$0.09 tax rate per terameter of liquefied petroleum gas (LPG), up to US$500
• US$0.02 tax rate per British thermal unit on natural gas, up to US$500
• US$0.05 tax rate per barrel on petroleum bitumen, up to US$500
• the procedure for physical review and inspection by the Customs Authority (DGA). 

The term ‘Green Freeports’ reflects the Scottish Government’s specific net-zero aspirations. The UK government will continue to use the term ‘Freeports’ for its program in the rest of the UK.

The Scottish government will support the significant tax reliefs that will be made available to Green Freeports through devolved tax levers, including rates relief. HMRC will also provide support via reserved levers including enhanced tax allowances, Employers National Insurance relief and customs duty reliefs. Learn more.

The Forth Green Freeport bid aspires to deliver up to an additional 50,000 jobs across the UK, generating GBP6 billion in investment and contributing over GBP4 billion in GVA across sites in Grangemouth, Rosyth, Leith, Burntisland and Edinburgh Airport. Its activities will focus on renewables, advanced manufacturing, alternative fuels, carbon capture utilization and storage, shipbuilding, logistics and creative industries.

The Inverness and Cromarty Firth bid aims to build a world-beating floating offshore wind manufacturing sector, with sites in the Cromarty Firth, Invergordon, Nigg and Inverness. It expects to create up to 25,000 new jobs and attract GBP2.6 billion in inward investment. In addition to offshore wind manufacturing, it will focus on green hydrogen and the creation of a new innovation cluster.

The bidding prospectus set out the requirements for applicants as well as the assessment and selection process. The Scottish government will publish more information on the outcome of the assessment and selection process in due course. 

The draft legislation of the tonnage tax regime will now be considered by the Council of States, which is expected to take place in 2023.

Get a closer look in this January 2023 report by the KPMG’s Switzerland member firm.

This blog post is adapted from a newsletter prepared by our Dutch colleague and tax lawyer Ernst-Jan Bioch.

Marie-Sara Pages, Manager, Commerce & Industry at KPMG Luxembourg and Member of the Luxembourg Maritime Cluster.

Henri Prijot, Tax Partner, Commerce & Industry at KPMG Luxembourg and Board Member of the Luxembourg Maritime Cluster.