EC Approves Tonnage Tax Regime For Lithuania

by Ulrika Lomas, for LawAndTax-News.com, Brussels

21 July 2006

The European Commission on Wednesday approved the introduction of a tonnage tax system, whereby taxable entities in Lithuania engaged in international transportation by ship or a directly related activity can change the tax base for their operating profits.

Companies fulfilling certain criteria may opt for a “tonnage tax” for the taxation of their profits from international maritime traffic. The tax will be calculated according to the net tonnage of their fleet, instead of the normally applicable corporation tax.

The authorised scheme will run from January 2007 for 10 years, and is expected to cost up to EUR0.6 million a year.

The measure is designed to stimulate the Lithuanian shipping sector, as ship-owners will pay a lower level of tax for vessels registered in any EU/EEA Member state.

The Commission considers that this scheme complies with Community rules, and has approved it in the context of its maritime policy, which aims at maintaining the Community fleet and preserving employment of EU staff both on-board and on shore.

The measure will decrease flagging-out of the EU maritime fleet, thereby retaining employment and maritime know-how in Europe.

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