Tax Treaty Deters Shipowner From Using NIS Flag

by Ulrika Lomas, Tax-News.com, Brussels

06 October 2010

Seatrans, a Bergen based shipping company, is planning to reflag nine chemical tankers and one paper carrier to Malta by the end of the year, by which time its Polish crew members would have been required to pay Polish income tax if they continued to work on Norwegian flagged vessels under the terms of the latest tax treaty between Poland and Norway.

The ships have been registered up to now with the Norwegian International Register (NIS). However, more than 40% of Seatrans’s 435 seafaring employees are Polish, and many of them are masters or chief engineers. The company claims that its chemical tankers could not operate without them. Some of the company’s fleet of 21 vessels already sail under Singapore, Bahamas and Liberian flags and crews operating these are unaffected by the tax treaty requirements.

The tax treaty was negotiated by the Norwegian finance ministry without consulting Norwegian shipowners, Lloyd’s List reported Seatrans director Atle Sommer as saying, and later talks between shipowners and the ministry did not succeed in having the onerous clauses in the treaty amended.

Despite attempts by the Norwegian government to gain favour with the shipping industry, it has been an uneasy year; a shipowners’ lawsuit earlier this year over transitional arrangements for the new tonnage tax would have left Norwegian shipping companies with a USD3.6bn bill in back taxes, if the government’s proposals had not been deemed unconstitutional by Norway's Supreme Court.

More recently, Norwegian shipping magnate, John Fredriksen, reflagged all his Norwegian ships to the Marshall Islands, citing tax reasons. Fredriksen, said to be Norway’s richest man, claimed that his Norwegian shipping activities generated annually NOK 6bn (USD1bn) in tax revenues, but he was given little credit for it.

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