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I. A checklist for application of the special tax regime regarding labour force taxes (Seafarers Scheme)
 

Prerequisites:
1) the tax liability arises in Estonia;
2) instead of the usual tax regime, the employer opts for the application of the special tax treatment.

Conditions for undertakings to receive State aid:
1) the State aid recipient shall not be an undertaking in difficulty within the meaning of Guidelines on State aid for rescuing and restructuring non-financial undertakings in difficulty established by the European Commission;
2) the State aid recipient shall not have failed to perform the obligation to repay the State aid declared illegal and incompatible with the internal market on the basis of the decision of the European Commission.

Conditions to be met by ships in order to be eligible:
1) the GT of the vessel on which the crew member works is at least 500;
2) the ship flies the flag of an EEA Contracting State;
3) the vessel is:
a) a cargo ship
b) a passenger ship engaged in regular service outside the EEA
c) a dredger or a tugboat, and the requirements set out in § 13 (6) of the Income Tax Act are fulfilled;
4) the vessel is used for international maritime transport.

The carriage of goods and passengers by sea shall be deemed international if more than 50% of the port calls within a calendar year take place between:
1) an Estonian port and a foreign port;
2) an Estonian port and a facility located outside the territorial sea of Estonia;
3) the ports in a foreign country or in foreign countries;
4) a foreign port and a facility located off the shore.

Additional information:
- State aid is applicable only to the activity of carriage of goods and passengers by sea, while the usual tax regime is applied to the other activities of the enterprise;
- State aid can be applied to dredgers and tugboats only on the condition that more than 50% of the operational time of the vessel within a calendar year is spent in carrying out maritime transport.


II. A checklist for application of the tonnage tax scheme by the operator of the vessel


Prerequisites:
1) the tax liability arises in Estonia;
2) the operator (shipping company) wishes to apply the tonnage tax scheme instead of the usual tax regime.

Conditions for undertakings to receive State aid:
The operator of the ship meets the following conditions:
1) the strategic, business and technical management decisions related to the operation of the ship are made in Estonia;
2) the decisions related to the management of the crew are made in an EEA Contracting State;
3) it is not an undertaking in difficulty within the meaning of Guidelines on State aid for rescuing and restructuring non-financial undertakings in difficulty established by the European Commission; and
4) it has not failed to perform the obligation to repay the State aid declared illegal and incompatible with the internal market on the basis of the decision of the European Commission.

Conditions to be met by vessels in order to be eligible:
1) the GT of the vessel used for international maritime transport is at least 500;
2) at least 60% of the gross tonnage of the ships included in the calculation of the tonnage scheme and used by a resident company or by the company and the undertakings belonging to the same group as the company, including all towage and dredging vessels, are registered under the flag of an EEA Contracting State;
3) at least 25% of the gross tonnage of the ships used by a resident company or by the company and the undertakings belonging to the same group as the company must be owned by the company or the company and undertakings belonging to the same group as the company or used by them on the basis of the bareboat charter party;
4) the vessel is:
    a) a cargo ship
    b) a passenger ship engaged in regular service outside the EEA
    c) a dredger or a tugboat, and the requirements set out in § 521 (11) of the Income Tax Act are fulfilled.

5) the vessel is used for international maritime transport.


Additional information:
State aid is applicable to the following activities (in respect of other activities, the undertaking is subject to the usual tax regime):
a) Core activities of international carriage of goods or passengers by sea:
    1) carriage of goods or passengers for a fee;
    2) granting cabins for use for a fee;
    3) sale of food and drinks for immediate consumption on board;
    4) granting a ship for use for a fee on the basis of a charter party (hereinafter chartering out), except chartering out on the basis of a bareboat charter party.
b) Ancillary activities of international carriage of goods or passengers by sea (if income received from the ancillary activities does not exceed 50% of the income received from the activities of international carriage of goods or passengers by sea of a ship complying with the conditions of clause 13 (5) 1) or subsection 13 (6) of the Income Tax Act) are:
    1) provision of services or sale of goods, usually on passenger ship, provided that these activities are directly related to the carriage of passengers by sea;
    2) salvage;
    3) loading, unloading and securing of cargo if these activities are carried out by crew members of a resident company;
    4) granting containers or other tanks for use for a fee;
    5) renting out a space on board to a seller of goods or a provider of services;
    6) granting an advertising space on board for use for a fee;
    7) mediation of sightseeing during a voyage to a passenger on a ship, provided that the passenger’s cabin remains in his/her use.
c) Other activities related to international carriage of goods or passengers by sea:
    1) crew or technical management of a ship;
    2) chartering out a ship on the basis of a bareboat charter party to an undertaking in a Contracting State which belongs to the same group as the company;
    3) chartering out a ship on the basis of a bareboat charter party, provided that:
- the reason for chartering out is the excess capacity of the tonnage of a ship temporarily not used in business by a resident company due to other reasons than purchasing or chartering a ship for the purpose of chartering it out;
- the ship is chartered out for no longer than three years;
- the chartering out does not exceed 50% of the gross tonnage of the ships used by the resident company and included in the calculation of the tonnage scheme.
- State aid is applicable to activities carried out with a dredger or a tugboat outside the port and the territorial sea of Estonia only if more than 50% of the operational time of the dredger or tugboat within a calendar year is spent in maritime transport, and only in respect of such transport activities.


III. A checklist for application of the tonnage tax scheme by the ship management company


Prerequisites:
1) the tax liability arises in Estonia;
2) the ship management company (provider of crew management service or technical management service) wishes to apply the tonnage tax scheme instead of the usual tax regime.

Conditions for undertakings to receive State aid:
The ship management company meets the following conditions:
1) it is not an undertaking in difficulty within the meaning of Guidelines on State aid for rescuing and restructuring non-financial undertakings in difficulty established by the European Commission;
2) it has not failed to perform the obligation to repay the State aid declared illegal and incompatible with the internal market on the basis of the decision of the European Commission;
3) the provider of the crew management service makes management decisions in Estonia and fully adheres to and applies all the requirements of the Maritime Labour Convention of the International Labour Organization;
4) the provider of the technical management service makes management decisions in Estonia, has taken over the liability for managing the maritime safety and technical service of the ship and has a corresponding certificate;
5) all the ships and crews managed by the service provider comply with international standards and requirements arising from the law of the European Union related to the maritime security and safety, training and certification of seafarers, environmental conservation and working conditions on a ship;
6) the service provider has at least one crew manager and four other employees to manage crews of up to ten ships and at least two crew managers and eight other employees to manage crews of more than ten ships;
7) the service provider has at least one technical manager and four other employees for technical management of up to ten ships and at least two technical managers and eight other employees for technical management of more than ten ships;
8) at least 51% of the employees specified in the last two clauses are citizens of a Contracting State.

Conditions to be met by vessels in order to be eligible:
1) the GT of the vessel managed is at least 500;
2) at least 60% of the gross tonnage of the ships included in the calculation of the tonnage scheme and used by the company and the undertakings belonging to the same group as the company, including all towage and dredging vessels, are registered under the flag of an EEA Contracting State;
3) the vessel is
    a) a cargo ship
    b) a passenger ship engaged in regular service outside the EEA
    c) a dredger or a tugboat, and the requirements set out in § 521 (11) of the Income Tax Act are fulfilled;

4) the vessel is used for international maritime transport.

Last updated: 9 October 2020