Navigating tax waters : the impact of BEPS pillar two carve-out on income and tonnage taxation in the shipping industry
SONAR|HES-SO
- Jaquemet, Kevin
- Godinet, Sylvain (Degree supervisor)
- Genève : Haute école de gestion de Genève
115 p.
Bachelor of Science HES-SO in International Business Management: Haute école de gestion de Genève, 2024
English
In a context where generating profit margins is difficult, shipping companies are constantly striving to optimize their efficiency, whether it be operational or financial. In this regard, while tax optimization can be perilous, it is a well-known strategy among international structures. Shipping companies are no exception and have, for many years, the opportunity to benefit from tax advantages greater than what other industries dare to hope for.
Through strategic hubs offering significant incentives, including zero or low tax rates on maritime income, shipping companies have the opportunity to maintain competitive prices and manage their tax burdens. Among these methods is the little-known tonnage tax, which has long been employed in certain regimes and at the center of discussions in others. In Switzerland, for example, questions arise regarding tax fairness vis-à-vis other industries.
Fairness is also debated through the GloBE rules of the OECD. Indeed, the BEPS program, which establishes guidelines to tackle tax avoidance, has, in its latest reform, implemented a minimum tax rate of 15% on income for all multinational corporations with turnover exceeding EUR 750 mio. However, an exemption exists for international shipping activities, which constitutes an injustice for some and a boon for the main stakeholders.
The impact of this exemption proves to be tremendous; incomes from shipping activities can continue to benefit from reduced taxation, mostly offered by shipping hubs.
This research, aiming to provide an in-depth analysis of the impact of the BEPS Pillar Two carve-out on maritime taxation, has revealed that tonnage tax, based on the carrying capacity of ships, remains a preferred option compared to traditional taxation for most of the maritime companies or commodity trading groups’ shipping arm. This preference is explained by its predictability and alignment with operational needs, offering a more stable and manageable tax obligation.
Finally, the study has also demonstrated that the adoption of sustainable solutions on vessels, aligned with social and environmental standards, could positively affects the tax burden, thus creating additional incentives for shipping companies to improve their overall impact.
Through strategic hubs offering significant incentives, including zero or low tax rates on maritime income, shipping companies have the opportunity to maintain competitive prices and manage their tax burdens. Among these methods is the little-known tonnage tax, which has long been employed in certain regimes and at the center of discussions in others. In Switzerland, for example, questions arise regarding tax fairness vis-à-vis other industries.
Fairness is also debated through the GloBE rules of the OECD. Indeed, the BEPS program, which establishes guidelines to tackle tax avoidance, has, in its latest reform, implemented a minimum tax rate of 15% on income for all multinational corporations with turnover exceeding EUR 750 mio. However, an exemption exists for international shipping activities, which constitutes an injustice for some and a boon for the main stakeholders.
The impact of this exemption proves to be tremendous; incomes from shipping activities can continue to benefit from reduced taxation, mostly offered by shipping hubs.
This research, aiming to provide an in-depth analysis of the impact of the BEPS Pillar Two carve-out on maritime taxation, has revealed that tonnage tax, based on the carrying capacity of ships, remains a preferred option compared to traditional taxation for most of the maritime companies or commodity trading groups’ shipping arm. This preference is explained by its predictability and alignment with operational needs, offering a more stable and manageable tax obligation.
Finally, the study has also demonstrated that the adoption of sustainable solutions on vessels, aligned with social and environmental standards, could positively affects the tax burden, thus creating additional incentives for shipping companies to improve their overall impact.
- Language
-
- English
- Classification
- Economics
- Notes
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- Haute école de gestion Genève
- International Business Management
- hesso:hegge
- Persistent URL
- https://sonar.ch/global/documents/330869
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