Greece introduces amendments to the taxation of ships
Evgenia Kousathana of EY Greece summarises the key changes in the shipping industry that the Greek government introduced through L. 4646/2019.
In the context of the tax reform introduced by L. 4646/2019 to most areas of the Greek tax legislative framework, significant shipping taxation amendments have also entered into force as of January 1 2020.
Under the new shipping tax law provisions, the Greek tax legislator has also expanded the tonnage tax regime to bareboat chartering and ship leasing by amending Article 25 of L. 27/1975. This provides the legal framework for the establishment of offices and branches of foreign shipping companies in Greece through the introduction of two new articles (26B and 26C) to L. 27/1975.
In particular, for tax years as of January 1 2020, offices of foreign enterprises dealing with the representation of bareboat charterer or ship lessee companies, now explicitly fall within the scope of the tonnage tax regime. In addition, the rights and obligations arising from the exploitation of ships under the tonnage tax regime have been extended to bareboat charterer companies and ship lessees, as well as their ultimate shareholders, up to the level of the private individual shareholder.
As a result, starting January 1 2020, the payment of tonnage tax exhausts any further tax liability with respect to any tax, tax duty, contribution or withholding for foreign-sourced income arising from the ship’s exploitation, for the shipowner company, as well as the bareboat charterer company, the ship lessee company or the company owning the ship with a foreign flag (which is administered or exploited by a Greek L. 27/75 ship management company).
However, ship leasing companies are explicitly excluded from the application of tonnage tax regime.
With respect to the payment of tonnage tax, the management companies are jointly liable for the payment of the tax, alongside the ship owning companies or the bareboat charterers, or the ship lessees that granted them the relevant management and administrative rights. In cases of more than one company established in Greece in accordance with L. 27/1975, managing the ship, they are all severally liable for the payment of the tax.
In addition to the above-mentioned changes, the provisions of L. 791/1978, regarding the criterion of the statutory (and not of the real) seat, were also amended, so as to be applicable to bareboat charterers or ship lessees, as well. Therefore, the seat of bareboat charterers or ship lessees is defined by reference to their articles of association.
By virtue of these amendments, the tax treatment of the income arising from the ship’s exploitation, irrespective of the existence of the ship ownership rights, have been harmonised. This approach is aligned with the developments in the shipping industry, since bareboat chartering and ship leasing are long established ways of ship exploitation.