A tonnage tax scheme was established for shipping companies, as an alternative system to the standard corporate income taxation in Estonia. The standard corporate income taxation system is a system of deferred taxation - if profits are not distributed, no tax obligation arises.
The aim of the seafarers’ labour taxes scheme is to reduce fiscal costs of shipping companies and seafarers. The personal income tax rate for seafarers working on ships covered by the special tax treatment will be of 0% and the social tax paid by the employer will be set at 20% and only on a tax base of up to 750-euro, instead of on the actual earnings.
Following the reform, a separate register of bareboat chartered ships was created for companies that do not have a place of business in Estonia.
The special regimes encourage ship registration in Estonia to benefit from high digitalization level, i.e. the electronic ship registry, digital signature and e-residency program.
Article first published in AIJA October 2020 newsletter: https://bit.ly/3dP2cpK