The Norwegian Government has communicated that the Norwegian tonnage tax regime will be continued for another period, but that new restrictions will be implemented as compared with today's regime. The new period will last from 1 July 2017 until 31 December 2026.

Today’s tonnage tax regime has approval from the EFTA Surveillance Authority (ESA) until 1 July 2017. It has now been notified for another period, from 1 July 2017 until 31 December 2026.

It is expected that the proposed legal amendments for the tonnage tax regime will be presented together with the national budget this autumn. However, the amendments will in such case still enter into force as of 1 July 2017, as ESA’s approval of today’s tonnage tax regime expires on this date.

On account of the ESA process and to ensure that the regime will comply with EEA regulations, Norwegian authorities are now notifying a regime with new restrictions. The new restrictions appear from the letter from the Ministry of Finance of 24 May 2017. In the letter, the restrictions are summarised as follows:

  • Chartering vessels out on bareboat terms is limited to 50 per cent of the total tonnage of the group. The strategic management for the tonnage chartered out must take place in the EEA.
  • Chartering tonnage in on time charter and voyage charter terms in vessels not registered in an EEA country is limited to 90 per cent of the total tonnage of the Group.
  • The restrictions on the chartering of vessels will generally not apply to already concluded contracts.
  • Vessels without their own propulsion mechanism will not be allowed in the regime if for the most part they are employed in inland traffic.
Further to the restrictions on chartering vessels out on bareboat terms

Under the current rules, there are no restrictions on chartering vessels out on bareboat terms. In their letter, the Ministry of Finance state that they recognise that the restrictions that will apply to chartering vessels out on bareboat terms will increasingly ensure that shipping remains the core activity within the tonnage tax regime. The following restrictions are proposed in the letter to ESA:

  • Chartering vessels out on bareboat terms is limited to 50 per cent of the total tonnage of the group. This implies that the group will be considered as a whole, and it also expressly appears from the letter that chartering vessels out on bareboat terms within the group will not affect the calculation. The calculation is planned to take place annually, but there will be an exception which allows for tonnage to be calculated over a four-year period.
  • Moreover, the period for chartering vessels out on bareboat terms is limited. A maximum limit of 5 years is proposed, with the possibility of extending for another 3 years.
  • Finally, there is a requirement that the “strategic management” of the vessels chartered out on bareboat terms must take place within the EEA. The term “strategic management” refers to the top management of the company, as carried out by the CEO and the board of directors.

In their letter, the Ministry of Finance emphasise, however, that it is the actual charter which is decisive in terms of whether the new restrictions will apply. Contracts which formally constitute chartering vessels out on bareboat terms, but which actually imply chartering vessels out on time charter terms, will not be covered by the restrictions. This applies typically where the (local) subsidiary of the company chartering the vessels out is in charge of the crew.

In order to encourage companies to adapt to the new restrictions, transitional rules are proposed. The new restrictions will not apply to contracts that have already been concluded and that have a term of 5 years or less (including contracts with the possibility to extend for 3 years).

Further to the restrictions on chartering vessels in on time charter and voyage charter terms

It is proposed that the chartering in of tonnage on time charter and voyage charter terms in vessels not registered in an EEA country should be limited to 90 per cent of the total tonnage of the group. The calculation will be performed annually on group level. A transitional rule has been proposed to the effect that the restrictions will not apply to contracts already concluded.

Windmill vessels

The Government proposed its national budget for 2017 to extend the tonnage tax regime to include windmill vessels carrying out activity relating to the putting up, repair, maintenance and disassembly of windmills. This proposal implies a clarification of the demarcation between windmill vessels inside and outside of the scope of the regime. This amendment has now been notified, and if the extension is approved, it will take effect as early as 1 January 2017.

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