On April 5, 2016, the Council of Ministers accepted the Minister of Finance’s draft Act on development of shipbuilding and related industries (hereinafter: „the draft Act”). The new legislation is expected to enter into force as of 1 January 2017.
Below we present the most important amendments introduced by the draft Act to the existing tax regulations.
The taxpayers whose business activity consists in the construction of new ships and reconstruction of existing ships would have an option between the CIT and the flat rate sales value tax.
The construction of a ship and its completion, as well as the reconstruction of a ship and its completion by the taxpayer will be confirmed by a certificate issued upon the taxpayer’s request by the Director of Maritime Office or the Director of Inland Navigation Office.
The tax base of the flat rate sales value tax will be calculated based on the revenue arising from the construction or reconstruction of ships. Such revenue shall be treated separately from other sources of revenues, which are taxed in accordance with other Acts on taxation of income.
The rate of the proposed flat rate sales tax shall be equal to 1 per cent of the tax base. In order to opt for the flat rate sales value tax, the taxpayer will be required to submit a relevant declaration. Such a declaration will need to be sent not later than on January 20 of the fiscal year, in which the taxpayer carries on shipbuilding or ship reconstruction activities. In cases where the taxpayer commences shipbuilding or ship reconstruction activities during the current fiscal year, the deadline for such declaration shall be the day preceding the date of the commencement of those activities.
The taxpayers who opted for the flat rate tax will be subject to this form of taxation for the period of 3 fiscal years. In this period the taxpayer will not be entitled to resign from this form of taxation.
The taxpayers will be obliged to calculate the value of the flat rate tax due for each month of the fiscal year and settle it by the 20th day of the following month. The amount due for the month of December shall be settled with the tax office by January 31 the following year.
The draft Act proposes to extend the catalogue of vessels covered by the 0 per cent VAT rate also to the ship construction and equipment. The current limited list of vessels will be replaced by an open catalogue. In accordance with the draft Act, the 0 per cent VAT rate will be applied to the supply of:
It should be pointed out that the draft Act allows for the extension of the 0 per cent VAT rate to supplies other than direct supplies to shipowners. The draft Act also applies the 0 per cent VAT rate on the supply of ship parts produced for the abovementioned vessels, provided that such parts are part of the ship’s structure or are necessary for its operation.
The draft Act allows for the application of the special economic zone status to areas intended for shipbuilding and related industries, which belong to entities other than state-owned entities, companies wholly owned by the Treasury, local governments and municipal associations, and those being subject to the right of perpetual usufruct by the operator or a company wholly owned by the Treasury.
The draft Act also provides for the possibility of extending the existing special economic zones in cases where it would lead to development of shipbuilding or related industries.
The amendments proposed in the draft Act may play a crucial role in tax settlement of entities operating in the widely-defined shipbuilding market.
If you would like to receive more detailed information regarding this issue, please do not hesitate to contact us.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.