Freight tax

Income tax: 40% of taxable income, which is considered to be 7.5% of (i) all gross outward freight and (ii) gross inward freight provided that such freight is payable in India (= 3%). This is subject to a surcharge of 2.5%  (=3.075%), which in turn is subject to an additional surcharge (education cess) of 3.0% (=3.16725%)  

Exemption Agreements

Residence of the following countries may benefit from double taxation agreements which reduce or waive the income tax on voyage earnings.

Country  Reduction Date of entry  into force Effective date
Albania 1b 100% 04/12/2013 01/04/2014
Armenia 100% 09/09/2004 01/04/2005
Australia 100% 30/12/1991 01/04/1992
Austria 100% 05/09/2001 01/04/2002
Bangladesh 50% 27/05/1992 01/04/1993
Belarus 100% 17/07/1998 01/04/1999
Belgium 100% 01/10/1997 01/041998
Bhutan 1a, 1b 100% 17/07/2014 01/04/2015
Botswana 100% 30/01/2008 01/04/2009
Brazil 1a, 1b 100% 11/03/1992 01/04/1993
Bulgaria 2 See Note 23/06/1995 01/04/1996
Canada 100% 06/05/1997 01/04/1998
China 3 100% 21/11/1994 01/04/1995
China 4 100% 12/08/2011 01/04/2012
 China 14  100% 30/11/2018 01/04/2019
Colombia 100% 07/07/2014 01/04/2015
Croatia 1b
100% 11/02/2015 01/04/2016 
Cyprus 5 100% 21/12/1994 01/04/1993
Cyprus 5 (Renegotiated)  100% 14/12/2016  01/04/2017
Czech Republic 100% 27/09/1999 01/04/2000
Denmark 100% 13/06/1989 01/01/1990
Egypt 100%   01/01/1970
Estonia 100% 20/06/2012 01/04/2013
Ethiopia 1b 100% 15/10/2012 01/04/2013
Fiji 1a, 1b 100% 15/05/2014 01/04/2015
Finland (Renegotiated) 1b 100% 19/04/2010 01/04/2011
France 100% 01/08/1994 01/04/1995
Georgia 100% 08/12/2011 01/04/2012
Germany 1a, 1b 100% 26/10/1996 01/04/1997
Greece 6  50%   01/04/1964
Hungary 100% 04/03/2005  01/04/2006 
Iceland 1b 100% 21/12/2007 01/04/2008
Indonesia 100% 19/12/1987 01/04/1988
Indonesia (Renegotiated) 1a, 1b
50% 05/02/2016 01/04/2017
Ireland, Rep. of 7 See Note 26/12/2001 01/04/2002
Israel 100% 15/05/1996 01/04/1997
Italy 100% 23/11/1995 01/04/1996
Japan 100% 29/12/1989 01/04/1990
Jordan 8 See Note 16/10/1999 01/04/2000
Kazakhstan 100% 02/10/1997 01/04/1998
Kenya 9 See Note   01/04/1985
Korea, Republic of 10% 31/08/1986 01/04/1987
Korea, Republic of (Renegotiated) 50% 12/09/2016  01/04/2017
Kuwait 1b 100% 17/10/2007 01/04/2008
Kyrgyzstan 0% 10/01/2001 01/04/2002
Latvia 100% 28/12/2013 01/04/2014
Libya1a 100%   01/04/1983
Lithuania 100% 10/07/2012 01/04/2013
Luxembourg 1b 100% 09/07/2009 01/04/2010
Macedonia 1a, 1b
100% 12/09/2014 01/04/2015
Malaysia (Renegotiated) 100% 26/11/2012 01/04/2013
Malta 100% 08/02/1995 01/04/1996
Malta (Renegotiated) 100% 07/02/2014 01/04/2015
Mauritius 1a, 1b 100%   01/04/1983
Mexico 100% 01/02/2010 01/04/2011
Mongolia 100% 29/03/1996 01/04/1994
Montenegro 100% 23/09/2008 01/04/2009
Morocco 100% 20/02/2000 01/04/2001
Mozambique 100% 28/02/2011 01/04/2012
Myanmar 1b 100%   01/04/2010
Namibia 1a, 1b 100% 20/01/1999 01/04/2000
Nepal (Renegotiated) 100% 16/03/2012  01/04/2013
The Netherlands 1a, 1b 100% 21/01/1989 01/04/1987
New Zealand 50% 03/12/1986 01/04/1987
Norway (Renegotiated) 100%   01/04/2012
Oman 100% 03/06/1997 01/04/1998
The Philippines 40% 21/03/1994 01/04/1995
Poland 1a, 1b, 10 See Note 26/10/1989 01/04/1990
Portugal 100% 30/04/2000 01/01/2001
Qatar 100% 15/01/2000 01/04/2001
Romania 11 See Note   01/04/1989
Romania (Renegotiated) 1a, 1b
100% 16/12/2013 01/04/2014
Russia 12 See Note 11/04/1998 01/04/1999
Saudi Arabia 1b 100% 01/11/2006 01/04/2007
Serbia 100% 23/09/2008 01/04/2009
Singapore 100% 27/05/1994 01/04/1994
Slovenia 1b 100% 17/05/2005 01/04/2006
South Africa 100% 28/11/1997 01/04/1998
Spain 100% 12/01/1995 01/01/1996
Sri Lanka 50% 24/03/1983 01/04/1981
Sri Lanka (Renegotiation) 1b
50% 22/10/2013 01/04/2014
Sudan 1b 100% 15/04/2004 01/04/2005
Sweden 100% 25/12/1997 01/04/1998
Switzerland 0% 29/12/1994 01/04/1995
Switzerland (Protocol) 100% 10/10/2011 01/04/2012
Syria 100% 06/02/1984 01/04/1983
Tajikistan 1b 100% 10/04/2009 01/04/2010
Tanzania 50% 05/09/1979 01/01/1980
Thailand 50% 13/03/1986 01/01/1987
Thailand (Renegotiated)
50% 13/10/2015 01/04/2016
Trinidad & Tobago 100% 13/10/1999 01/04/2000
Turkey 100% 01/02/1997 01/04/1994
Turkmenistan 100% 07/07/1997 01/04/1998
Uganda 100% 27/08/2004 01/04/2005
Ukraine 100% 31/10/2001 01/04/2002
United Arab Emirates 5 100% 22/09/1993 01/04/1994
United Kingdom 13 100% 26/10/1993 01/04/1994
United States 100% 18/12/1990 01/04/1991
Uruguay 1a, 1b 100% 21/06/2013 01/04/2014
Uzbekistan 100% 25/01/1994 01/04/1993
Vietnam 100% 02/02/1995 01/04/1996
Zambia  0%   01/04/1979
       
Comprehensive treaty negotiations currently in progress:
Signed but not ratified      
Kenya (Renegotiated)
Signed 11/07/2016
 
In the process of negotiation or finalised but not signed
Albania      
Azerbaijan      
Bahrain      
Chile      
Cuba      
Iran      
Korea, Republic of  (Renegotiation)      
Mauritius (Renegotiation)      
Senegal      
Venezuela      
Zambia (Renegotiation)      

Notes

  1. a. Profits from the operation of ships in international traffic shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.

    b. If the place of effective management of a shipping enterprise is aboard a ship, then it shall be deemed to be situated in the Contracting State in which the home harbour of the ship is situated, or, if there is no such home harbour, in the Contracting State of which the operator of the ship is a resident.
  2. Income derived from the operation of ships between India and Bulgaria: 100% exemption. All other cases the tax shall not exceed: 50% of the tax otherwise imposed, or 2.50 % of the gross amount payable in respect of such operation of ships, whichever is lower.
  3. This treaty does not apply to residents of Hong Kong, SAR; Macao, SAR or Taiwan, Province of China.
  4. This treaty only applies to residents of  Taiwan, Province of China.
  5. In July 1999 BIMCO was informed of a quasi-judicial judgement passed by the Indian Tax Authorities which ruled that the double taxation avoidance agreements (DTAA) established with countries that do not themselves levy taxes on freight earnings could not be enforced. Hence, whilst DTAA exists with both Cyprus and the United Arab Emirates, the assessing officer has a discretionary power to grant 100% relief. Therefore, as different officers have different interpretations it is important to investigate the matter on a case by case basis.
  6. The treaty states that "when a resident of Greece, operating ships, derives profits from India through such operations carried on in India, such profits may be taxed in Greece as well as in India; but the tax so charged in India shall be reduced by an amount equal to 50% thereof, and the reduced amount of Indian tax payable on the profits shall be allowed as a credit against Greek tax charged in respect of such income. The credit aforesaid shall not exceed the Greek tax charged in respect of such income."
  7. Income derived from the operation of ships between India and Ireland: 100% exemption. All other cases the tax imposed shall be reduced by 2/3 (two-thirds).
  8. Income derived from the operation of ships between India and Jordan: 100% exemption. All other cases the tax imposed shall be reduced by 50%.
  9. The treaty stipulates that the taxable income shall not exceed 5% and that the tax imposed shall be reduced by 50%.
  10. Income derived from the operation of ships between India and Poland: 100% exemption. All other cases the tax imposed shall be reduced by 50%.
  11. The treaty stipulates that the tax charged shall not exceed 2.5%.
  12. Income derived from the operation of ships between India and Russia: 100% exemption. All other cases the tax imposed shall be reduced by 2/3 (two-thirds).
  13. The treaty only applies to residents of Great Britain and Northern Ireland.
  14. Only applies to residents of Hong Kong, SAR

Remarks

At some Indian ports the tax must be paid prior to departure and owners can later apply for adjustment (refund). Refunds of the income tax can not be collected before the end of the Indian fiscal year, which runs from 1 April until 31 March. However, some local tax authorities are known to waive the payment in cases where owners are exempt.

Coastal operations. All earnings derived from coastal operations are taxed regardless of whether the shipowners reside in a country having a tax exemption agreement with India.

Time charter and bareboat charter hire is not subject to tax, unless such hire payments are received from Indian parties.

Incorrect interpretation of taxation laws
Members are warned that the some tax authorities have taken it upon themselves to redefine the taxation laws by refusing to accept the normal practice of exemption based on the residency of the vessel's owner/time charter owner who is the freight recipient. Instead, the tax authorities state that income tax is payable when the head owner, disponent owner, charterer or sub-charterer is resident in a country not covered by a double tax agreement.

Whilst BIMCO is of the opinion that such action is unlawful, it appears that in the case of Haldia, the tax authorities have the backing of the local courts. However, a local tax consultant has informed BIMCO that they have been able to obtain refunds in such case via the Mumbai tax authorities.

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