Tonnage profit determination

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The tonnage profit determination is a profit determination method for profits from the operation of merchant vessels in international traffic. The legal basis is EStG.

The widely used term tonnage tax, which is based on the tonnage tax applied in many countries, is not entirely correct in the case of Germany insofar as it is not a separate tax, but merely a method of calculating profit on a flat-rate basis. If the conditions listed below are not met, the profit according to Abs. 1, i.e. EStG can be determined by comparison of operating assets.

The basis for the profit determination is the net tonnage, i.e. the size of the vessel. Because the lump sum is less than one cent per tonne, there is usually a lower tax burden than a taxation according to the otherwise usual profit determination. However, this tax burden is also to be borne if no real profits are made from the operation of the ship (→ substance tax). Profits from the sale of the vessel are recognised via the so-called difference determined at the time of transition to tonnage profit determination.

Background
The tonnage profit calculation was introduced in Germany by the Maritime Adaptation Act of 9 September 1998. The aim of the scheme was to “strengthen Germany as a shipping location” (promoting the industry and maritime financial services providers) by lowering the German tax level to an international level.

Previously, the subsidies to the German shipping industry amounted to around 100 million. DM 30 million DM lowered and later deleted. This made the operation of a merchant ship under the German flag less attractive. In the first two months of 1997 alone, around 50 merchant ships were flagged out of Germany, which corresponded to an annual quota of previous years. Flagging out (often to third world countries, such as Antigua and Liberia) has the advantage for shipowners that domestic laws (e.g. on pay for employees) no longer apply and the rules are based on the country to which the flag was flagged.

In exchange for the tax cut through the tonnage profit determination, the German government demanded from the German shipping companies that by the end of 2010 again 600 ships under the German flag should sail. However, the number of ships under the German flag continued to decline to only around 300 by the end of 2014 and the number of flagged ships increased to around 2,700. North Capital

Union scheme
The EU Commission agreed in the 2004 aid scheme that “all tax relief should in principle be linked to the use of a Community flag”. In order to be promoted with a low taxation according to the tonnage profit determination, according to the EU scheme, a maximum of 40 percent of ships of a shipowner or a country must not fly an EU flag