Why offshore shipping Company need tax incentives ?

The decision on which tax regime is most suitable for a company, how to structure your business and where to locate an offshore shipping activities will depend on the circumstances and the activities. It will need to take into account a broad range of factors. How well a company can manage and control a business is critical. But other factors including the effectiveness of the tax system for the specific offshore shipping activities an enterprise is engaged in, ship financing, freight taxes, wage cost deduction for seafarers, and taxes at source can also make a big difference to a business. These article will show the tax incentive in some countries and Indonesia.

Indonesia government can learn why a country gives tax incentive in a company offshore.

Picture 1. Tax incentive in offshore company in some countries

No Country Tax Incentives
1 Malta –          Nothing specific within shipping.

–           In certain circumstances, the salary received by non-Maltese resident seafarers is likely to be not chargeable to income tax in Malta, where the employment activities are carried on outside of Malta.

–          Zero VAT-rate for delivery and provisioning of seagoing vessels


2 Netherlands –          Wage cost deduction for seafarers

–           Accelerated depreciation of seagoing vessels

–           Zero VAT-rate for delivery and provisioning of seagoing vessels


3 Indonesia –   refund value added tax (VAT) or not collected

–   Government-borne import duties (BMDTP) for

component imports that intersect with other


–   exemption from import duty (BM) for import of


–   tax deduction.

Not only Indonesia, Malta and the Netherlands give Zero VAT-rate for delivery and provisioning of seagoing vessels the shipping industry. Malta and Indonesia are island nations, potential income can be obtained from the shipping industry sector because Indonesia and Malta have wider territorial waters than land. The problem is whether the government supports the shipping industry incentives, because the presence of shipping industry tax incentives will cause a decrease in income. Malta, Netherlands and Indonesia support rolling out VAT exemptions for the shipping industry because they see a large potential income from the shipping sector if the VAT is released

Even Malta and the Netherlands do not only provide tax incentives for exemption from VAT and import duties. They provide tax incentives for wage cost deduction for seafarers accelerated depreciation of seagoing vessels.

Freeing up VAT of 10% and import duty on components by 15% can be believed that fiscal leeway will make ship production costs more competitive. All this time Indonesian-made vessels are still less competitive compared to imported vessels because production costs are not competitive because of the high cost of spare parts. This is due to the imposition of VAT and import duties on the import of ship components, with the support of tax exemption to be released up to the components, and government-borne import duties for components to the shipyard industry can reduce production costs, with low production costs become a competitiveness that can increase investor interest in investing in Indonesia

The impact of shipping industry tax incentives will lead to a decrease in income, but in the long term where these tax incentives go well, synergizing with precisely influencing factor, such as availability of resources, political and economic stability will have a good impact as one of Indonesia’s revenue sources.

Maya Safira Dewi

Image Sources: Google Image