Many Dutch shipping companies pay little to no taxes due to decades old scheme

Multiple large Dutch shipping companies pay little to no tax because they benefit from a decades-old tax arrangement. Despite this, shipping companies are calling for even more tax cuts, NOS reports.

The tax break in question is the tonnage regulation from 1996. Shipping companies who use this scheme don’t pay tax on their profit, but on the net loading capacity of the ship. The risk is that if they suffer a loss, they still have to pay tax. But on the upside, several large companies are making millions in profit and paying hardly any tax.

The tonnage regulation was implemented at a time when the Dutch fleet was struggling, Lodewijk Wisse, in charge of fiscal affairs at the Royal Association of Dutch Shipowners, told the broadcaster. “The tonnage scheme was supposed to give the maritime business climate a boost, and it did just that.”

Dutch companies can sign up for the scheme in 10-year increments. About a thousand currently use it. “That’s a big gamble for companies because if they only make losses after four years, they still pay taxes,” Wisse said.

According to NOS, that gamble has paid off very well for various Dutch shipping companies in recent years. Wagenborg from Delfzijl made 375 million euros in profits in the past decade. Spliethoff from Amsterdam made 109 million euros in profit. Both companies accrued more tax deductions than they paid taxes in that period. They can also deduct that money from future taxes.

Vertom from Rhoon, Zuid-Holland, only started using the tonnage scheme on a large scale in 2015. In the years before, the company paid an average of around 43 percent in taxes. Since 2016, that has dropped significantly. Over the past ten years, the company paid an average of 5 percent in taxes. It made 122 million euros in profit in that period.

Wagenborg and Vertom did not respond to NOS’s questions about the tonnage scheme. Spliethoff told the broadcaster that it was a necessary scheme. “It is of great importance for the Dutch maritime industry to remain competitive on the international market,” a spokesperson said.

Officials from the Ministry of Finance acknowledged that the tonnage scheme means that shipping companies who make profits pay little to no taxes. In the Budget Memorandum, the government takes into account 120 million euros in uncollected taxes linked to this scheme per year, according to NOS.

According to the Royal Association of Dutch Shipowners, the government can’t cut the scheme now because all maritime countries now have such an arrangement. “That is the misery of a global playing field. If you are the only country to make cuts, your maritime climate will be in ruins,” Wisse said, pointing out that the Netherlands is already losing market share in the sector.

Shipping companies, therefore, argue for the scheme to be expanded. “In countries like Cyprus and Denmark, work vessels needed for the construction of wind farms also fall under the tonnage scheme. That should also be the case here.”