Wednesday, 14 June 2017

On 25th of April, 2017 Lithuanian Tonnage tax scheme (state aid- SA.45764 (2016/N) – Lithuania – State aid in favour of maritime transport. Prolongation and modification of the tonnage tax scheme) was approved by the European Commission. Accordingly on 9th of June, 2017 the provisions of the scheme have been incorporated into the national law and enforced by the Lithuanian Parliament.

Lithuanian authorities and stakeholders agreed on the improved regulation and applied to the European Commission with request to prolong the scheme from 1st of January 2017 for a period of 10 years.

The objective of the Lithuanian tonnage tax scheme is to preserve the shipping sector in Lithuania, improve a safe, efficient, secure and environment friendly maritime transport, protect and promote employment for EU/EEA seafarers. The scheme aims to encourage ship-owners to repatriate ships sailing under flags of convenience and to maintain or develop maritime activities in Lithuania such as the strategic and commercial management of vessels.

Tonnage Tax is an alternative method of calculating corporation legal entities (which are liable to corporate tax in Lithuania and engaged in international maritime transport by ships or in an activity assimilated thereto) tax profits by reference to the net tonnage of the ship operated. The tonnage tax involves both the tax-adjusted commercial profit/loss on a shipping trade and the chargeable gains/losses made on tonnage tax assets. Other profits of a shipping company are taxable in the normal way.

Income received by a shipping entity from international carriage by sea-going vessels or international carriage by seagoing vessels and activities directly related thereto may be taxed in accordance with the provisions of Lithuanian Tonnage tax scheme, during the whole tax period of a Lithuanian entity or a tax period of a permanent establishment through which a foreign entity registered or otherwise organised in a state of the European Economic Area operates on the territory of the Republic of Lithuania through a permanent establishment, if the shipping entity meets a certain criteria.

Lithuanian authorities seek to promote EEA ships‘ flag, therefore requirement to fly under EEA countries flag remains in the Law. Activities such as ships chartering in/chartering out, bare-boat – out fall under the provisions of the tonnage tax.  

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