The introduction of the so-called tonnage tax (flat-rate profit calculation based on tonnage, regulated in Section 5a of the German Income Tax Act, EStG) in 1999, which the German Shipowners’ Association (VDR) had long campaigned for, was a milestone in building the tax framework for shipping companies based in Germany. Similar tax legislation has been adopted by many countries in Europe (21 EU states have introduced tonnage taxation) and worldwide. It has been a success story in Germany due to its considerable positive economic effects. As early as 2009, a study commissioned by the Federal Ministry of Finance to evaluate the tonnage tax came to the conclusion that it was central to Germany as a maritime location and therefore had no alternative. This continues to apply today.
The tonnage tax according to EStG Section 5a is not a tax in the strict sense, but an alternative method of determining profits that a shipping company can opt for if it meets certain conditions. It is then bound to this decision for a period of at least ten years. The profit is calculated as a lump sum based on the size (net tonnage) of the ship instead of the actual profit or loss. The tonnage tax offers shipping companies a reliable, calculable tax framework while limiting the potential tax burden to an internationally adequate, competitive level.
