The Estonian government has decided to make exceptions in the tax system for the shipping sector and seafarers as well as establish digital information systems, including an e-register for ships accessible to e-residents as well.
At the end of August, the government reached an agreement that an exception could be made in Estonia’s previously uniform tax system for the shipping sector and seafarers.
The government found that the taxable base should be EUR 750; it must now decide whether it should tax that EUR 750 the typical 20% or 11.6%, which is the local government rate.
The state also wants to implement an exception for labor taxes as well, calculating social tax based on a EUR 750 tax base ceiling and leaving the remainder untaxed.
Regarding social tax, the government proposes that, going forward, employers pay only pension insurance for their employees at the current rate of 20%, with the employer paying another 4% and employee 2% into the employee’s second pension pillar.
Employers would not pay for health insurance, which is 13%; only seafarers would be given the opportunity to purchase state health insurance for themselves.
The government also decided that a tonnage tax would be introduced as an alternative to corporate income tax for shipping companies. While this would be exceptional in the Estonian tax system, it is already commonplace elsewhere in Europe. Shipping companies could thus decide whether to pay the typical 20% tax on withdrawn profits or a tonnage tax at a yet undetermined rate based on a vessel’s gross tonnage.
The government has also decided to create modern, paperless digital information systems that would be accessible worldwide.
One example is an e-registry for ships, which would allow e-residents of Estonia to register ships remotely, without the owner of the ship having to physically travel to Estonia to do so and without the requirement of a physical representative in the country.
As the supervision of ships and issuing of certificates must be done very operatively, the goal is to gradually switch to electronic ship and crew certificates as well, said Estonian Maritime Administration communications director Priit Poiklik.
According to Poiklik, the government’s decision is based on the fact that vessels registering under the Estonian flag would in turn spur growth in the shore sector servicing them. Ships bring in money for Estonia via registration fees, but these sums pale in comparison to the growth potential in the shore sector.
As a result of legislative changes, 300 ships are expected to be sailing under the Estonian flag by the year 2029. Current decisions regarding the matter are being made based on large cargo ships with a gross tonnage of 500 or more serving international shipping lanes as well as passenger ships with a gross tonnage of 500 or more serving routes outside of the EU. (ERR/Business World Magazine)
