Shipping Companies

Shipping income of a shipping enterprise is exempt from tax under Sections 13A and 13F of the Income Tax Act (ITA).

Shipping Income under Section 13A

Shipping enterprises operating Singapore-registered and foreign ships enjoy tax exemptions on certain types of shipping income under Section 13A of the Income Tax Act (ITA). For definitions of shipping enterprise, qualifying company, ship management services, etc. please refer to Section 13A(16).

Singapore-Registered Ships

Shipping enterprises operating Singapore registered ships plying in international waters will enjoy tax exemption on income derived from:

  1. the carriage of passengers, mails, livestock or goods;
  2. towing or salvage operations carried out;
  3. the charter of such ships;
  4. the use of the ship as a dredger, seismic ship or vessel used for offshore oil or gas activity;
  5. foreign exchange and risk management activities which are carried out in connection with and incidental to its operation;
  6. the provision of ship management services to any qualifying company in respect of Singapore ships owned or operated by the qualifying company (for income derived on or after 22 Feb 2010);
  7. mobilisation, demobilisation, holding fees and incidental container leasing (for income derived on or after 24 Feb 2015);
  8. exploration or exploitation of offshore energy (for income derived on or after 25 Mar 2016);
  9. exploration or exploitation of offshore mineral extraction (for income derived on or after 25 Mar 2016);
  10. ancillary activities supporting the offshore activities in (h) and (i) (for income derived on or after 25 Mar 2016)

Foreign Ships

For foreign ships, tax exemption applies to income derived from freight uplift from Singapore.

This exemption does not cover charter fees and carriage arising solely from transshipment from Singapore or purely within the limits of the port of Singapore.

Applying for Tax Exemption under Section 13A

There is no need to apply to IRAS for this exemption. Companies which derive income that qualifies for the exemption need only report the amount and nature of the income when filing their annual Income Tax Return (Form C) and tax computation.

International Shipping Profits under Section 13F

Approved international shipping enterprises operating ships plying in international waters enjoy tax exemptions on certain types of international shipping income under Section 13F of the Income Tax Act (ITA).

Approved International Shipping Enterprises

An approved international shipping enterprise is one approved under the "Maritime Sector Incentive - Approved International Shipping Enterprise award (MSI-AIS)" that is administered by the Maritime and Port Authority of Singapore (MPA). To apply for this incentive, please refer to MPA's website at www.mpa.gov.sg .

Approved international shipping enterprises enjoy tax exemption on income derived from:

  1. carriage of passengers, mails, livestock or goods by foreign ships;
  2. charter of such ships to any person for the carriage of passengers, mails, livestock or goods outside the limits of the port of Singapore;
  3. carriage of passengers, mails, livestock or goods by foreign ships to Singapore solely for the purpose of transshipment;
  4. towing or salvage operations by foreign ships;
  5. charter of such ships to any person for towing and salvage operations;
  6. operation of a dredger, seismic ship or vessel used for offshore oil or gas activity
  7. charter of a foreign dredger, seismic ship or vessel used for offshore oil or gas activity;
  8. foreign exchange and risk management activities which are carried out in connection with and incidental to the operations described above;
  9. the provision of ship management services to any qualifying special purpose vehicle in respect of any ships owned or operated by the qualifying special purpose vehicle (for income derived on or after 22 Feb 2010);
  10. mobilisation, demobilisation, holding fees and incidental container leasing (for income derived on or after 24 Feb 2015);
  11. exploration or exploitation of offshore energy (for income derived on or after 25 Mar 2016);
  12. exploration or exploitation of offshore mineral extraction (for income derived on or after 25 Mar 2016);
  13. ancillary activities supporting the offshore activities in (k) and (l) (for income derived on or after 25 Mar 2016).

Concessions and Exemptions for Disposal of Vessels

From 1 June 2011

As announced in Budget 2012, tax exemption is granted automatically to qualifying ship operators and ship lessors under the Maritime Sector Incentive (MSI) awards on gains from the disposal of vessels derived on and after 1 Jun 2011. This is to bring Singapore's tax regime on par with other maritime nations and provide certainty to the maritime sector. The exemption does not cover ship disposal gains by any entity engaged in the business of ship trading.

As the tax exemption is granted automatically, companies will not need to make an election in respect of gains from any ship disposals made on or after 1 Jun 2011.

From 16 Feb 2008 to 31 May 2011

As a concession, the following gains are not subject to income tax:

  1. Gains from the disposal of vessels registered with the Singapore Registry of Ships (SRS)
  2. Gains from the disposal of vessels owned or operated under the MSI-AIS award
  3. Gains from the disposal Singapore-registered ships by Maritime Sector Incentive - Maritime Leasing (MSI-ML) entities engaged in the business of ship operations
  4. Gains from the disposal of vessels which would subsequently be leased back to shipping companies; and
  5. Gains from the sale of 100% shareholding in a Special Purpose Company (SPC) that owns a vessel registered with SRS or a vessel under the MSI-AIS award.

The concession does not cover gains from the disposal of ships by an entity engaged in the business of ship trading.

Tax Computation for Shipping Companies

Please refer to the Basic Format of Tax Computation for a Shipping Company (105KB).

Guidelines for Preparation of Tax Computation

  1. The company must prepare separate operational accounts for each of its Singapore ship and foreign ship it owns so that the income and direct expenses of each ship can be separately identified.
  2. The company should maintain certificates for each ship and be prepared to submit these certificates to IRAS upon request.
    1. For claims under Section 13A, the company should maintain copies of Certificate of Singapore Registry (CSR) of each ship.
    2. For claims under Section 13F, the company should maintain copies of Certificate of Registry of the foreign country.
  3. Companies claiming exemption under Section 13F must ensure that the terms and conditions specified in the letter of award issued by the MPA are met.
  4. Companies should ensure the tax computation distinguishes the different categories of incentivised income clearly and indicate the relevant Income Tax Act provision or incentive scheme under which the income is derived.
  5. Where both exempt and non-exempt income is derived, the company should allocate the common expenses (usually administrative expenses) that cannot be directly identified to each ship on a reasonable basis.

Normally, the turnover basis is used. The share of common expenses allocated to exempt income will be deducted against exempt income.

Claiming Capital Allowances

Where a shipping company derives both exempt and non-exempt income, capital allowances should be apportioned on the common fixed assets on a turnover basis.

If the fixed assets are directly identifiable to a particular exempt or non-exempt income source, the capital allowances for such assets will be deducted against that respective source of income.

For instance, capital allowances on a Singapore registered ship plying in international waters can be claimed only against Section 13A exempt shipping income.

A shipping company can choose not to claim capital allowances for the portion that is attributed to its exempt income under Section 13A. However, it is mandatory for a shipping company to claim capital allowances against its shipping income exempted under Section 13F.

Where a shipping company claims capital allowances against the exempt income under Section 13A for the current YA, the unutilised balance of such allowances, if any, cannot be used to offset against any other income or be carried forward.

Setting-Off and Carrying-Forward Company Losses

When the company suffers losses from the portion of business qualifying for Section 13A exemption, that amount of losses cannot be used to offset against non-exempt income.

The losses also cannot be carried forward to future years for set-off against future years' income.

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