TTM06440 - Relevant Shipping Profits: Distributions from qualifying overseas shipping companies

Timing: Example

A tonnage tax company, Shipping Ltd, has an overseas subsidiary, Overseas Shipping SA, with an accounting date of 31 December.

Shipping Ltd elected into tonnage tax with effect from 1 January 2001.

Overseas Shipping SA has mixed (tonnage tax and non-tonnage tax) activities until July 2002, when it sells its non-tonnage tax activities to General Trader SA, another overseas subsidiary of Shipping Ltd.

During 2003 and 2004 the paragraph 49(2) conditions are satisfied.

In May 2005 Overseas Shipping acquires a freight forwarding business from a third party, and the paragraph 49(2) conditions cease to be satisfied from this date.

In February 2006 Overseas Shipping SA sells the freight forwarding business to General Trader SA, and the paragraph 49(2) conditions are again satisfied from that date.

Overseas shipping pays up various dividends to Shipping Ltd

• On 1 June 2003 it pays a dividend out of the profits that arose in 1999 and 2000.

This dividend is not relevant shipping income as it is paid out of profits arising in a period when the recipient was not a tonnage tax company (paragraph 49(2)(e)(ii)).

• On 1 June 2004 it pays a dividend out of the profits arising in 2001 and 2002

This dividend is not relevant shipping income as it was paid out of profits arising in a period when the conditions were not satisfied(paragraph 49(2)(e)(I))

• On 1 December 2004 it pays a dividend out of the profits arising in 2003

This dividend is relevant shipping income, as it was paid at a time when the conditions were satisfied out of profits that arose in a period when the conditions were satisfied.

• On 1 June 2007 it pays a dividend out of the profits arising in 2004

This dividend is relevant shipping income, as it was paid at a time when the conditions were satisfied, out of profits that arose in a period when the conditions were satisfied.

References