The President signs the Shipyard Act
The Act on Stimulating the Development of the Shipbuilding and Complementary Industries
Tax Alert 16/2016 | 2 August 2016
On 30 July 2016, the President of the Republic of Poland signed the Act of 6 July 2016 on Stimulating the Development of the Shipbuilding and Complementary Industries [the “Act”], which should enter into force on 1 January 2017. The objective of the Act, as defined by the legislator, is to stimulate the development of the Polish sea industry in general, specifically through the introduction of numerous tax preferences.
The Shipyard Act – key consequences
The main beneficiaries of the Act are Shipbuilders defined as:
- natural persons, legal persons and limited joint-stock partnerships whose place of residence or registered seat or management, as appropriate, is located within the territory of the Republic of Poland;
- partners in a civil law partnership, registered partnership or limited partnership whose registered seat, management or place of residence, as appropriate, is located within the territory of the Republic of Poland;,
- foreign business entities within the meaning of the Act of 2 July 2004 on Freedom of Economic Activity (Journal of Laws of 2015, item 584, as amended)
carrying on business activity within the territory of the Republic of Poland the scope of which includes shipbuilding [i.e. building a new, complete and seaworthy ship] or ship reconstruction [i.e. reconstruction carried out in whole by the shipbuilder (i) the total value of which is at least the PLN equivalent of EUR 5,000,000; or (ii) which consists in a change of the intended use of the vessel or a change of its source of propulsion]. A ship is defined in the Act as a vessel used for sea or inland sailing, the hull of which exceeds 5 meters, subject to technical supervision by a recognized organization, as referred to in the Act of 18 August 2011 on Safety at Sea (Journal of Laws of 2016, item 281), including offshore drilling or production platforms.
Shipbuilders are entitled to pay lump-sum tax on shipbuilding or ship reconstruction, representing 1% of the tax base, which comprises revenue due for the sale or reconstruction of ships, earned in the fiscal year, less value added tax.
- Selection of the lump-sum form of taxation requires the submission of a declaration by the 20th day of the first month of the first fiscal year of the taxable period.
- The said declaration should be submitted to the head of the competent income tax office.
- The taxable period for a shipbuilder subject to lump-sum tax is three consecutive fiscal years.
- The form of taxation may not be changed during the taxable period.
- Selection of the lump-sum form of taxation can be made during the validity period of a positive decision of the European Commission regarding compliance of the lump-sum tax with the internal market.
Also the regulations governing the application of the 0% VAT rate are to be modified. Under the Act, the 0% VAT rate may be applied to:
- the supplies of vessels used for sea sailing and transporting passengers for a consideration or used for commercial, industrial or fishing purposes;
- the import of vessels used for sea sailing and transporting passengers for a consideration or used for commercial, industrial or fishing purposes;
- the supplies of spare parts for the aforesaid vessels and their equipment, if they are built-in or used for their operation;
- the import of spare parts for the aforesaid vessels and their equipment, if they are built-in or used for their operation;
- lease, rental or charter of the vessels referred to in Article 83.1 of the Value Added Tax Act of 11 March 2004 (Journal of Laws of 2016, items 710, 846 and 960, as amended) [the “VAT Act”] as well as lease, rental or charter of their equipment;
- other services provided to shipowners or other entities providing transport services with the use of means of sea transport, used directly for purposes of the vessels referred to in Article 83.1 of the VAT Act, or their cargo.
Finally, under the amended Act of 30 May 2008 on Certain Forms of Innovation Support (Journal of Laws of 2015, item 1710), the Council of Ministers may adopt a regulation setting out the terms of technology loans and technology bonuses granted to entities carrying on shipbuilding business, considering the necessity to ensure compliance of such support with EU laws.