All groups/companies in the UK tonnage tax regime should be aware of the UK flagging rules. Broadly, a group/company in tonnage tax is required to increase or at least maintain the percentage of the fleet flagged under an EU flag at the time of the group/company’s 'reference date', subject to an overall limit of 60%. If the percentage of the fleet flagged under an EU flag falls below the percentage at the reference date then the next ship that starts to be operated within the regime may have to be flagged under an EU flag in order to avoid the ship being permanently disqualified from tonnage tax. The reference date is therefore fundamental in establishing how the EU flagging rules apply to any particular group or company.
However, are you aware that a group/company’s reference date may change if it 'merges' with another group/company? This means that for example a group/company might have no vessels flagged under an EU flag at its initial reference date, with the result that the EU flagging rules do not apply, but after a merger it may have a different reference date with the result that the percentage of the fleet that it is required to maintain under an EU flag may change.
Therefore, all tonnage tax groups and companies that take part in a merger should consider whether this has changed the reference date for the purposes of the EU flagging rules as this could fundamentally affect the application of the EU flagging rules.
For further information please contact Sue Bill
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