Greece: Ships and Ship Management Companies

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Foreign ship management companies which run their shipping fleets from Greece are currently exempt from all Greek taxes on profits provided:  

• They obtain a special permit from the Economic Ministry and the Mercantile Marine Ministry.
• They import a minimum of USD50,000 annually to cover their office running costs.
• They place a USD10,000 bond with the Government.

• No corporate income tax is payable. Instead these ships pay a shipping tonnage tax calculable by reference to the category of ship, its age and its tonnage (as measured in koros).
• Shipping tonnage tax is reduced significantly in the following situations:
  
  • a 50% reduction if the ship flies the Greek flag and trades regularly between Greek and foreign ports or alternatively solely between foreign ports.
    a 60% reduction if the ship flies the Greek flag and is a passenger ship, a sailing vessel or a motor vessel.
  • a 75% reduction if the ship flies the Greek flag and is a fishing vessel.

• Ships flying the Greek flag are exempt from capital gains tax if they have a displacement in excess of 1,500 gross tons. If their displacement is less than 1,500 gross tons they pay a capital gains tax of USD1 per gross ton meaning that the sale of a ship in Greece is (at the time of writing) subject to a maximum capital gains tax of USD1,500.

The favorable tax regime which applies to ships flying the Greek flag partly explains the large size of the Greek maritime fleet.

At the start of 2002, the tonnage tax on cargo ships that trade regularly between Greek and foreign ports, or exclusively between foreign ports, was reduced by 50%. Greek-flagged cruise vessels also received the 50% reduction.

At the same time, Greece reduced the tax burden on its seafarers, cutting the income tax for officers from 9% to 6% and halving the tax rate on ratings to just 3%. If a ship that is subject to the tonnage tax is not trading because of repair work, lack of employment or for any other reason, the tonnage tax payable is reduced in proportion to the number of days during which the ship was not trading, provided that this time period exceeds two consecutive months during the previous or relevant financial year.

Greece’s tonnage taxation system covers any of a shipowner’s income that is derived from that shipowner’s use of his Greek-flagged ship(s) for commercial purposes. However, interest from bank deposits comprised of fares and other monies derived from the commercial use of ships is not deemed to constitute income from shipping activities, and is therefore taxed under the general rules of income taxation. The following exemptions apply to ships under the Greek tonnage tax regime:

• Ships built in Greece and registered under the Greek flag are exempt from tonnage tax until they are six years old; Ships that undertake regular voyages between Greek and foreign ports, or exclusively between foreign ports, as well as cruise vessels, are entitled to a 50% reduction on the tonnage payable;
• Ships less than 20 years old that have been repaired in Greece are exempt from tonnage tax for a number of years corresponding to one year for every USD100,000 spent on the repairs. However, in order to benefit from the exemption, the cost of repairs must have been paid using imported foreign currency. This exemption cannot exceed 50% of the total cost of the repairs, is applicable from the year following the date of completion of the repairs, and is valid for a maximum period of six years.

The Greek shipping tax regime was included on the list of 'Harmful Tax Practices' issued by the EU's Code of Conduct Committee, which requested its replacement with a formula-based tax linked to age, tonnage and type of vessel. A 2006 update by the OECD on its 'Harmful tax Practices' project, however, listed the Greek shipping tax regime as "not harmful." The outcome is unclear.

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