Shipping taxation in Latvia

Latvia has one of the most attractive shipping taxation regimes in the EU. If the usual company has income it must pay corporate income tax 15 %. Shipping companies registered under the Latvian flag have possibility to obtain Tonnage Tax payer status within the Tax authority and to pay flat fate tax based on the net tonnage – Tonnage Tax. Therefore the amount of the paid tax will be smaller.

So if this ship is working all the year the tax will be calculated as follows: Net tonnage * coefficients * exploitation days * tax 15%

Income coefficient expressed in EUR per net tonnage and shall be applied as follows:

Crew taxation in Latvia

The income and social tax shall be paid in Latvia. (23% personal income tax and mandatory state social insurance contributions 23, 59 % paid by employer and 10, 50% paid by employee). But, for the month of the taxation year in which the person was employed (in employment relations) on a ship utilized in international transport, the income of the referred to person for whom salary tax has to be paid shall be the part of the income obtained on the basis of employment relations in the following amount:

• to officers – in the amount of 2.5 monthly minimum salaries determined by the Cabinet;
• to other personnel – in the amount of 1.5 monthly minimum salaries determined by the Cabinet.

Therefore in according to law if the employee is working on the international transport ship the salary per 1 month will be calculated in the following way:

• for officers -  will be calculated from 900 EUR.
• for other - will be calculated from 540 EUR.

Registration of the vessel

There are following possibilities how to register the ship under the Latvian flag:

• the vessel might be registered under the Latvian flag if the owner of the vessel is the company registered in Latvia, the individual with Latvian citizenship or permanent residence ship. Therefore the Latvia limited liability company shall be registered in Latvia and then it is possible to register Latvian company as owner of the vessel.
• a bare boat charter contract shall be signed between the ship-owner and the bare boat charterer regarding the transferring of the actual possession of the ship to the bare boat charterer for the time period specified in the contract, during which the ship has a parallel registration in Latvia. The bare boat charterer shall be a Latvian operator of the ship. Registration of the ship in the Ship Register on the basis of the bare boat contract gives the ship the right to sail under the flag of the State of Latvia only but she will be also registered in the previous and you will pay fees in both countries maritime administrations.
• a management contract shall be concluded between the ship-owner and management company in Latvia regarding administration of the ship, which shall contain the obligatory requirement regarding the transfer of the technical management of the ship (it shall include safe ship management in conformity with the requirements of the International Safety Management Code) to the Latvian operator of the ship for the time period, during which the ship in accordance with the contract is registered in the Latvian Ship Register.