Why choose Luxembourg?
Which vessels may be registered in Luxembourg?
Who is authorised to register a ship?
Luxembourg, a traditionally non-Marine nation, has developed a competitive
legal framework for shipping companies. Among other minor advantages, the
merchant shipping status of Luxembourg offers VAT exemption (EU-wide), an
unlimited right of anchorage in EU waters, tax-free storage of fuel, EU
flagging, advantages of the financial centre of Luxembourg for ship financing
and the following competitive tax regime:
The Luxembourg law allows the registration of all vessels of at least
twenty-five tonnes which are, or are intended, to be used on a regular basis for
the sea transport of persons or things, for fishing, towing or any other gainful
form of shipping activity. The law lays down an age limit of fifteen (15) years
for an initial registration.
By derogation from the tonnage limit laid down in the law, passenger ships
may be entered in the Luxembourg public shipping register provided that they
satisfy the provisions of the 1974 International Convention on the Safety of
Life at Sea, as subsequently amended.
Yachts should be over 24 meters (loadline) for registration in the maritime
Those ships that are more than 50% owned by residents of the European Union
or by commercial companies that have their registered office in a member state
of the Union, and those chartered by such persons or companies, provided that in
all such cases all or part of the management of the ship in question is carried
out from Luxembourg territory.
Revenue earned by a Shipping company from the operation of Ships is subject
to income tax (Impôt sur les Revenus de Collectivités, IRC) at a rate of 22. %
plus a 4% of 22. % as employment tax (taxe pour l'emploi): that amounts 22.88%.
Shipping companies are exempted of municipal business tax.
In addition to Corporation Income Tax, a wealth tax is levied at a rate of
0.05% on the net wealth.
There are tax credits for investment made in an establishment located in the
Grand-Duchy and intended to remain there permanently and which are physically in
evidence on Luxembourg territory and which are other than buildings. On the
question of supplementary investment, the law provides for a tax credit equal to
8.4% of the said investment relating to a given operating year.
"Supplementary investment" is taken to be the difference between the book
value of the assets in question at the end of the operating year and the
arithmetical average of the respective book values of these same assets at the
end of five previous financial years. This amount is increased by the
depreciation operated on the eligible assets in the year of the investment.
In addition there also exists a further credit granted as a function of the
gross investment. This credit (in respect of a given operating year) is fixed at
a 4.2% of the acquisition price for that part that does not exceed Euro 150,000
and at 1.4% for the part above Euro 150,000.
Sliding-scale depreciation is permitted. There are two kinds of depreciation
which are accepted: linear depreciation and accelerated depreciation.
Linear depreciation: the purchase price of the ship may be depreciated
over a minimum period of 12 years OR on the basis of a percentage of the order
of 8% of the purchase price.
Accelerated depreciation: it may be adopted at a maximum rate of 24%
(three times the linear rate of depreciation) until such time as the amount
written off according to this latter method is less than the amount applying
under linear depreciation, where after the amount resulting from the application
of linear depreciation may be adopted.
A company's trading losses may be carried forward indefinitely. Therefore,
losses may be used to offset future profits.
Those are fully deductible.
Tax on capital gains on the re-sale of a ship owned by a Luxembourg company
for at least 5 years is deferred (tax deferral) provided the proceeds of the
sale are reinvested (within 2 years) in certain classes of fixed assets, e.g.
ships, real estate, shares held as participations in either Luxembourg or
Dividends received by a Luxembourg company and distributed by a Luxembourg or
foreign subsidiary shall be exempt from tax (privilege of parent companies and
subsidiaries) on the following conditions:
In order for the tax rate in question to be "comparable", the Luxembourg tax
authorities consider 15% to be the minimum rate of tax.
Tax treatment of capital gains on disposal of participations Capital gains on
disposals of participations in companies limited by shares are free of tax on
the following conditions:
Article 43/1 (f) of the 6th EU directive states that services to the shipping
industry shall be exempt from VAT. Indeed, Luxembourg, differently to other EU
states that have not fully applied the "spirit" of the directive above
mentioned, exonerates VAT in advance. In other EU states, such as France, Spain,
or Italy, it is very difficult, if not impossible, to get the VAT that has been
already paid back. In Belgium, it will take around two years.
In general, the rate of a seaman's tax is fixed at 10% of 90% of gross
earning, plus a lump sum abatement of LUF 35,000 a month (or LUF 1,400 a day
throughout the duration of the contract of employment). This flat rate tax is
not applicable to seamen who are resident in Luxembourg, but only to
non-resident seamen. Social security is in accordance with EU Directive 1408/71
or bilateral agreement or private insurance.
In general, in order to ensure that a shipping company will be treated as
resident in Luxembourg and will thus be granted all the advantages provided for
by double taxation agreements, the company in question must actually be managed
from Luxembourg, that is to say, the place where the Board of Directors and the
Shareholders' AGM actually meet, the place where the accounts are kept and where
the company's offices are located and that where the company is actually
These various types of income that may be received by a company operating
ships engaged in international trade are subject to Luxembourg tax but may also
be subject to a limited withholding tax in the country in which they originate.
In absence of a double taxation agreement, this withholding tax is likely to be
Luxembourg does not levy any withholding tax on interest. As far as dividends
are concerned, the standard rate of withholding tax is 20%. In the case of a
participation in the Luxembourg company of at least 25%, the rate of tax varies
from 5 to 10% according to the different tax agreements. The dividends paid by a
Luxembourg company to its parent company established in another EU member state
are no longer subject to any withholding tax if the participation is at least
10% and is held at least for a period of 1 year. Royalties to be paid by a
Luxembourg company to a foreign company, e.g. rent also to be paid under the
terms of a leasing agreement, are subject to withholding tax rate of 12%. This
rate is reduced to 0%-10% under tax agreements.
Luxembourg has ratified the 1926 Brussels Convention on Liens and Mortgages.
There is only a limited fee for the Register.
Luxembourg law provides effective protection to mortgagees and other holders
of liens and/or security interests.
There is no fee for registration of mortgage deeds on ships.
Yes, Bareboating in and out is authorised.
As a member of the EU, Luxembourg flagged ships benefit from agreements and
arrangements concluded by the EU with third countries concerning freight taxes
or similar dues.
OCRA Marine is a dedicated division of OCRA Worldwide
providing bespoke superyacht and ship registration
services. Our professional services extend
from yacht registration to providing a complete yacht
management service through a dedicated point of contact.
We invite you to contact the consultant listed below for
a Free Initial Consultation.
If you would prefer to make contact with a consultant
at one of our offices who speaks your language,
click here for a full list of our office contact details,
otherwise follow the details below to make contact.
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Languages spoken in this office: English,
Dutch, French, Italian, German and Spanish
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