Tonnage tax

• Favourable method for determining taxable income
• Prerequisites for use of tonnage tax
• Tonnage tax is not restricted to the German flag

Favourable method for determining taxable income for seagoing ships

The tonnage tax as implemented in 1999 subsidises German shipping by means of favourable taxation.

Tonnage tax is not a tax but rather a method for determining taxable income. By this the taxable income is calculated as a lump sum depending on the size (net tonnage) of the ship, independent of the actual earnings (profit or loss). Normally, the taxable income as calculated by this method is considerably lower than the actual profit. For example, the tonnage tax profit per year of a 6,500-TEU container ship with a net tonnage of about 45,000 is approximately 65,000 €, given a 365-day operation. The appropriate tax must be paid on that notional profit.

The decision to determine the taxable income according to the tonnage tax is binding for a period of ten years, any earlier change of method is not possible.

Prerequisites for use of tonnage tax

The individual prerequisites for using the tonnage tax are specified in § 5a of the German Income Tax Law:

• Operation of merchant ships in international traffic.
• Transport of passengers or cargo.
• The management is located in Germany.
• The ship is registered in a German shipping register.
• The operation of the ship is managed from German territory. This comprises in particular the following essential activities:
• Concluding contracts that concern the ship,
• equipping and provisioning the ship,
• hiring masters and ship officers,
• freighting the ship,
• concluding contracts for bunkers and lubricant,
• maintaining the ship,
• concluding insurance contracts for ship and equipment,
• keeping the books,
• financial accounting.

For further information please refer to the German Ministry of Finance communication of 10. July 2023 on tonnage tax (only in German language).

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Tonnage tax is not restricted to the German flag

Flying the German flag is no prerequisite for determining taxable income according to the tonnage tax. Tonnage tax may therefore also be used for flagged-out ships.

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