This alert is intended for non-PRC owners and charterers who may or have time-chartered vessels to PRC entities.

There are two PRC tax regimes that levy taxes against hire payments made by PRC time-charterers, the Enterprise Income Tax ("EIT") and the Business Tax ("BT"). Previously, hire payments made to foreign (non-PRC) entities had enjoyed the benefit of certain long-standing exemptions from these PRC tax regimes. However, these exemptions were removed in recent years following the introduction of new laws and regulations in relation to EIT and BT. Unfortunately, a recent flurry of enquiries suggests that these changes have not yet become common knowledge within the shipping community; which might leave some owners inadequately protected by the terms of any time-charter negotiated.

It is therefore strongly suggested that any non-PRC entity should acquaint themselves with the operation of these tax regimes before time-chartering a vessel to PRC entities, noting inter alia that...

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