PRC Tax Regimes and Time-Charter Hire Payments


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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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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