What types of ship do not qualify?

The following types of ship are excluded:

• Fishing vessels or factory ships
• Pleasure craft (this does not mean cruise liners, which do qualify)
• Harbour or river ferries
• Offshore installations
• Tankers dedicated to a particular oil field
• Non qualifying dredgers
• Non qualifying tugs
• A vessel the main purpose of which is to provide goods or services normally provided on land (e.g. floating hotel or supermarket)

Flagging - Where must Vessels be Registered?

The flagging rules (Registration) only apply in years that are not "excepted" years.  A financial year is excepted if it is designated as such by a Treasury Order.  The financial years 2005, 2006 and 2007 are excepted years.  Financial year 2008 is not an excepted year so the flagging rules will apply in this year.

All qualifying tugs and qualifying dredgers must be registered in one of the EU Member States ship registers.

Other qualifying vessels will only need to be registered (flagged) in one of the EU member States if the following conditions are satisfied:

Condition 1:

Is the company or group operating the ship for the first time?

Condition 2:

Is the average proportion for the company's total tonnage that is community flagged less than 60% over a period beginning with the start of that financial year and ending on the day the company begins to operate the new ship?   

Condition 3:

Is the average percentage of the company's total tonnage which is registered in a Member State in the period in condition 2 above less than the percentage that was registered in a Member State at the end of the accounting period in which the company became a tonnage tax company?   

Condition 4:

Is the ship that is operated for the first time registered on a register other than that of a Member State?

If the answer to all four questions is "yes", ie the conditions are satisfied, then the ship will not qualify for tonnage tax whilst it is operated by that company.   

If the company begins to operate a ship that is not a qualifying ship because the conditions are satisfied, then the company has the option to re-register onto the register of a Member State. If the ship is registered in a Member State within 3 months of the date the company operated the ship for the first time, then the ship will satisfy the flagging requirements and, provided the other conditions are met, will qualify for tonnage tax.

For the purpose of the flagging rules the term "Member State" refers to the first registers of Member States and to the first registers of the 3 EEA EFTA states, Norway, Iceland and Liechtenstein.