The Norwegian Government and EFTA Surveillance Authority (ESA) have since May 2017 negotiated a prolongation of the Norwegian tonnage tax regime. ESA announced 14 December 2017 that the Norwegian tonnage tax regime has been accepted for ten more years from 1 January 2018 until 31 December 2027. As anticipated, certain new restrictions are to be proposed implemented. A transitional period until 31 October 2018 has also been accepted.

Proposed amendments

For ESA to accept a prolongation of the existing tonnage tax regime, certain amendments will be proposed by the Ministry of Finance. If approved by Parliament, the amendments are expected to be in force from 1 January 2018. The main amendments to be proposed will be as follows:

  • Lease out on bareboat terms will be limited. Limitations depends on the type of vessel:
  1. For offshore vessels (including support vessels, windmill farm vessels and cable laying vessels), maximum 50% of the tonnage in the group can be leased out on bareboat terms. The lease period must be maximum 5 years with a 3 years option for extension. Strategic management of the bareboat leased out vessels must take place in the EEA area. Intra-group bareboat will be allowed without limitations.  
  2. For traditional shipping vessels, maximum 40% of the total tonnage in the group can be leased out on bareboat terms. The Ministry mentions no time limit on the bareboat lease out under this limitation rule. Bareboat lease out cannot be financial. The Ministry of Finance has in its press release provided one example of financial bareboat leases, when the lessee or a third party will acquire the vessel on other terms than market terms at the end or after the lease period.
  • Lease in of non-EEA vessels on time and voyage charter terms is limited to 90% of the total tonnage in the group.
  • Barges without own propulsion will not be allowed in the tonnage tax regime if they are mainly operating on lakes and rivers. To qualify, barges must be registered in the EEA and have a gross tonnage of at least 1 000 gross tons.

Transitional rules and grandfathering provisions

Transitional rules and grandfathering provisions will be proposed implemented.

Limitations on bareboat chartering out will as a starting point only apply to new contracts. However, the limitations will also apply for the following bareboat contracts:

  • Offshore vessel bareboat contracts with a remaining term exceeding five years.
  • Traditional shipping vessel bareboat contracts with a remaining term exceeding eight years.
  • In order to avoid abuse of the transitional rule, amendments to existing bareboat contracts made between 15 November and 31 December 2017 influencing the remaining term of the bareboat contact will be disregarded.

Companies within the tonnage tax regime who fails to meet the new requirements by 1 January 2018 will have to exit the regime unless the breach is corrected under the general correction rule. A company outside the tonnage tax regime will not be able to enter the regime from 2018 unless the company is compliant with the tonnage tax regime with its amendments mentioned above.

ESA has approved a transitional period until 31 October 2018 for companies to adapt to the new rules on bareboat lease out and requirements for EEA registration and gross tonnage of at least 1 000 gross register tons for barges without own propulsion.

Windmill farm vessels approved for the regime

ESA has also approved an expansion of the tonnage tax regime to comprise certain windmill farm vessels, provided such vessels operate outside Norwegian internal waters or territorial waters.