S.L. 234.43 Art. 5Inapplicability of the Income Tax Act. Cap. 123. Cap. 123. Cap. 123. Cap. 123. Cap. 281. Cap. 12. Cap. 372.

(1) Notwithstanding anything contained in the

Income Tax Act, or in any enactment replacing that Act, if the condition contained in sub-regulation (3) hereof is complied with, and provided that all relevant tonnage taxes are duly paid by the shipping organisation as may be prescribed by regulations under the Act, including, in the case of a ship operated under charter as referred to in the relevant provisions of the Act, an amount paid to the Registrar by the shipping organisation equal to the annual tonnage tax for that year in addition to that paid by the owner:

(a) no further tax under the Income Tax Act shall be charged or payable on the income of that shipping organisation, to the extent that such income is derived from shipping activities, and

(b) no further tax under the Income Tax Act shall be charged or payable on any income, profits or gains of a shipping organisation derived from the sale or other transfer of a tonnage tax ship which had been acquired and sold whilst under the tonnage tax system or from the disposal of any rights to acquire a ship which when delivered or completed would qualify as a tonnage tax ship:

Provided that the activities and objects of the organisation, where applicable, are restricted to such shipping activities and related activities.

(2) The distribution of profits derived from shipping activities or from other transactions referred to in sub-regulation (1) shall be exempt from tax under the Income Tax Act in the hands of the shareholders:

Provided that where the person in receipt of such dividend is itself a company (hereinafter referred to as ‘the second company’), any dividend paid to the members of the second company shall, to the extent that such dividend is paid out of profits derived from shipping activities or from other transactions referred to in sub-regulation (1), not be charged to tax under that Act and where a member of the second company is again a company, the provisions of this proviso shall, mutatis mutandis, apply as though references to the shipping organisation were references to the second company and as though references therein to the second company were references to that member, and the principle set out in this proviso shall continue to be applied for as long as the profits derived from shipping activities are distributed by way of dividends.

(3) The condition referred to in sub-regulation (1)is that for the year in respect of which exemption from tax is applied, separate accounts were kept clearly distinguishing the payments and receipts by the shipping organisation concerned in respect of shipping activities, including the ownership, operation, administration or management of a tonnage tax ship, and payments and receipts in respect of any other business.

Furthermore, for the avoidance of doubt, it is hereby clarified that in determining the chargeable income of any person, the provisions of the Income Tax Act shall, mutatis mutandis, apply to any income not falling within paragraph (a) of sub-article (1) including, but not limited to, that all outgoings and expenses incurred by such person during the year preceding the year of assessment shall be deductable only to the extent to which such outgoings and expenses were wholly and exclusively incurred in the production of the income in terms of article 14 of that Act.

(4) In the case of a shipping organisation whose activities fall under these regulations, which has no income whatsoever, or which has no income other than income from shipping activities, a return shall be submitted to the Commissioner for Revenue and the Registrar-General in such form set out in the relevant Merchant Shipping Notice, by a person holding the warrant of a certified public accountant and auditor under the Accountancy Profession Act, or by a person holding the warrant of advocate in terms of the Code of

Organization and Civil Procedure in lieu of a tax return required in terms of the Income Tax Management Act, and the relative provisions of the Income Tax Management Act shall, for the purpose of these regulations, be construed accordingly:

Provided that where such person has income which is not income from shipping activities, the provisions of this sub-regulation shall not apply.