New Policy Calls for Ships Flying Convenience Flag to “Go Home”

Reporter Xu Miaomiao

On August 31, 2016, a new notice on import tax policy for Chinese-capital ships flying convenience flag returning to China for registration was jointly issued by the Ministry of Finance and the General Administration of Customs. On September 22, the Ministry of Transport issued related speci fic rules about this notice. The introduction of the new policy undoubtedly hands out the olive branch to Chinese-capital ships flying convenience flag.

The introduction of the new policy has given the original policy stronger vitality. As next step, the Ministry of Transport will develop and issue the “Regulation of Ship Registration”, to further simplify the ship registration procedures, and improve facilitation for ships to return to China for registration, giving full play to the effect of policies and promoting the sustainable and healthy development of China's shipping industry.

In addition, the Ministry of Transport will make further efforts to simplify the whole process. The expert points out that attracting Chinese-capital ships flying convenience flags returning home is a systematic work, which involves many factors and needs related departments to join forces and jointly create the policy, system, financing and development environment which are conducive for their return and for attraction of more Chinese-capital ships flying convenience flags to return to China for registration,so as to further expand the fleet of ships flying five-star flag,enhance the capability to safeguard Chinese international maritime transportation, and play an important role in serving economic development, safeguarding the national economic and strategic security and realizing the strategy of building strong maritime power.

In terms of taxes and fees, it is undoubted that returning“Convenience flag” ships should pay necessary taxes and fees in accordance with the requirements of China’s tax law. Although import tariffs and value-added tax for returning ships have been reduced by up to 27.5%after the introduction of special tax-free policy, there are still other taxes, such as 33% of the income tax,travel tax, additional tax of education, business tax etc.,all of which has direct impact on the operation costs of Chinese-capital ships flying convenience flag after their return.

At the same time, the financing environment also needs to be optimized. As a capital intensive industry, the shipping industry has high demand for funds, and the money to purchase second-hand ships or construct a new ship mainly rely on loans. As a result, the operation costs of shipping enterprises will increase greatly,and most of the ready money will be bounded. The longest period for loans for ships is 10 years, thus the enterprises will face huge pressure on loan payment.In addition, during the operation, ships sometimes encounter problems of fund chain that will affect the normal operation of ships. Especially for single ship companies, they sometimes go bankruptcy as the result of poor financing.

In addition, the return of Chinese-capital ships also faces many problems in the fields of insurance, law,and the entire soft shipping environment. In the face of these dif ficulties, the insiders believe that the return of Chinese-capital ships flying convenience flags is not just related to the implementation of a policy or a strategy, it also requires the coordination of many more parties and departments to build up perfect shipping service system in order to constantly improve the competitive strength of China’s shipping industry.

In terms of the macro environment, a whole set of system and service system which can compete with other registration countries and regions are needed,and breakthroughs are needed in aspects such as ship mortgage, ship insurance, ship trading, corporate tax, so to create a business environment similar to the overseas ones for Chinese shipping companies.

In terms of specific measures, such measures as allowing the returning ships to time rent or naked rent; allowing ships changing nationality to enjoy the same treatment as ordinary five-star flag ships; no tax for dismantling within the period of supervision;reducing tax burden and canceling the tonnage tax;further simplifying returning procedures to improve efficiency, especially to avoid ship suspension should be considered. Only in the context of the improvement of macro environment and specific measures can the Chinese-capital ships “flying convenience flags and wandering outside of China” return to China with an easy mind.