Shipping Companies

Shipping enterprises operating Singapore-registered and foreign ships enjoy tax exemptions on certain types of shipping income under Section 13A of the Income Tax Act 1947. For definitions of shipping enterprise, qualifying company, ship management services, etc., refer to Section 13A(16).

There is no need to apply to IRAS for these exemptions under Section 13A. If your company derives income that qualifies for the exemptions, you need to only report the amount and nature of the income when filing your company’s annual Corporate Income Tax Return (Form C) and tax computation.

Tax Exemptions for Singapore-Registered Ships

An shipping enterprise operating Singapore registered ships enjoys tax exemption on the following income derived from the operation of Singapore ships outside the limits of the port of Singapore:

1. The carriage of passengers, mails, livestock or goods;
2. Towing or salvage operations;
3. The charter of ships;
4. The use of the ship as a dredger, seismic ship or ship used for offshore oil or gas activity;
5. Foreign exchange and risk management activities which are carried out in connection with and incidental to the operation of Singapore ships;
6. Gain on the sale of a Singapore ship;
7. Gain on the assignment of rights under a contract for the construction of a ship. At the time of the assignment, the ship is intended to be registered or is provisionally registered under the Merchant Shipping Act 1995;
8. Gain from the sale of 100% issued ordinary shares in a Special Purpose Company (‘SPC’) that does not own any foreign ship at the time of the sale of shares and the SPC:
   1. Owns a Singapore ship or a ship that is provisionally registered under the Merchant Shipping Act 1995; or
   2. Is the buyer under a contract for the construction of a ship that, at the time of sale, is intended to be registered or is provisionally registered under the Merchant Shipping Act 1995.

The exemptions mentioned in paragraphs (6) to (8) above do not include:

• Income of the shipping enterprise derived before 12 Dec 2018 as a lessor of a ship under a finance lease that is treated as a sale under Section 10C; or
• Income of the shipping enterprise from carrying on a business of trading in ships or of constructing ships for sale.

9. Income derived between 22 Feb 2010 and 23 Feb 2015 from the provision of ship management services [defined in Section 13A(16)] to any qualifying company in respect of Singapore ships owned or operated by the qualifying company;
10. Income derived on or after 24 Feb 2015 from the leasing of any container (other than finance leasing) carried out in connection with and incidental to the operation of Singapore ships;
11. Income derived on or after 24 Feb 2015 from:
    1. The provision of prescribed ship management services [Income Tax (Prescribed Ship Management Services) Rules 2017] to a qualifying company in respect of Singapore ships owned or operated by the qualifying company;
    2. Any mobilisation, holding or demobilisation of any ship used or to be used for offshore oil or gas activity where these activities are undertaken by the shipping enterprise itself using a Singapore ship;
    3. Any mobilisation, holding or demobilisation of a Singapore ship owned or operated by the shipping enterprise and used or to be used for offshore oil or gas activity.
12. Income derived on or after 29 Dec 2016 from foreign exchange and risk management activities that are carried out in connection with and incidental to any activity mentioned in paragraph (11) above;
13. Income derived on or after 25 Mar 2016 from:
    1. Any mobilisation, holding or demobilisation of any ship used or to be used for offshore renewable energy activity, or offshore mineral activity, where these activities are undertaken by the shipping enterprise itself using a Singapore ship;
    2. Any mobilisation, holding or demobilisation of a Singapore ship owned or operated by the shipping enterprise and used or to be used for offshore renewable energy activities, or offshore mineral activities;
    3. Foreign exchange and risk management activities that are carried out in connection with and incidental to any activity mentioned in paragraphs (a) and (b) above;
    4. The use of Singapore ships for offshore renewable energy activity or offshore mineral activity.
14. Income derived on or after 12 Dec 2018 from the finance leasing of a Singapore ship.

Tax Exemptions for Foreign-Registered Ships

For foreign ships, tax exemption applies to income derived from the carriage of passengers, mails, livestock or goods uplifted from Singapore, except where such carriage arises solely from transhipment from Singapore, or is only within the limits of the port of Singapore.

Approved international shipping enterprises (AISEs) operating foreign ships plying in international waters enjoy tax exemption on certain types of international shipping income under Section 13E of the Income Tax Act 1947.

An AISE is one approved under the ‘Maritime Sector Incentive - Approved International Shipping Enterprise award (MSI-AIS)’ that is administered by the Maritime and Port Authority of Singapore (MPA). Find out how to apply for this incentive at MPA's website.

If you are an AISE claiming exemption under Section 13E, you must ensure that the terms and conditions specified in the letter of award issued by MPA are met.

Tax Exemptions for Approved International Shipping Enterprises

An AISE enjoys tax exemption on the following income derived from the operation of foreign ships outside the limits of the port of Singapore:

1. Carriage of passengers, mails, livestock or goods by foreign ships;
2. Charter of any foreign ship to any person for the carriage of passengers, mails, livestock or goods outside the limits of the port of Singapore;
3. Carriage of passengers, mails, livestock or goods by foreign ships to Singapore solely for the purpose of transhipment;
4. Towing or salvage operations by foreign ships;
5. Charter of any foreign ship to any person for towing or salvage operations;
6. Operation of any dredger, seismic ship or any ship used for offshore oil or gas activity;
7. Charter of any foreign dredger, foreign seismic ship or any foreign ship used for offshore oil or gas activity to any person where such dredger, seismic ship or ship is used by the person for his operation outside the limits of the port of Singapore;
8. Foreign exchange and risk management activities which are carried out in connection with and incidental to the operations mentioned in paragraphs (1) to (7) above;
9. Gain on the sale of a foreign ship used for prescribed purpose;
10. Gain on the assignment of rights under a contract for the construction of a ship for a prescribed purpose that, at the time of the assignment, is intended to be a foreign ship to be used for that or any other prescribed purpose;
11. Gain from the sale of 100% issued ordinary shares in a Special Purpose Company (‘SPC’) of the approved AISE where at the time of the sale of the shares, the SPC:
    1. Owns any foreign ship that is used for a prescribed purpose;
    2. Is the buyer under a contract for the construction of a foreign ship for a prescribed purpose that is intended to be used for that or any other prescribed purpose;
    3. Owns a Singapore ship or a ship that is provisionally registered under the Merchant Shipping Act 1995; or
    4. Is the buyer under a contract for the construction of a ship that, at the time of the sale, is intended to be registered or is provisionally registered under the Merchant Shipping Act 1995.

The exemptions mentioned in paragraphs (9) to (11) above do not include:

• Income of an AISE as a lessor of a foreign ship used for a prescribed purpose, under a finance lease that is treated as a sale under Section 10C; or
• Income of an AISE from carrying on a business of trading in foreign ships used for a prescribed purpose, or of constructing for sale foreign ships for a prescribed purpose.

12. Income from the carriage of passengers, mails, livestock or goods uplifted from Singapore, except where such carriage is only within the limits of the port of Singapore;
13. Income derived between 22 Feb 2010 and 23 Feb 2015 from the provision of ship management services [defined in Section 13A(16)] to any qualifying special purpose vehicle in respect of ships owned or operated by the qualifying special purpose vehicle, unless the conditions of its approval otherwise provides;
14. Income derived on or after 24 Feb 2015 from:
    1. Providing prescribed ship management services to any qualifying special purpose vehicle in respect of ships owned or operated by the qualifying special purpose vehicle, unless the conditions of its approval otherwise provides;
    2. Any mobilisation, holding or demobilisation of any ship used or to be used for offshore oil gas activity where these activities are undertaken by the AISE itself using a foreign ship;
    3. Any mobilisation, holding or demobilisation of a foreign ship owned or operated by the AISE and used or to be used for offshore oil or gas activity outside the limits of the port of Singapore;
    4. The leasing of any container (other than finance leasing) carried out in connection with and incidental to the operation of foreign ships.
15. Income derived on or after 25 Mar 2016 from:
    1. The operation outside the limits of the port of Singapore of any foreign ship for offshore renewable energy activity or offshore mineral activity;
    2. The charter of any foreign ship for offshore renewable energy activity or offshore mineral activity to any person, where such ship is used by the person for the person’s operation outside the limits of the port of Singapore;
    3. Any mobilisation, holding or demobilisation of any ship used or to be used for offshore renewable energy activity, or offshore mineral activity where these activities are undertaken by the AISE itself using a foreign ship;
    4. Any mobilisation, holding or demobilisation of any foreign ship owned or operated by the AISE and use or to be used for offshore renewable energy activity or offshore mineral activity, outside the limits of the port of Singapore;
    5. Foreign exchange and risk management activities which are carried out in connection with and incidental to any activity mentioned in paragraphs (a) to (d) above;
    6. Activity mentioned in paragraphs (9) to (11) above in respect of any foreign ship used for offshore renewable energy activity or offshore mineral activity.
16. Income derived on or after 29 Dec 2016 from foreign exchange and risk management activities that are carried out in connection with and incidental to any activity mentioned in paragraphs (12) and (14)(a) to (c) above.
17. Income derived on or after 12 Dec 2018 from:
    1. Finance leasing of any foreign ship where the ship is used, outside the limits of the port of Singapore, for the carriage of passengers, mail, livestock or goods; dredging, seismic or offshore oil or gas activity; towage or salvage operation; or for offshore renewable energy activity, or offshore mineral activity;
    2. Foreign exchange and risk management activities which are carried out in connection with and incidental to an activity mentioned in paragraph (a) above.
18. Income derived on or after 19 Feb 2020 from the provision of prescribed ship management services to - 

1. Any qualifying special purpose vehicle of the AISE or another AISE; or
2. Any qualifying shareholder of the AISE, in respect of ships owned or operated by the qualifying special purpose vehicle or qualifying shareholder (as the case may be), unless the conditions of its approval otherwise provide.

As announced in Budget 2024, to better align Singapore’s tax regime for shipping entities with common international practices, an alternative net tonnage basis of taxation (“NTT basis”) is available for shipping enterprises under Section 13A, approved international shipping enterprises under Section 13E and approved shipping investment enterprises under Section 13P with effect from Year of Assessment (YA) 2024.

The NTT basis is not a separate tax regime but an alternative way of computing the income tax base of a qualifying shipping entity and subjecting that income tax base to the prevailing corporate income tax. 

A qualifying shipping entity that makes an election for the NTT basis will apply the NTT basis to all qualifying ships owned/ operated by the entity. The entity’s income tax base for a YA is the total sum of the income for each qualifying ship computed by reference to the net tonnage of that ship, a deemed daily income per net ton and the number of days that the ship was in operation during the basis period of a YA. The election, once made, is irrevocable.

In computing the corporate income tax payable under the NTT basis, a qualifying shipping entity should note the following:

• partial tax exemption, tax exemption for new start-up companies, and deductions do not apply to the income computed under the NTT basis
• any unutilised capital allowances, trade losses and donations (i.e. unutilised items) cannot be deducted against the income computed under the NTT basis
• the entity is not eligible to claim carry-back of capital allowances and losses or group relief against the income computed under the NTT basis
• where applicable, foreign tax credit can be claimed subject to the entity meeting all qualifying conditions under existing tax rules, and the terms and conditions of the relevant double taxation agreement in the case of claims for double tax relief
• corporate income tax rebate, if any, is applicable for that YA.

For entities that do not elect for the NTT basis, the existing tax exemption under the relevant shipping incentives continues to apply.

1. The principal activities of Company A are that of ship owner and operator. Company A derives charter income from the chartering out of Singapore-registered ships. It receives a compensation sum from a customer for early termination of the charter-out contract. Is the compensation receipt exempted from tax under Section 13A of the Income Tax Act 1947?

   The compensation receipt qualifies for tax exemption under Section 13A of the Income Tax Act 1947 if it is to compensate Company A for the loss of future charter income, which it is expected to earn if not for the early termination. This is subject to the following conditions:

   1. The vessel chartered out is used by Company A to derive income that qualifies for tax exemption under Section 13A of the Income Tax Act 1947 immediately prior to the termination of the charter-out contract;
   2. The compensation sum is provided for under the charter-out contract; and
   3. The compensation amount is determined with reference to the estimated income loss for Company A from the early termination of the charter-out contract. It is computed based on the difference between the charter hire rate per the charter-out contract and the prevailing market charter hire rate at the early termination date over the remainder of the charter period.

2. Company B is an AISE. It receives a compensation sum from a customer for early termination of the charter out of a foreign ship. Is the compensation receipt exempted from tax under Section 13E of the Income Tax Act 1947?

   The compensation receipt qualifies for tax exemption under Section 13E of the Income Tax Act 1947 if it is to compensate Company B for the loss of future charter income, which it is expected to earn if not for the early termination. This is subject to the following conditions:

   1. Company B is an AISE at the point of early termination of the charter-out contract;
   2. The vessel chartered out is used by Company B to derive income that qualifies for tax exemption under Section 13E of the Income Tax Act 1947 immediately prior to the termination of the charter-out contract;
   3. The compensation sum is provided for under the charter-out contract; and
   4. The compensation amount is determined with reference to the estimated income loss for Company B from the early termination of the charter-out contract. It is computed based on the difference between the charter hire rate as per the charter-out contract and the prevailing market charter hire rate at the early termination date over the remainder of the charter period.

• You may refer to the Basic Format of Tax Computation for a Shipping Company (XLS, 129KB).
• Your company must prepare separate operational accounts for each Singapore ship and foreign ship it owns so that the income and direct expenses of each ship can be separately identified.
• Your company should maintain certificates for each ship and be prepared to submit these certificates upon IRAS’ request.
  • For claims under Section 13A, your company should maintain copies of the Certificate of Singapore Registry of each ship.
  • For claims under Section 13E, your company should maintain copies of the Certificate of Registry of the foreign country/ territory.
• Your company should ensure that the tax computation distinguishes the different categories of incentivised income clearly and indicates the relevant Income Tax Act 1947 provision or incentive scheme under which the income is derived.

• Qualifying companies that wish to elect for the alternative net tonnage basis of taxation (“NTT basis”) under Section 34K of the Income Tax Act 1947 with effect from a YA must submit an election form to IRAS and MPA at https://go.gov.sg/electionform by the filing due date of the income tax return for that YA. For example, the election must be made on or before 30 November 2024 for the NTT basis to be applied from YA 2024.
• Where the income tax return for YA 2024 has already been filed with IRAS and a qualifying company wishes to elect for the NTT basis, apart from submitting an election form to IRAS and MPA by 30 November 2024, it must also submit a revised tax computation to IRAS with supporting schedules showing the computation of corporate income tax payable under the NTT basis by the same date.
• A qualifying company that has elected for the NTT basis (referred to as the electing company) needs to provide the following disclosure* in the tax computation for each of the YA while it is on the NTT basis.

*The company has elected for the alternative net tonnage basis of taxation (NTT basis) under the <Section 13A incentive for shipping enterprise/ Section 13E incentive for approved international shipping enterprise/ Section 13P incentive for approved shipping investment enterprise> with effect from <effective date of incentive or the first day of the basis period of the YA XX (to indicate the later date)>.

• Upon election, the start date of the NTT basis will be the electing company’s:
  • first day of the basis period of the YA for which the election is made; or
  • the effective date of the company’s incentive status*,

  whichever is later.

  *For an electing company with Section 13A incentive, the effective date of the incentive status refers to the date that it owns/ operates a qualifying Singapore-registered ship (“SRS”). Where the electing company has both the Section 13A and Section 13E incentives, the effective date of the incentive status refers to the earlier of the date that it owns/ operate the qualifying SRS or the effective date of its Section 13E incentive.

• You may refer to the Basic Format of Tax Computation for a Shipping Company (under NTT basis) (XLSX, 84KB).
• [NOTE]
  • For the purposes of filing the Form C for YA 2024, the NTT deemed income should be excluded. Companies are only required to compute the corporate income tax payable under the NTT basis in the tax computation with supporting schedules for YA 2024. IRAS will raise the assessment for the NTT deemed income based on the declaration in the YA 2024 tax computation filed.
  • For YA 2025 and subsequent YAs, the NTT deemed income is to be declared in the Form C as well as in the tax computation with supporting schedules.

Common Expenses

Where both exempt and non-exempt income are derived, your company should allocate, on a reasonable basis, the common expenses (usually administrative expenses) that cannot be directly identified to each ship. Normally, the turnover basis is used. The share of common expenses allocated to exempt income is to be deducted against exempt income.

Capital Allowance Claims

Where your shipping company derives both exempt and non-exempt income, capital allowance claims on common assets should be apportioned to income derived from different tax categories using an appropriate basis (e.g. turnover basis).

If the fixed assets are directly identifiable to a particular exempt or non-exempt income source, the capital allowances for such assets must be deducted against that respective source of income. For instance, capital allowances on a Singapore registered ship plying in international waters can be claimed only against Section 13A exempt shipping income.

Your shipping company can choose not to claim capital allowances for the portion that is attributed to its exempt income under Section 13A. However, it is mandatory for your shipping company to claim capital allowances against its shipping income exempted under Section 13E.

Where your shipping company claims capital allowances against the exempt income under Section 13A for the current Year of Assessment (YA), the unutilised balance of such allowances, if any, cannot be set-off against any other income or be carried forward.

Application of Section 13A(11) when a ship ceases to be a Singapore ship (a ship registered with the Singapore Registry of Ships)

Your shipping enterprise enjoys tax exemption on income derived from the operation of Singapore ships outside the limits of the port of Singapore under Section 13A of the Income Tax Act 1947.

During the tax-exempt period, it is not mandatory for your shipping enterprise to claim capital allowances on the ship and other assets used in the shipping operation. However, when such ship ceases to be a Singapore ship, Section 13A(11) provides for the capital allowances to be computed on the Residue of Expenditure (RoE) of the assets.

RoE is the notional tax written down value of the assets after taking into account the capital allowances for those YAs during which income derived from the operation of the Singapore ship was exempt from tax, notwithstanding that no claim for such allowances was made.

In GCN v CIT [2020] SGITBR 2, the Income Tax Board of Review ruled that all capital allowances (both initial and annual allowances under Section 19) should be taken into account in computing the RoE.

Set-Off and Carry-Forward of Company Losses

When your company suffers losses from the portion of business qualifying for Section 13A exemption, that amount of losses cannot be set-off against non-exempt income.

The losses also cannot be carried forward to future years for set-off against future years' income.