Vessels – exemption from taxes

This exemption encompasses vessels of at least 15 metres used for passenger transport in return for payment, goods transport, towing, salvage or rescue operations, ice breaking or hunting and fishing.

Note: An update of this article is pending. Please note that some terms and/or references may differ from the Movement of Goods Act and the Customs Duty Act that enters into force from the 1st of January 2023.

The reason for these tax exemptions is attributed to the international position of shipping in Norway, among other things.

What is a ship?

A fully or partially assembled hull that floats on its own keel can be regarded as a ship in accordance with this provision. Registration with the ship registers on importation is not a condition for exemption from taxes, but failure to register will be a factor that points against regarding the object as a ship at the time of importation.

Requirement of a minimum length of 15 metres

This requirement applies to all ships mentioned in Section 6-9, first paragraph (a) of the Norwegian Value Added Tax Act.

The Norwegian Maritime Directorate has prescribed more detailed rules for the official measurement of vessels. Anchor arrangements, mounted bathing platform or railings, or permanently mounted optional equipment that extends outside the hull is not part of the ship's length.

It is the length stated either in the identity certificate or tonnage certificate that will apply on importation.

Passenger transport in return for payment

The reason for this exemption is consideration for scheduled public transport and its financial and competitive position. In practice, this provision has been expanded to also encompass passenger transport other than scheduled transport.

Concept of “passenger transport”

Businesses that are only engaged in the importation and resale of passenger vessels and pleasure craft are not encompassed by the exemption. It is because the businesses are then only engaged in the sale of goods, and not passenger transport.

You will not receive exemption on importation if you are engaged purely in the rental of vessels. If whoever you lease the vessel to provides the skipper and crew on the vessel, then this is just the rental of goods. If you engage in genuine commercial activity in the form of passenger transport, you must normally also expect payroll expenses for the crew. Such expenses are evident from the accounts of the business.

Transport of the owner himself or his employees from their place of residence to work, or in connection with the operation of the business, is not encompassed by the exemption from taxes.

Concept of “in return for payment”

To obtain exemption from taxes, the vessel must be acquired for use in commercial activity. The commercial activity must also consist of engaging in passenger transport in return for payment. You must therefore document that the business is of a certain scope and duration, that you are managing it at your own expense and risk and that it is apt to make a profit in the long term.

A sports club or humanitarian institution acquiring a vessel for use in connection with competitions, excursions or trips will not be encompassed by the exemption from taxes. This is in spite of the fact that the participants pay a certain amount for the trip to cover the operating costs of the boat.

Concept of “to be used for”

Norwegian Customs makes a concrete overall assessment of several factors. The “to be used for” in the Act places, inter alia, requirements on the outfitting of the vessel. The vessel must be outfitted for passenger transport and the purpose of the purchase must be to use the vessel for such transport.

In principle, it is the condition of the vessel at the time of importation that is decisive for the assessment. Repairs, maintenance, remodelling, extensions, etc. after the time of importation will not be of importance to whether the exemption conditions have been met.

If the vessel is classified as a pleasure craft according to the identity certificate or tonnage certificate, as an importer you must be able to document by other means at the time of importation that you will be using the vessel in a commercial enterprise that will engage in passenger transport in return for payment. Documentation to show that you will be using the vessel for passenger transport may for example be in the form of a passenger certificate.

The exemption does not apply to vessels imported for scrapping. The same applies to importation of a large vessel that is to be docked and rented out as rooms, or if you will be operating a restaurant on board.

Combined use

If part of the vessel’s use falls within the scope of the exemption criteria, but the remaining use falls beyond the scope, the part that gives entitlement to exemption must represent the primary use of the vessel in order for you to be eligible to import it with exemption from taxes.

In what link in the chain of distribution must the conditions for exemption be met?

The general rule for obtaining exemption from value added tax on importation is that you as an importer must fulfil the conditions for exemption. Exemption in a subsequent link in the chain of distribution must be assessed in accordance with the rules that apply to domestic sales and rental.

In certain cases, the use in the next link in the chain of distribution can nevertheless be used as a basis if you as an importer do not yourself fulfil the conditions. The conditions for exemption may be fulfilled in cases where you as the importer at the time of importation can present a sales contract and documentation that demonstrate as probable that the new owner will actually use the vessel for business activity in the form of passenger transport. When you as the importer do not fulfil the conditions at the time of importation, there will be particularly strict documentation requirements for granting exemption from taxes on importation.

To the extent that it can be demonstrated as probable at the time of importation that you as the importer have a lessee that will actually use the vessel in a business activity that gives entitlement to exemption, the conditions for exemption in the Act may be regarded as having been met. There will also be particularly strict documentation requirements here as well. The assessment of whether the conditions for exemption have been met will be made at the time of importation, which means that at a minimum a lease must have been entered into prior to the importation. In addition, documentation must be submitted at the same time to demonstrate as probable that this lessee will actually use the vessel for passenger transport in return for payment.

Factors of importance to assessment of the exemption

insurance certificate that is particularly suited for this type of business
passenger certificate or a permit for limited carriage of passengers from the maritime authorities
whether the crew and skipper are permanent employees
the importer has already started a business that is engaged in passenger transport in return for payment
such a business has been registered with the Register of Business Enterprises
Prospectuses, advertisements, etc. are available
the boat has recently been rebuilt for the purpose abroad with approved safety equipment.

The examples are not exhaustive. A concrete assessment of the vessel, the stated use and the documentation that has been submitted must be made on importation.

Goods transport, towing, salvage or rescue operations, ice breaking or hunting and fishing

Here there is no requirement that the activity shall be in return for payment. It is the transport situation, rescue situation, etc. that is decisive for this exemption.

The importation of ships for the transport of cargo for private use falls beyond the scope of the exemption from taxes. Only commercial transport (at one's own expense or the expense of others) receives exemption from value added tax.

The classification of the registration authorities is not decisive for assessment of the obligation to pay tax. This applies, for example, if the ship is registered as a hunting and fishing vessel, but investigations show that the purpose is for pleasure.

See the Value Added Tax Handbook

Special vessels

The exemption encompasses special vessels for use in offshore petroleum activities.

A special vessel is a vessel that is custom-built or rebuilt for use in petroleum activities and has assignments in such activities.

See Section 6-9, first paragraph (b) of the Norwegian Value Added Tax Act

The prerequisite for obtaining an exemption in accordance with this provision is that the vessel has assignments in the oil operations. Among other things, the exemption encompasses standby and supply vessels, tankers for offshore buoy loading and diving vessels, provided that they are for use in oil operations and have assignments as specified in the provision.

Training ships

For these vessels there is no specific length requirement.

In order to receive an exemption in accordance with this alternative, the vessel must be used for professional seamanship training, such as at the maritime training schools, or for seaman training en route in distant waters. Vessels that are to be used for school camps, maritime educational welfare schools, or elective subjects, as well as various assignments in the field of ethnology or marine archaeology, will not be encompassed by the exemption.

Vessels to be delivered to the Norwegian Armed Forces

For vessels to be delivered to the Norwegian Armed Forces, it is a condition that the vessel must be at least ten metres in length. All of the Norwegian Armed Forces’ vessels over ten metres are encompassed by this exemption The exemption also applies to vessels that are leased to the navy.

Ships to be used for research and weather forecasting

Examples of vessels that are encompassed by this exemption are vessels that are engaged in marine research, fishery research, etc. Vessels that are used for depth measurement and surveying the seabed for the Norwegian Hydrographic Service and private entities that desire information on safe towing routes etc. are not encompassed by the exemption.

Vessels that have been acquired by businessmen for use in experimentation, testing and studies as part of product development are not research vessels in accordance with this provision either.

Professional fishing

The exemption encompasses vessels of at least six metres for use in professional fishing. Vessels for professional fishing we define as vessels that are only used for fishing and that are suitable for this with regard to their design and equipment, and which have not been built for propulsion by an outboard motor, including a stern drive.

For fishing vessels under 15 metres, you must document the exemption with a confirmation from the tax office that the importer is registered in the VAT register and that in the past twelve months he has had sales revenue from raw fish, seals, whales, seaweed or sea grass that exceeds the amount limit for registration pursuant to Section 2-1 of the Value Added Tax Act. There shall also be a declaration from the importer that the vessel is to be used exclusively for professional fishing. The importer must have such a confirmation as mentioned from the tax authorities no later than at the time of importation or in connection with the customers clearance of the vessel. The confirmation shall be presented to Norwegian Customs and stored as a record in the accounts together with the other supporting documents for the customs declaration.

Goods for vessels

You can receive exemption from value added tax for operating equipment for the vessels mentioned above in the following cases:

When you import operating equipment that is delivered together with the vessel. The concept of “to be delivered together with” means that the equipment is delivered contractually at the same time as the actual vessel. The supplier of the equipment must be the same supplier as for the vessel. You cannot obtain an exemption for subsequent supplementary deliveries from the same supplier. You are only eligible for exemption from taxes for operating equipment that is actually used on board. Fishing gear will therefore fall beyond the scope of the exemption, even if it is delivered together with the vessel.
See Section 7-3, first paragraph and Section 6-9, first paragraph of the Norwegian Value Added Tax Act
You will receive an exemption from taxes on certain specific conditions for provisions, consumables and fixtures. Exemption from value added tax is granted to the same extent as exemption from customs duties is granted pursuant to Section 5-2 (a), (d) and (e) of the Norwegian Customs Act.
See Section 7-3, second paragraph of the Norwegian Value Added Tax Act
You will also receive exemption from value added tax for the temporary importation of spare parts and operating equipment for use on foreign vessels, as mentioned in Section 6-9, first paragraph of the Norwegian Value Added Tax Act. The goods must be delivered directly to the foreign vessel and be re-exported with the vessel.

Value added tax upon importation – Norwegian Tax Administration

The Norwegian Tax Administration took over administrative responsibility for value added tax on import from 1 January 2017. For more information on exemption from value added tax on the importation of vessels, see here on the website of the Norwegian Tax Administration.

Updated: 2/28/2018

Change comment:

Translated