Chapter 4 - Accounting
Article 27 - International Shipping Income Exclusion
For the purposes of applying the provisions of Paragraph C of Article 12 of these Regulations, where the Constituent Entity can demonstrate that the strategic or commercial management of all ships concerned is effectively carried on from within the Kingdom, International Shipping Income and Qualified Ancillary International Shipping Income shall be excluded for the purposes of determining the Constituent Entity Income or Loss.
Where the computation of a Constituent Entity's International Shipping Income and Qualified Ancillary International Shipping Income results in a loss, the loss shall be excluded from the computation of its Constituent Entity Income or Loss.
For the purposes of applying the provisions of this Article, International Shipping Income is the net income derived from International Shipping Activities.
International Shipping Activities means any of the following:
The transportation of passengers or cargo by ships operated by the Constituent Entity in international traffic, whether the ship is owned, leased or otherwise at the disposal of the Constituent Entity.
The transportation of passengers or cargo by ships operated in international traffic under slot-chartering arrangements.
Leasing a ship, to be used for the transportation of passengers or cargo in international traffic, on charter fully equipped, crewed and supplied.
Leasing a ship on a bare boat charter basis, for the use of transportation of passengers or cargo in international traffic, to another Constituent Entity in the same Multinational Enterprise Group.
The participation in a pool, a joint business or an international operating agency for the transportation of passengers or cargo by ships in international traffic.
The sale of a ship used for the transportation of passengers or cargo in international traffic provided that the ship has been held for use by the Constituent Entity for a minimum of one year.
For the purposes of applying the provisions of Paragraph D of this Article, International Shipping Activity shall not include the transportation of passengers or cargo by ships via inland waterways within the Kingdom.
For the purposes of applying the provisions of this Article, Qualified Ancillary International Shipping Income is the net income derived from Qualified Ancillary International Shipping Activities.
Qualified Ancillary International Shipping Activity means any of the following activities that are performed primarily in connection with the transportation of passengers or cargo by ships in international traffic:
Leasing a ship on a bare boat charter basis to another shipping enterprise that is not a Constituent Entity, provided that the charter does not exceed three years.
Sale of tickets issued by other shipping enterprises for the domestic leg of an international voyage.
Leasing and short-term storage of containers or detention charges for the late return of containers.
Provision of services to other shipping enterprises by engineers, maintenance staff, cargo handlers, catering staff, and customer services personnel.
Investment income where the investment that generates the income is made as an integral part of the carrying on the business of operating the ships in international traffic.
For the purposes of applying the provisions of Paragraph A of this Article, if the aggregated Qualified Ancillary International Shipping Income of all Constituent Entities located in the Kingdom exceeds 50% of the aggregated International Shipping Income of such Constituent Entities, the Qualified Ancillary International Income of all such Constituent Entities shall be limited to 50% of such aggregated International Shipping Income.
For the purposes of computing International Shipping Income and Qualified Ancillary International Shipping Income all of the following shall apply:
Costs incurred by a Constituent Entity that are directly attributable to International Shipping Activities or to Qualified Ancillary International Shipping Activities shall be allocated to these activities and deducted from the revenue earned from such activities.
Costs incurred by a Constituent Entity that are indirectly attributable to International Shipping Activities or to Qualified Ancillary International Shipping Activities shall be allocated to these activities and deducted from the revenue earned from these activities on the basis of the revenues earned by the Constituent Entity from these activities in proportion to its total revenues.