GRP Rainer LLP

Shipping Investment Funds: Tax Advantages Can Go Up in Smoke - Tax-Law

Due to disparities that must be calculated, investors in shipping funds may have to wait a long time before benefitting from expected tax savings.


Cologne, NRW -- (SBWIRE) -- 09/05/2013 -- GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Bremen, Dusseldorf, Essen, Frankfurt, Hamburg, Hanover, Munich, Nuremberg, Stuttgart and London conclude: The tax advantages investors have come to expect will materialize only at the end of their investment period. Yet often, investors can face the problem that the disparity will show only at the end of the investment term. Quite often, investors are surprised when they realize that taxes can be demanded retroactively.

Whether an investor will face a gain or a loss is determined by whether the disparity is negative or positive. In any event, investors will be facing a general obligation to pay taxes, regardless of the result of the disparity.

The difference between the book value of a ship and its going concern value is the disparity. It is also calculated from the tonnage tax which determines the taxable income. The tonnage tax is due at the end of each shipping investment period.

During the preliminary consideration whether an investment in a shipping fund is appropriate for an investor, the disparity should always be taken into account. If the disparity is disregarded, investors may be facing a high amount of retroactively payable taxes. Thus, the expected tax advantages can be quickly wiped out by immense back taxes.

Expected tax advantages can go completely up in smoke due to the negative results of the disparity. Such a case can occur when an investor did not adequately prepare for a possible demand of retroactive taxes.

In particular, this also applies to investors who have had their shipping investment financed by a foreign currency loan. These are not safe from the disparity either. They result in a disparity due to the different currency exchange rates that existed at the beginning and the end of the term. The taxable disparity results from the sum of disparities for the ship and for the loan.

Investors who are planning to invest in shipping should at an early time look for a lawyer who is experienced in tax law to avoid being negatively surprised by the result of disparity.

GRP Rainer LLP is an international firm of lawyers and tax advisors who are specialists in commercial law. The firm counsels commercial and industrial companies and corporations, as well as associations, small- and mid-sized businesses, self-employed freelancers and private individuals worldwide from offices Cologne, Berlin, Bonn, Dusseldorf, Essen, Frankfurt, Hamburg, Hannover, Munich, Stuttgart, Bremen, Nuremberg and London UK.
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