OVERVIEW OF MAIN TAXES & international AGREEMENTS
Overview of the main taxes after the entry into force of law no. 120 of 2 August 2019 on Maritime Navigation Reform
San Marino shipping companies
Commercial shipping companies (transport of goods and people, rental, charter) established in San Marino have a favorable tax treatment: they have access to the legislation on incentives and tax breaks for newly established companies, hiring staff and earmarking profits and, starting from an ordinary tax rate of 17%, they can obtain an overall tax rate ranging from 3.40% to 8.5%.
With regard to indirect taxes, purchases made by commercial shipping companies, such as new vessels and related armaments, are exempt from taxes. On shore and on-board naval services are subject to a withholding tax of 3%.
For the shipowner and/or the managers of the company, it is also possible to establish residency in the Republic of San Marino enjoying favorable tax treatment such as, for example, the taxation of dividends equal to 3% if received from abroad and of the 5% if received by San Marino companies.
Shipping companies and foreign individuals
Foreign shipowners (both individuals and legal entities) who have appointed a local representative in San Marino (resident agent) will enjoy the following taxation benefits:
- Total exemption from the payment of the single-phase tax (monofase) on imports, which would otherwise operate on the assumption of registration in the national register, and would discount a rate commensurate with the value of the vessel.
- Maintenance of tax residence in one’s country of citizenship (for individuals) or of establishment (for legal entities), without any taxation on income by San Marino authorities.
Trust
San Marino maritime legislation also allows the ownership of vessels to be managed through trusts regulated by both foreign and local law, which can enjoy the same tax benefits mentioned above, provided that both the settlor and the beneficiary of the trust are individuals resident abroad or legal entities established abroad.
Mortgages and financial leasing
San Marino recognises the strategic role of financial services for the development of the shipping and maritime sector, taking into consideration all types of vessels and operations (from cargo ships to charter services, from private/leisure use to vessels under construction).
For such reason the legal and regulatory framework is meant to protect the interests of banks, lenders and leasing companies with the highest degree of security, in order to reduce risks generally associated with cross-border financing transactions by preserving conventional priorities through an internationally recognised registration system that gives notice to third parties and allows creditors to enforce their rights and remedies in the event of a debtor’s default or insolvency.
Mortgages and financial leases registered over San Marino registered ships/yachts may entitle the secured party to take the following default remedies (among the others):
- To take possession of the mortgaged asset (even if it is held by third parties).
- To sell the mortgaged asset and retain the relevant income.
- To carry out all required actions the ensure the continuing maintenance and seaworthiness status of the asset.
- To collect incomes generated from the management and/or charter of the asset.
- To receive insurance proceeds in case of accidents.
- To de-register and export abroad the asset.
Moreover, it is worth mentioning that mortgaged ships/yachts cannot be de-registered from San Marino without the prior written consent of the secured parties; in addition, such parties may freely choose the governing laws for the financial contract entered into with the borrower (including foreign laws).
In summary, high regulatory standards, recognition of legal rights and efficient enforcement measures make San Marino a reliable international ship register to secure the interests of finance parties.
International representatives and agreements
Relations with Italy are governed by the 1939 friendship and good neighborly convention and by the double taxation convention operating from 01/01/2014.
The Republic of San Marino has joined the International Monetary Fund in 1992 and is a member State of the Council of Europe, U.N., UNESCO, IMO and ICAO.
The Republic of San Marino joined the Council of Europe Group of States against Corruption (GRECO) in August 2010, and it signed the OECD Multilateral Convention in 2013.
On 7 June 2017, the Republic of San Marino also signed the Multilateral Convention for the implementation of the OECD provisions against Base Erosion and Profit Shifting (BEPS).
Finally, it should be noted that, over the last few years, several international collaboration agreements have been signed on the subject of double taxation and exchange of information.
Customs and Monetary Union with Europe
The Republic of San Marino has signed a Cooperation and Customs Union agreement with the European Economic Community; this agreement establishes measures equivalent to those defined in Council Directive 2003/48/EC on the taxation of savings income in the form of interest payments and Memorandum of Understanding.
In addition, a Monetary Agreement has been signed with the Italian Republic and the European Union, and Association Agreements with the European Union, which will give the Republic of San Marino the rights of a Member State, are currently being defined.
Privacy and Anti-Money Laundering
The Republic of San Marino has been a member of Moneyval since 1998. Moneyval is a committee of experts within the Council of Europe for the evaluation of measures to combat money laundering and the financing of terrorism. San Marino, having implemented the directive 2005/60/EC and the methodology imposed by the FATF, is considered an Equivalent Country (in the whitelist). This is also a benchmark for Moneyval.
For further information, please refer to the list of advisers reported in Bulletin 01, available here.
Further information:
San Marino Ministry of Finances, Budget and Transport
Ministry of Foreign Affairs of San Marino
From “Nautica & Fisco” 4th edition
Navigation of non-EU units in European Community territorial waters
Although pleasure crafts flying the flag of a non-EU State are free to navigate in the territorial waters of the EU, they are required to comply with specific rules established based on a single regulation for all the Member States (EC Regulation no. 993/2001 of 4 May 2001 amending EEC Regulation no. 2454/1993[1]). These customs regulations allow, under certain conditions, to have access to the EU territory, which includes EU territorial waters (Pursuant to Article 3, paragraph 3, of Council Regulation (EEC) of 12 October 1992, the Community marine waters consist of the territorial waters and internal waters of the Member States, excluding those belonging to territories that are not part of the customs territory of the Community), without this access implying the payment of any duties and the provision of security. This procedure is called “temporary admission” (Chapter V of EEC Reg. no. 2454/1993).
This procedure differs depending on whether the means of transport is used for “commercial use” or “private use”. For customs purposes, a means of transport is used for “commercial use” when it is used for the transport of persons or goods for remuneration or in the context of the economic activities of a company, while “private use” means the use of a means of transport excluding any commercial use (Article 555, paragraph 1, of EEC Reg. no. 2454/1993)
Naturally, the means of transport also include spare parts, accessories, and normal equipment by which they are accompanied (Art. 555, paragraph 2, of EEC Reg. No. 2454/1993).
Temporary admission can take place without the obligation to request an authorisation and with total exemption from import duties, for means of transport used for maritime and in inland waterways navigation, provided that the following conditions are met:
- The units must be registered outside the customs territory of the European Union.
- The registration must be in the name of a natural or legal person established outside the customs territory of the European Union or, in case of non-registration of the units, they have to be owned by a person established outside the customs territory of the European Union (Article 558, paragraph 1, letter a) of EEC Regulation no. 2454/1993).
- The units must be used by people residing outside the customs territory of the European Union, except for the exceptions indicated below (Article 558, paragraph 1, letter b), of EEC Reg. No. 2454/1993).
- The units must be used exclusively for transport that begins or ends outside the customs territory of the European Union. However, it is possible to derogate from this rule if, in the transport sector in question, there are rules that expressly provide for the possibility of use for internal traffic relating, in particular, to the conditions of access and execution (Article 558, paragraph 1, letter c), of EEC Reg. 2454/1993[2]).
For units used for private use which fly a flag of a State outside the European Union, temporary admission is limited to a period of stay within Italian territorial waters after which the obligation to request definitive import arises. After this period (the so-called “discharge deadline”), customs duties and VAT must be paid. This term is currently 18 months (Article 562, letter e), of EEC Reg. No. 2454/1993).
If the unit has not been transferred out of the territorial waters of the European Union within the term of discharge, or if a different customs regime has not been applied, or it has not been permanently imported into Italy, a case of contraband that is criminally punishable is determined (Art. 216, paragraph 2, of Presidential Decree no. 43 of 23 January 1973).
On the other hand, for units engaged in maritime transport for commercial use, the discharge deadline is not set in a time period of stay in the territorial waters. The deadline is instead determined with reference to the time necessary to carry out the transport operations (Article 562, letter b) of EEC Reg. 2454/1993).
The discharge period is interrupted in the case of units kept in storage, provided that the following conditions are met:
- The place where the unit is stored must be communicated to the local customs authority by attaching the navigation licence along with the request to affix the seals.
- The unit must remain in storage for at least three consecutive months.
At the end of the storage period, the same customs authority will remove the seals and return the navigation licence. In this case, the original discharge deadline is extended for the period of time during which the goods have not been used.
With regard to yachts flying a non-EU flag and used for charters in Italian territorial waters, any confusion regarding their legality has recently been cleared out by means of an amendment made to the Italian Pleasure craft regulation which expressly provides for this possibility (Article 60 of the Legislative Decree n. 1/2012, converted with amendments into Law n. 27/2012, modified the third paragraph of art. 2 of the Italian Recreational Craft Code providing that a commercial activity of rental and leasing of pleasure craft can be carried out in Italy also using pleasure crafts flying a non-EU flag).
Finally, it should be noted that the owners of these yachts, in order to avoid any problems associated with the lack of any of the requirements to qualify for temporary admission, often proceed to import them into a country of the EU by paying the related VAT.
[1] The EEC Regulation no. 2454/1993 was abrogated. The new Regulation is the EU Delegate Regulation 2015/2446
[2] Article 217, letter e), of the EU Delegate Regulation 2015/2446