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 maritime companies
Commercial companies that are newly established in San Marino and running their business in the maritime sector (e.g. transport of goods and people; brokerage activity; rental and charter services) may have access to a favorable tax treatment based on incentives and tax breaks, namely:
- corporate tax on profits equal to 3.4% for the first ten fiscal years of the company. The company will be allowed to postpone the application of such reduced tax rate starting from the third fiscal year after the company incorporation.
- exemption from the license release tax;
- exemption from the yearly licence tax for the first three fiscal years of the company;
- tax credits (to be offset with the corporate profits) for investments made by the company in innovation technology, training and development programs.
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.
Importation of Ships
Ships imported by San Marino established companies that are exclusively used for commercial transport of passengers and/or cargo shall benefit of a full exemption from the San Marino import tax. In order to benefit of the said tax exemption, the relevant ship(s) shall not be sold to other parties for a period of two years after their registration in San Marino.
Maritime 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.
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.
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.
Mortgages and financial leasing
San Marino recognizes 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.
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.
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