The Ministry of Finance has responded to the Directorate of Customs and Excise’s request for interpretation of parts of the regulations governing tax on emissions of NOx. The individual issues and clarifications are discussed below. All references to sections are to the Regulations concerning Special Taxes.
1. Vessels embarking or disembarking a pilot
Will a vessel that would otherwise be regarded as sailing in direct foreign traffic (and therefore exempt from tax) but that becomes subject to tax on domestic traffic because en route she calls at a Norwegian port to pick up or discharge a pilot nevertheless be regarded as “in direct foreign traffic”? In other words, will the extra call at a Norwegian port be regarded as forming part of the direct foreign traffic?
It is not the intention that the activities of marine pilots should have consequences in terms of the tax. In other words, vessels embarking or disembarking a pilot as discussed above will still be considered to be in “direct foreign traffic”.
2. The term “accredited institution”
As a result of responses received during the consultation process, the term “accredited institution” was removed from the provision governing the documentation required for the purpose of calculating the tax, cf. Section 3-19-10. Will the term nevertheless continue to apply as part of the documentation requirement in the provisions on transitionary arrangements, cf. Sections 3-19-14 to 3-19-16?
The term “accredited institution” does not form part of the documentation requirement under Sections 3-19-14 to 3-19-16 and will be removed from these provisions.
3. The tax status of vessels in traffic between two foreign ports
The exemption for direct foreign traffic applies to “traffic between Norwegian and foreign ports”. Is the exemption also intended to encompass “traffic between two foreign ports”? Is traffic between two foreign ports in any way intended to be covered by the liability for the tax? For example: A Norwegian-registered vessel sails from a Danish port to a UK port, but on the way passes through “near waters” (sea areas where the distance to the Norwegian coast (base line) is less than 250 nautical miles). Under Section 3 19 2 (1) letter c, the vessel is liable for tax on emissions in near waters.
Emissions from vessels in traffic between two foreign ports are not encompassed by the area of application of the tax. This will be the case irrespective of the nationality of the vessel and the activities conducted under way. It is not the intention that this type of traffic should be encompassed, the assumption being that it is traffic to/from Norwegian ports that provides the point of departure for the scope of liability for the tax.
4. Undertakings subject to the registration requirements – “owner or operator”
According to the regulations, the owner is subject to the registration requirement in the case of shipping/fishing, aviation and land-based undertakings (the “own” alternative in Section 5-1 letter g) whereas the operator is subject to the registration requirement in the case of undertakings on the Shelf (the “operate” alternative in Section 5-1 letter g). Very often, however, the party responsible for the operations of vessels or aircraft is not the owner. Is the operator/party responsible for operations also to be the entity subject to the registration requirement in the case of shipping, aviation and land-based activities, rather than the owner?
Assuming that this has no effects in terms of control or administration or other unintended effects, the “operator” may be the entity subject to the registration requirement rather than the owner, including in the shipping/fishing, aviation and land-based sectors. The Directorate will draw up a draft amendment to the regulations incorporating these changes. Until then, the existing rules governing the undertaking subject to the registration requirement will remain in force, cf. Section 5.1 letter g.
5. The terms “Norwegian ports” and “foreign ports”
In the case of vessels, the precondition for exemption under to Section 3-19-11 (1) is that the vessel “is in direct traffic between Norwegian and foreign ports”. Is there a need for separate definitions of what constitutes a “Norwegian port” and what constitutes a “foreign port”?
The wording of Section 3-19-3 letter c, the definition of “domestic traffic”, indicates that Svalbard, Jan Mayen, the dependencies and installations on the Norwegian Continental Shelf are not a definition of “Norwegian port”, but rather a delimitation of the term “domestic traffic”. The regulation does not specify the requirement that there be “direct traffic” between these destinations and a foreign port in order for exemption to be granted pursuant to Section 3-19-11 (1). These destinations are in a special position and are accordingly subject to a special extension of the term “domestic traffic” that is not applied in a corresponding way to traffic to and from foreign ports.
This entails that traffic between these specific destinations falls outside the scope of the term “domestic traffic”. For example, traffic between two Norwegian Continental Shelf installations will not be subject to the tax, irrespective of whether the installations are located in near or in remote waters. Traffic from Norway to these installations will be subject to the tax, cf. Section 3-19-3 letter c. Furthermore, traffic from Norway to installations in, for example, the UK sector will be exempt from the tax if the direct traffic precondition has been met.
Likewise, traffic between foreign ports and the special destinations provided for in Section 3-19-3 letter c (Svalbard, Jan Mayen, the dependencies and installations on the Norwegian Continental Shelf) lies outside the scope of the liability for the tax.
6. Exemptions for direct foreign traffic – the term “other activities”
How should the term “other activities” in the definition of “direct traffic” in Section 3 19 3 letter g be understood?
“Other activities” should be understood as other activities conducted by a vessel in addition to ordinary traffic out of the taxation area. The carriage of goods or passengers where the purpose of the traffic is precisely and solely shipment between points A and B are examples of “ordinary traffic” and will accordingly qualify for exemption. If in addition the purpose of the traffic is to, for example, provide the passengers with a particular experience under way by virtue of the choice of route, this will no longer constitute “ordinary traffic”. This will typically apply in the case of cruise traffic in Norwegian fjords. Vessels engaged in research during the course of their voyages will also be considered to be engaged in “other activities”.
In other words, the purpose of the traffic is a key element when determining whether the traffic is “ordinary” and accordingly whether the preconditions for exemption have been met. The “direct traffic” requirement is not linked to physical movement. This means that a vessel engaged in ordinary goods shipment will be considered to be in “direct traffic”, even if the vessel has to anchor up while waiting to put into a port. The purpose of the traffic in this instance is not the anchoring up, but rather the transportation of goods.
The clarifications provided in points 1, 3, 5 and 6 above represent interpretations of the applicable regulations. Accordingly, on these points the Directorate will initially confine itself to providing the necessary re-emphasis in the comments in the annual circular on the NOx tax and then, at a later stage, consider whether a need exists to make changes to the regulations themselves.
In the event of conflict between the Norwegian and the English circular, the Norwegian circular shall have priority.