Our Edge: Canadian Tax Incentives for International Shipping Companies

You can manage your international shipping business from Canada without creating a taxable presence.

Non-resident shipping companies operating in Vancouver with Canadian management will not be subject to Canadian tax on their income, even if they manage a global business from their Canadian office.

The following sources of profit earned by non-resident companies are generally not subject to tax in Canada:

  • Income from “international shipping activities” undertaken in Canada
  • Capital gains on sale of vessels outside of Canada
  • Foreign-sourced income

Canada’s shipping industry is critical for ensuring goods get safely to market. The International Maritime Centre aims to attract targeted foreign investment into Canada, facilitate foreign shipping companies and support businesses in establishing their headquarters in Vancouver.
– From 2015 federal budget tabled in the House of Commons by the Honourable Joe Oliver, P.C., M.P., Minister of Finance

Qualifying Requirements

The corporation must:

  1. (a.) Principally carry on an international shipping business; or
    (b.) Hold an interest (generally at least 25%) in an eligible entity (a shipping corporation that itself qualifies); and
  1. Derive all or substantially all (>90%) of its gross revenue from international shipping.

Just like the aerospace cluster, the maritime centre will help to attract more international companies to British Columbia — along with the businesses and jobs that support them.
– The Honourable Mike de Jong, Minister of Finance, Province of British Columbia

International Shipping Activities

For Canadian tax purposes, the definition of international shipping activities includes:

  • Operation of owned or leased ships that are used primarily in transporting passengers or goods in international traffic; and
  • Activities incidental to the operation of ships including:
    »» Crewing
    »» Vessel management
    »» Marketing
    »» Finance
    »» Insurance
    »» Accounting
    »» Treasury
    »» Head office services
    »» Back office support

No Restrictive Commercial Requirements

  • No flagging requirements
  • No minimum time commitment
  • No vessel ownership restrictions
  • No restriction on type of vessel

Regime Flexibility

  • Allows joint venture arrangements
  • Allows pooling arrangements
  • Allows indirect ownership of vessels

Recent Amendments

  • More flexible rules reflect the structures of modern shipping organizations
  • Provide for use of partnerships and trusts as holding and operating entities
  • Lower ownership threshold (25%) accommodates a broader range of shipping group structures
  • Allows for related bareboat and interest income to enhance creditor protection
  • Allows for service providing entities within an international shipping group