Estonian parlt committee backs exempting seamen's pay from income tax

TALLINN – The economic affairs committee of the Riigikogu on Tuesday passed a bill seeking to support Estonian shipping on to the second reading, declaring its support for a measure envisaged in the draft that would completely exempt the pay of seafarers from income tax. 

The chairman of the committee, Sven Sester, said that a number of proposals were received to provide more favorable ground and  greater interest in launching the process.

"With this bill, we have to ensure the transfer of ships under the Estonian flag, while also ensuring inflow of money into the state budget," Sester said according to spokespeople for the parliament.

According to the chairman of the standing committee, the committee backed the proposals which create the best conditions for achieving the desired goal. Of the changes made to the bill, the most important was the one exempting the pay of seafarers from income tax.

"When the goal is to bring ships under the Estonian flag and receive revenue in the future in the form of registry fees, tonnage fees and onshore service fees, a zero percent income tax on seafarers' pay definitely supports it. With this decision the economic affairs committee made a historic step in seeing to the future of Estonia as a maritime nation," Sester said.

Toomas Kivimagi, deputy chair of the committee, said that the gain from introducing a zero rate tax is a hundred times bigger than  potential loss, and described the zero percent tax rate as "inevitable."

"While a compromise somewhere in-between might be elegant politically, if it doesn't correlate with market conditions, success cannot be hoped for," Kivimagi said.

He added that the state currently receives between one and two million euros annually in income tax on the wages of crew members of cargo ships.

The aim of the draft legislation is to create more favorable conditions for the registration of foreign ships in the Estonian bareboat chartered ships register. As a result, the fleet of ships sailing under the Estonian flag will increase, which is conducive to growth of the Estonian economy and emergence of the onshore sector, the explanatory remarks accompanying the bill say.  

The bill would offer Estonian seafarers the possibility to conclude a voluntary agreement with the Estonian Health Insurance Fund and thereby to gain access to medical insurance.

The committee decided to send the bill to amend the Law of Ship Flag and Ship Registers Act, the Income Tax Act and related laws to the chamber for a second reading to be held on January 23, with a view to holding the third and final reading on February 13.