CMA CGM Considers More Commitment to UK Tonnage Tax Regime

Thursday, January 20, 2005
The arrival of CMA CGM Vivaldi into service means that CMA CGM (UK) Limited has met its initial commitment to enter 11 ships into the UK's Tonnage Tax regime, but there could be more to come.

Comments David Halliday, executive chairman CMA CGM (UK) Limited: "Given the extent of CMA CGM's newbuilding programme, there is every possibility that we would seek to expand our presence in the UK Tonnage Tax regime and add vessels to our initial commitment. But that would be conditional on the UK Tonnage Tax remaining an attractive proposition and continuing to offer both financial and operational efficiencies."

All 11 vessels of the original complement are owned by the CMA CGM's UK subsidiary and managed by the technical department in the UK.

As a result of entering the UK Tonnage Tax regime, CMA CGM (UK) Limited has made a commitment to train UK nationals as cadets. Initially, the company recruited seven cadets into a three-year training programme with courses onshore and onboard CMA CGM vessels.

Adds Mr Halliday "With our initial complement of ships now in the regime, we will be looking to increase the number of cadets that we recruit this year. Successful candidates can expect to become a ship 's Captain or Chief Engineer by their late 20s and have responsibility for ships and cargoes worth millions of dollars."

The United Kingdom introduced a tonnage tax regime from 1st January 2000 for qualifying shipping companies to stimulate investment in UK shipping. Under Tonnage Tax, the tax liability is calculated with reference to a pre-set scale of alternate income based on the tonnage of the ships in the relevant fleet, rather than actual income earned. Therefore, under Tonnage Tax, tax expense varies with the tonnage of the fleet rather than with the profitability of the business.

In particular, it is generally not permitted for a company within Tonnage Tax to reduce its liability to Tonnage Tax by offsetting losses or depreciation. Entry to Tonnage Tax requires an election by the relevant shipping company. Such an election generally must be made for a ten-year period and, once made, is irrevocable.

CMA CGM (UK) Limited entered the Tonnage Tax regime in July 2004.

Adds David Halliday: "Fulfilling our initial commitment under the UK Tonnage Tax Regime comes at an exciting time for the CMA CGM Group.

"CMA CGM Vivaldi is one of 21 owned vessels, with a combined capacity of 130,000 teu that CMA CGM will take delivery of between 2004 and 2007, enabling us to continue with the upgrade of existing services and launch of new ones.

"In the UK, the CMA CGM Group is becoming an increasingly significant player with a developing maturity. All told, we've now got over 270 staff at eight offices across the United Kingdom."

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