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SPANISH  SECOND REGISTRY OF VESSELS AND SHIPPING COMPANIES BASED IN THE CANARY ISLANDS

A special registry based in the Canary Islands (Registro Especial de Buques y Empresas Navieras) was created by our Spanish Ports and Merchant Marine Law 27/1992. Since 1998 it is possible to inscribe in this registry all type of vessels.

In April 2001 the number of vessels registered under this Registry was of 221. In year 2000 the vessels registered were 179, that is 10 more vessels than in 1999. It is important to note that this registry not only increases the number of vessels owned by Spanish interests but it now also starts to register foreign vessels.

The conditions which are required for the vessels and the shipping companies to have access to this Registry are:

1. Conditions required for shipping companies:

• They should have their vessels’ operational headquarters in the Canary Islands. If the headquarters are in any other Spanish city or in a foreign country, they should then have a permanent office or a legal representative in the Canary Islands.
• They must own the vessels they want to register or they must be the demise charterers of the vessel.

1. Conditions required for the vessels:

• The type of vessels must be either merchant vessels or cruise vessels. Fishing vessels are excluded.
• Minimum gross tonnage of 100 GT.
• They should be operated between Spain and any other port outside Spain, between Ports where Spain does not have any Jurisdiction, or vessels operated for pilotage services (included as per our new Law: Royal Decree 2221/1998, authorising the inscription in the Special Registry of vessels and shipping companies the companies and vessels operating pilotage services).
• Vessels registered under other Registries should justify the compliance with the Spanish regulation and with the International Conventions referred to the maritime safety. These vessels could also be inspected before being registered.
• Vessels need to have a special complement of crew in order to get registered: the Master and the First Officer must have Spanish nationality and at least 50% of the crew must have Spanish nationality or be of any other EU nationality. If the vessel can not employ the required 50% EU citizens, the employment of non EU citizens can then be authorised by the Spanish Government.

The vessels and the shipping companies registered under this Registry have attractive tax incentives. These are the following:

ESTATE AND TRANSFER TAX: there is an exemption regarding the tax referred to transactions and contracts done in relation to the vessels registered under the Special Registry of the Canary Islands.

PERSONAL INCOME TAX: the crew employed will have an exemption of a 50% in relation to their Income Tax related to the income obtained from their employment on board those vessels.

CORPORATE TAX: there is an allowance of a 90% of the tax rate referred to the activity done by the shipping company in relation to the registered vessels.

QUOTATION ON THE NATIONAL INSURANCE SYSTEM: there is an allowance of a 90% from the company’s National Insurance quota applied to the crew employed on vessels registered under the Special Registry of the Canary Islands.

It should be finally mentioned that it has also been recently created a special tax regime within an area in the Canary Islands. Those companies based in this special area called Zona Especial Canaria –ZEC- and having certain conditions will have tax benefits such as paying a 1% to 5% of corporate tax. The aim is to promote the economical and social development of the islands. Therefore shipping companies established in the ZEC will have the benefits established for this regime, which is different from the benefits established for shipping companies registered in the Special Registry of the Canary Islands.

To become a company registered under the ZEC, the following conditions must be complied with: to be a company newly established and with its headquarters based in the Canary Islands; at least one of the Managers must have the residence in the Canary Islands; the company must invest a minimum of EURO 100,000.- (Ptas. 16.6 million) within the first two years of activity; the company must create 5 work places within the first 6 months of its activity, and finally; the company’s social activity must be the production, processing, manipulation or distribution of commodities or a services activity.