Understanding the Taxation of Charterparty Contracts in Nigeria’s Maritime Industry
The world over, every country has its own set of rules governing its coastal trade. Players in this sector either own the ships which are leased to charterers or lease vessels from vessel owners for the purpose of further leasing same to charterers who make use of the vessels to transport their goods and services. Transactions in this sector are usually guided by the country’s applicable coastal laws. However, when a vessel is provided on charter to a player in the oil and gas industry, such a transaction is not only guided by the country’s applicable coastal law, it is also guided by relevant oil and gas law. Transactions entered into this regard also have their tax implications.
This article intends to explore the types of taxes applicable to a maritime services company providing charter party services in the Nigerian maritime sector.
2. WHAT ARE CHARTER PARTY CONTRACTS?
A charter party is a document which sets out in writing the terms of a charter agreement between a ship owner and a charterer. Under this contract, the owner of the vessel lets out (hires) the vessel to a third party (known as the charterer) for the purpose of transporting passengers or cargo either for a fixed time (time charter) or for the duration of a voyage (voyage charter). The transportation of goods and passengers by a vessel from one port to another port within a country is referred to as coastal trade or cabotage. In Nigeria, the Nigerian Coastal and Inland Shipping (Cabotage) Act, 2003 defines the term ‘Coastal Trade’ or ‘cabotage’ as:
“(a) The carriage of goods by vessel, or any other mode of transport, from one place in Nigeria or above Nigeria waters to any other place in Nigeria or above Nigeria waters, either directly or via a place outside Nigeria and includes the carriage of goods in relation to the exploration, exploitation or transportation of the mineral or non-living natural resources of Nigeria whether in or under Nigerian waters;
(b) The carriage of passengers by vessel from any place in Nigeria situated on lake of river to the same place, or to any other place in Nigeria, either directly or a place outside Nigeria to the same place without any call at any port outside Nigeria or to any other place in Nigeria, other than as an in -transit or emergency call, either directly or via a place outside Nigeria;
(c) The carriage of passengers by vessel from any place in Nigeria to any place above or under Nigerian waters to any place in Nigeria, or from any place above Nigerian waters to the same place or to any other place above or under Nigerian waters where the carriage of the passengers is in relation to the exploration, exploitation or transportation of the mineral or non -living natural resources in or under Nigerian waters; and
(d) The engaging, by vessel, in any other marine transportation activity of a commercial nature in Nigerian waters and, the carriage of any goods or substances whether or not of commercial value within the waters of Nigeria.”