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CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · Tax Planning and Business Restructuring

A shipping company, Neela Marine Ltd, was a qualifying company on 1 October 2004 and did not exercise the option for the tonnage tax scheme before 1 January 2005. It later amalgamates with another company. What follows under section 233(4)?

The tonnage tax provisions do not apply to the amalgamated company, and its income from operating qualifying ships is computed under the other provisions of the Act. Section 233(4) denies the scheme where an amalgamating company was a qualifying company on 1 October 2004 but did not opt before 1 January 2005.

  1. AThe tonnage tax provisions apply to the amalgamated company for the longest unexpired period
  2. BThe amalgamated company may opt in within three months of approval and be taxed under the tonnage tax scheme
  3. CThe tonnage tax provisions do not apply, and income from operating qualifying ships is computed under the other provisions of the ActCorrect
  4. DOnly the income of Neela Marine's ships is excluded from tonnage tax, while the rest remains eligible

Explanation

Section 233(4) says that where one amalgamating company was a qualifying company on 1 October 2004 and did not opt before 1 January 2005, the Part does not apply to the amalgamated company. Its shipping income is computed under the other provisions. The three-month opt-in in the second option applies only under section 233(2) and is overridden here.

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