Carnival Cruises 2014 Annual Report Download - page 25

We believe that the U.S. source transportation income earned by Carnival plc and its Italian resident subsidiary
currently qualifies for exemption from U.S. federal income tax under applicable bilateral U.S. income tax
treaties.
Our domestic U.S. operations, principally the hotel and transportation business of Holland America Princess
Alaska Tours, are subject to federal and state income taxation in the U.S.
Carnival Corporation and Carnival plc and certain of their subsidiaries are subject to various U.S. state income
taxes generally imposed on each state’s portion of the U.S. source income subject to U.S. federal income taxes.
However, the state of Alaska imposes an income tax on its allocated portion of the total income of our companies
doing business in Alaska and certain of their subsidiaries.
UK and Australian Income Tax
Cunard, P&O Cruises (UK) and P&O Cruises (Australia) are divisions of Carnival plc and have elected to enter
the UK tonnage tax on a rolling 10-year term and, accordingly, reapply every year. Companies to which the
tonnage tax regime applies pay corporation taxes on profits calculated by reference to the net tonnage of
qualifying ships. UK corporation tax is not chargeable under the normal UK tax rules on these brands’ relevant
shipping income. Relevant shipping income includes income from the operation of qualifying ships and from
shipping related activities.
For a company to be eligible for the regime, it must be subject to UK corporation tax and, among other matters,
operate qualifying ships that are strategically and commercially managed in the UK. Companies within UK
tonnage tax are also subject to a seafarer training requirement.
Our UK non-shipping activities that do not qualify under the UK tonnage tax regime remain subject to normal
UK corporation tax. Dividends received from subsidiaries of Carnival plc doing business outside the UK are
generally exempt from UK corporation tax.
P&O Cruises (Australia) and all of the other cruise ships operated internationally by Carnival plc for the cruise
segment of the Australian vacation market are exempt from Australian corporation tax by virtue of the UK/
Australian income tax treaty.
Italian and German Income Tax
In early 2015, Costa and AIDA will reelect to enter the Italian tonnage tax regime through 2024 and can reapply
for an additional ten-year period beginning in early 2025. Companies to which the tonnage tax regime applies
pay corporation taxes on shipping profits calculated by reference to the net tonnage of qualifying ships.
Most of Costa’s and AIDA’s earnings not considered to be shipping profits for Italian tonnage tax purposes will
be taxed at an effective tax rate of 5.5% under the Italian International shipping tax regime since all of their ships
are Italian registered.
Substantially all of AIDA’s earnings are exempt from Italian and German corporation tax by virtue of the Italy/
Germany income tax treaty.
Income and Other Taxes in Asian Countries
Substantially all of our brands’ income from their international operation in Asian countries is exempt from local
corporation tax by virtue of relevant income tax treaties.
Other
We recognize income tax benefits for uncertain tax positions, based solely on their technical merits, when it is
more likely than not to be sustained upon examination by the relevant tax authority. The tax benefit to be
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