Royal Caribbean Cruise Lines 2009 Annual Report Download - page 29

Because we and Celebrity Cruises Inc. conduct a trade or business in the United States, we and Celebrity Cruises Inc. would be
taxable at regular corporate rates on our separate company taxable income (i.e., without regard to the income of our ship-owning
subsidiaries), from United States sources, which includes 100% of income, if any, from transportation that begins and ends in the
United States (not including possessions of the United States), 50% of income from transportation that either begins or ends in the
United States, and no income from transportation that neither begins nor ends in the United States. The legislative history of the
transportation income source rules suggests that a cruise that begins and ends in a United States port, but that calls on more than one
foreign port, will derive United States source income only from the first and last legs of such cruise. This conclusion is not free from
doubt, however, because there are no regulations or other Internal Revenue Service interpretations of the above rules. In addition, if
any of our earnings and profits effectively connected with our United States trade or business were withdrawn, or were deemed to
have been withdrawn, from our United States trade or business, those withdrawn amounts would be subject to a “branch profits” tax
at the rate of 30%. The amount of such earnings and profits would be equal to the aforesaid United States source income, with certain
generally minor adjustments, less income taxes. We and Celebrity Cruises Inc. would also be potentially subject to tax on portions of
certain interest paid by us at rates of up to 30%.
If Section 883 were not available to our ship-owning subsidiaries, each such subsidiary would be subject to a special 4% tax on
its United States source gross transportation income, if any, each year because it does not have a fixed place of business in the United
States and its income is derived from the leasing of a ship. Such United States source gross transportation income may be determined
under any reasonable method, including ratios of days traveling directly to or from United States ports to total days traveling, or of the
lessee’s United States source gross income from the ship (as determined under the source rules discussed in the preceding paragraph,
and subject to the assumptions and qualifications set forth therein) to the lessee’s total gross income from the ship.
Maltese Income Tax
Our Pullmantur ship owner-operator subsidiaries qualify as licensed shipping organizations in Malta. No Maltese income tax is
charged on the income derived from shipping activities of a licensed shipping organization. Instead, a licensed shipping organization
is liable to pay a tonnage tax based on the net tonnage of the ship or ships registered under the relevant provisions of the Merchant
Shipping Act. A company qualifies as a shipping organization if it engages in qualifying activities and it obtains a license from the
Registrar-General to enable it to carry on such activities. Qualifying activities include, but are not limited to, the ownership, operation
(under charter or otherwise), administration and management of a ship or ships registered as a Maltese ship in terms of the Merchant
Shipping Act and the carrying on of all ancillary financial, security and commercial activities in connection therewith.
Our Maltese operations that do not qualify as licensed shipping organizations, which are not considered significant, remain
subject to normal Maltese corporate income tax.
United Kingdom Income Tax
The Brilliance of the Seas is operated by a company that is strategically and commercially managed in the United Kingdom,
which has elected to be subject to the United Kingdom tonnage tax regime (“U.K. tonnage tax”). Companies subject to U.K. tonnage
tax pay a corporate tax on a notional profit determined with reference to the net tonnage of qualifying vessels. Normal United
Kingdom corporate income tax is not chargeable on the relevant shipping profits of a qualifying U.K. tonnage tax company. The
requirements for a company to qualify for the U.K. tonnage tax regime include being subject to United Kingdom corporate income
tax, operating qualifying ships, which are strategically and commercially managed in the United Kingdom, and fulfilling a seafarer
training requirement.
Relevant shipping profits include income from the operation of qualifying ships and from shipping related activities. Our United
Kingdom income from non-shipping activities which do not qualify under the U.K. tonnage tax regime and which are not considered
significant, remain subject to United Kingdom corporate income tax.
State Taxation
We, Celebrity Cruises Inc. and certain of our subsidiaries are subject to various United States state income taxes which are
generally imposed on each state’s portion of the United States source income subject to federal income taxes. Additionally, the state
of Alaska subjects an allocated portion of the total income of companies doing business in Alaska and certain other affiliated
companies to Alaska corporate state income taxes and also imposes a 33% tax on income from onboard gambling activities conducted
in Alaska waters. This did not have a material impact to our results of operations for all years presented.
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