Royal Caribbean Cruise Lines 2012 Annual Report Download - page 29

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25
PART I
subsidiaries) from United States sources. In addition, if
any of our earnings and profits effectively connected
with our United States trade or business were with-
drawn, or were deemed to have been withdrawn, from
our United States trade or business, those withdrawn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%. We and Celebrity Cruises Inc. would
also be potentially subject to tax on portions of cer-
tain 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.
Other United States Taxation
We and Celebrity Cruises, Inc. earn United States
source income from activities not considered inciden-
tal to international shipping. The tax on such income
is not material to our results of operation for all years
presented.
State Taxation
We, Celebrity Cruises Inc. and certain of our subsid-
iaries 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 adjusted gross
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.
MALTESE AND SPANISH INCOME TAX
Our Pullmantur ship owner-operator subsidiaries,
which include the owner-operator of CDF Croisières
de France’s ship, qualify as licensed shipping organi-
zations 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 regis-
tered under the relevant provisions of the Merchant
Shipping Act. A company qualifies as a shipping orga-
nization 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, opera-
tion (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 com-
mercial activities in connection therewith.
Our Maltese operations that do not qualify as licensed
shipping organizations, which are not considered sig-
nificant, remain subject to normal Maltese corporate
income tax.
Pullmantur has sales and marketing functions, land-
based tour operations and air business in Spain. These
activities are subject to Spanish taxation. The tax
from these operations is not considered significant to
our operations.
UNITED KINGDOM INCOME TAX
We operate thirteen ships under companies which
have elected to be subject to the United Kingdom
tonnage tax regime (“U.K. tonnage tax”).
Companies subject to U.K. tonnage tax pay a corpo-
rate tax on a notional profit determined with refer-
ence to the net tonnage of qualifying vessels. Normal
United Kingdom corporate income tax is not charge-
able 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 stra-
tegically and commercially managed in the United
Kingdom, and fulfilling a seafarer training requirement.
Failure to meet any of these requirements could cause
us to lose the benefit of the tonnage tax regime which
will have a material effect on our results of operations.
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 consid-
ered significant, remain subject to United Kingdom
corporate income tax.
BRAZILIAN INCOME TAX
Pullmantur and our U.K. tonnage tax company charters
certain ships to Brazilian companies for operations in
Brazil from November to May. Some of these charters
are with unrelated third parties and others are with a
Brazilian affiliate. The Brazilian affiliate’s earnings are
subject to Brazilian taxation which is not considered
significant. The charter payments made to the U.K.
tonnage tax company and to Pullmantur are exempt
from Brazilian income tax under current Brazilian
domestic law.