Carnival Cruises 2011 Annual Report Download - page 22

Our domestic U.S. operations, principally the hotel and transportation business of Holland America Princess
Alaska Tours, are subject to state and federal 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, which have elected to
enter the UK tonnage tax regime. 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.
Substantially all of P&O Cruises (Australia)’s income is exempt from Australian corporation taxes by virtue of
the UK/Australian income tax treaty.
Italian, German, Portuguese and Spanish Income Tax
Carnival plc’s German and Spanish brands, AIDA and Ibero, are both divisions of Costa. Effective through fiscal
2014, Costa is entered into the Italian Tonnage Tax regime and Costa intends to reapply for an additional
ten-year period beginning 2015. This regime taxes Costa’s, AIDA’s and Ibero’s shipping profits, as defined,
which are principally all of their earnings, calculated by reference to the net tonnage of their 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 approximately 6% under the Italian tax regime since all of their ships are
Italian registered. The majority of AIDA’s earnings are exempt from German corporation taxes by virtue of the
Italy/Germany income tax treaty.
All of Ibero’s ships are registered in Portugal. Provided certain local employment requirements are satisfied,
most of Ibero’s income that is not considered to be shipping profits for Italian Tonnage Tax purposes was exempt
from Portuguese income tax through 2011 and, in 2012, will be subject to Portuguese income tax at an effective
rate of 3%, which will gradually increase to 5% in 2020. Ibero’s Spanish operations are minimal and, therefore,
its Spanish income taxes are minimal.
In fiscal 2010, AIDA and Costa recognized a $30 million income tax benefit from an Italian investment incentive
related to certain of their newbuild expenditures.
Brazilian and Mexican Income Tax
From November through March, Costa charters certain of its ships for operation in Brazil to a Brazilian
subsidiary. The subsidiary’s earnings are subject to Brazilian resident income tax, and we believe payments this
subsidiary makes to Costa are exempt from Brazilian income tax under Brazilian domestic law and the Italy/
Brazil income tax treaty.
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