Taxation and Ship Management: A Canadian Case Study

Abstract

In 1991, Canada began implementing changes to its tax regime with respect to international shipping activities, which were designed to address a steady erosion of shipping knowledge, expertise and shipping-related job opportunities in Canada. These changes represented a unique market-driven approach that sought to create an attractive financial environment for international shipping operations in Canada. Under this new tax regime, international shipping corporations were permitted to establish and maintain operations in Canada without being subject to Canadian corporate tax liability. A central element of this initiative was the elimination of the so-called “mind and management” test. After more than two decades since the initial implementation of these changes, it is clear that a significant number of international shipping corporations have relocated and established themselves in Canada and particularly so in Vancouver, Canada’s Pacific hub—which is now described as among the world’s leading maritime centres exerting competitive pressure globally.