Counsel Frankfurt
"German maritime taxation increasingly emphasises operational substance and economic reality over formal legal distinctions."
The maritime sector continues to evolve amid ongoing regulatory and operational changes. In parallel, recent developments in German maritime taxation increasingly emphasise operational substance and economic reality over formal legal distinctions. This shift is evident across areas such as seafarer taxation, tonnage tax requirements, charter structures, permanent establishment concepts and offshore wind-related maritime operations, pointing towards a more function and substance-oriented approach to German maritime taxation.
This article provides an update on some of the most significant developments in German maritime taxation over the past year. It illustrates how this shift is materialising in practice across key areas of German maritime taxation and how established structuring assumptions are increasingly being reassessed considering operational realities. For shipping and offshore groups, these developments raise important questions regarding the robustness of existing structures and future tax positioning.
Beyond the flag: a new approach to seafarer taxation
One of the most significant recent developments concerns the taxation of employment exercised aboard vessels operating on the high seas.
In April 2025, the German Federal Ministry of Finance (Bundesministerium der Finanzen, “BMF”) fundamentally revised its long-standing administrative position on the treatment of activities performed aboard ships operating on the high seas.[1] In doing so, the BMF expressly abandoned the traditional concept that a vessel on the high seas constitutes a ‘floating part’ of the territory of the flag state.
"One of the most significant recent developments concerns the taxation of employment exercised aboard vessels operating on the high seas."
Historically, many international crewing structures relied heavily on the flag state as the decisive connecting factor for payroll taxation and the allocation of employment income. Under the revised approach, however, the focus shifts from the flag towards the applicable treaty provision and the actual operational structure.
The practical implications become particularly visible in relation to German resident seafarers working on vessels flying the Liberian flag. As recent market commentary has highlighted, the Germany-Liberia Double Tax Treaty (“DTT”) does not contain a specific provision equivalent to Article 15(3) of the OECD Model Tax Convention for seafarers, which typically allocates taxing rights over employment income earned aboard ships in international traffic to the state of effective management of the shipping enterprise. As of 1 January 2026, employment income attributable to activities on the high seas may therefore become fully taxable in Germany.
For shipping groups, this may result in additional payroll withholding obligations, increased compliance requirements and potentially significant net compensation costs. More broadly, the revised guidance suggests that, in German maritime taxation, operational and functional considerations may be gaining importance relative to the flag of the vessel as a connecting factor.
Permanent establishments: operational rootedness gains importance
"A similar trend is visible in the BMF guidance dated 18 June 2026 (“BMF guidance”) which sets out the principles applied by the tax administration regarding the concept and creation of permanent establishments under domestic and international tax law."
A similar trend is visible in the BMF guidance dated 18 June 2026 (“BMF guidance”) which sets out the principles applied by the tax administration regarding the concept and creation of permanent establishments under domestic and international tax law.[2]
The BMF guidance places particular emphasis on:
- actual operational activity;
- management functions;
- operational integration; and
- the ‘rootedness’ of business activities to a particular location.
From a maritime perspective, the BMF guidance is particularly noteworthy because it expressly addresses ships, floating infrastructure and offshore installations. Whilst vessels engaged in navigation generally do not constitute permanent establishments due to the lack of a fixed connection to the ground, the BMF guidance adopts a broader approach regarding permanently stationed maritime infrastructure. Permanently moored ships, floating energy facilities and offshore installations may constitute permanent establishments where sufficient operational permanence and power of disposal exist. This is particularly relevant given the continued expansion of offshore wind infrastructure and increasing investments in floating maritime assets.
The BMF guidance also places strong emphasis on management functions and explicitly rejects the concept of ‘floating income’ detached from operational management structures. Broader international developments point in a similar direction. Discussions surrounding the OECD Pillar Two framework and shipping-related income exclusions increasingly focus on where strategic or commercial management functions are exercised. Nevertheless, uncertainties remain regarding the interaction between traditional shipping tax concepts and Pillar Two rules, including the treatment of certain offshore activities and the scope of the ‘international traffic’ concept for Pillar Two purposes.
Collectively, these developments suggest that the tax treatment of maritime activities is increasingly being aligned with operational business realities, while previous structuring parameters may become less decisive.
"In practice, the decision sends a very clear message: Outsourcing core ship management functions abroad may jeopardise eligibility for the German tonnage tax regime."
Tonnage tax: domestic substance requirements tighten
The same substance-oriented direction is particularly visible in the decision of the German Federal Fiscal Court (Bundesfinanzhof, “BFH”, i.e. the highest German tax court) of 6 June 2024 (the “decision”) concerning the German tonnage tax regime under Section 5a of the German Income Tax Act (Einkommensteuergesetz, “EStG”).[3] The decision clarifies the meaning of Bereederung im Inland – the domestic ship management requirement for being eligible for the German tonnage tax regime. In this context, the court defined Bereederung as the technical, commercial, and personnel management of a vessel, i.e. the overall management of ship operations.
Most importantly, the BFH held that ship management activities being carrying out ‘predominantly’ in Germany is not sufficient. Rather, ship management must be conducted ‘almost exclusively’ in German.
The decisive factor is where the relevant management decisions are taken and supervised. The decision is particularly relevant for shipping structures involving outsourced technical managers, international crewing providers and cross-border ship management platforms.
The BFH further emphasised that particular significance must be given to:
- technical management;
- chartering activities; and
- the recruitment and ongoing employment of captains and officers.
In practice, the decision sends a very clear message: Outsourcing core ship management functions abroad may jeopardise eligibility for the German tonnage tax regime. For shipping groups, this significantly increases the importance of operational governance, domestic management structures and the clear allocation of key operational responsibilities.
"The decision is particularly relevant for any logistics and container shipping structures not eligible for the German tonnage tax regime."
Trade tax relief: economic function prevails over formal classification
Interestingly, whilst the BFH adopted a strict substance-oriented approach in the tonnage tax context, it simultaneously embraced a broader and more commercially driven interpretation in a recent trade tax decision.
In February 2026, the BFH ruled that the trade tax relief under Section 9 Number 3 of the German Trade Tax Act (Gewerbesteuergesetz, “GewStG”) also applies to revenues generated through voyage charter and slot charter arrangements. The decision is particularly relevant for any logistics and container shipping structures not eligible for the German tonnage tax regime.
Rejecting the restrictive interpretation by the tax authorities, the BFH adopted a broad functional interpretation of the provision and focused on the economic purpose of the shipping activity rather than formal civil law classifications.
Once again, this reflects the broader trend visible across recent maritime tax developments: economic substance increasingly prevails over formal categorisation.
"Whilst the respective law is yet to be introduced, the debate illustrates how German maritime taxation is becoming increasingly linked to broader industrial and energy policy objectives."
Offshore shipping and offshore wind: a maritime tax policy outlook
The next major development may already be emerging in the offshore sector. In April 2026, representatives of the German offshore wind industry welcomed the federal government’s announcement that the German tonnage tax regime may be extended to offshore vessels operating in the offshore wind sector.[4]
Currently, many offshore support vessels operating between German ports and offshore wind farms located in the German Exclusive Economic Zone (“EEZ”) do not qualify for the tonnage tax regime because these operations are not treated as ‘international traffic’ under current German tax rules. Industry representatives argue that this creates a significant competitive disadvantage compared to jurisdictions such as Denmark and the Netherlands, where comparable offshore activities already benefit from tonnage tax systems.
Alongside this, offshore support vessels, cable layers, crane ships and other specialised offshore assets are becoming increasingly relevant from both a tax and regulatory perspective, particularly in connection with FuelEU Maritime, EU ETS developments, offshore permanent establishment concepts and shipping-related Pillar Two rules.
Whilst the respective law is yet to be introduced, the debate illustrates how German maritime taxation is becoming increasingly linked to broader industrial and energy policy objectives. Offshore wind expansion, offshore logistics, port infrastructure and maritime supply chains are becoming strategically interconnected. Against this backdrop, current policy discussions reflect increasing pressure to adapt the existing maritime tax framework to changing operational and economic realities, particularly in relation to offshore wind and offshore support activities.
The direction of travel: substance over form
Recent developments in German maritime taxation reveal a remarkably consistent direction of travel. Across several areas, courts, tax authorities and policymakers are moving towards a more substance-oriented and function-based approach. Whether in the context of seafarer taxation, ship management structures, charter arrangements, permanent establishment concepts or offshore operations, the decisive question increasingly becomes where and how the relevant economic activity is carried out.
For internationally operating shipping and offshore groups, this means that existing structures should be reassessed not only from a legal perspective, but also from an operational and governance standpoint.
In this context, the growing interaction between maritime taxation, offshore expansion, and industrial policy highlights the increasing need for Germany’s maritime tax framework to adapt to changing operational and economic realities in the global shipping and offshore sector.
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Footnotes
[1] See BMF guidance dated 15 April 2025 – IV B 2 – S 1301/01408/007/001, Federal Tax Gazette (Bundessteuerblatt “BStBl.”) 2025 Part I, p. 1008.
[2] See BMF guidance dated 18 June 2026 – IV B 2 – S 1301/01410/007/264.
[3] See BFH decision dated 6 June 2024 – IV R 15/21, BStBl. 2024 Part II, p. 759.
[4] See https://www.wind-energie.de/presse/pressemitteilungen/detail/gemeinsame-pressemitteilung-ausweitung-der-tonnagesteuer-staerkt-windenergiestandort.
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