Bunker supply and VAT
There are many legal issues that operators should be aware of when deciding to supply bunkers in Argentina, not to mention operational issues regarding:
- the lack of barges available;
- delays due to weather; and
- congestion during the grain season.
In this context, the question of whether foreign-flagged ships involved in international trade are subject to value added tax (VAT) when supplying bunkers in Argentina is frequently posed.
If a vessel is supplied bunkers in one Argentine port and subsequently calls to another Argentine port before proceeding overseas, this is generally considered to be cabotage and is therefore subject to VAT.
By definition, ‘maritime cabotage’ concerns laws and regulations that restrict the right to transport goods or passengers by water between ports in the same country. If a ship loads in different port terminals in Argentina (eg, at a river berth and subsequently a southern port), the rule of cabotage is not triggered provided that the total cargo is carried abroad, as is the case in most operations.
Decree 19,492/1944 regulates maritime cabotage in Argentina. According to the decree, maritime cabotage is restricted to Argentine-flagged vessels that fulfil the following requirements:
- the vessel is registered in Argentina;
- the master and officers are Argentine nationals; and
- 25% of the crew are Argentine nationals.
In the case of force majeure, foreign-flagged vessels can be authorised by the government to transport goods or passengers between ports in Argentina.
Conversely, there are several Argentine regulations that address the use of flags of convenience for all types of transport (including cabotage). The Menem government introduced Decree 1772/91 in 1991, which authorised Argentine owners and charterers to use flags of convenience, but in 2004 the Kirchner government passed Decree 1010/2004, which required Argentine owners and charterers of vessels flying a flag of convenience to adopt the Argentine shipping registry. Nonetheless, Decree 1010/2004 authorised foreign registries where the demise charterer was based in Argentina and the charterparty was subject to the rules of temporary import.
In 2017, Decree 1010/2014 was replaced by Act 27,419 with the aim of developing a national merchant shipping fleet with several tax benefits for Argentine owners and charterers under the Argentine flag. Similar to the previous regime, the new regime includes the possibility of chartering with demise foreign flag vessels. These regulations do not affect bunker supply, apart from the tax benefits of Argentine shipping companies that aim to incorporate Argentine ships into their fleets.
Under Article 513 of the Customs Code, supplies to vessels not under the cabotage regime are considered exports by the Argentine supplier. Further, Article 8(d) of the VAT Regulation (Decree 280/1997) establishes that all exports are exempt from VAT. As a result, if a ship is bunkering in a common anchorage zone (eg, the city of La Plata) before proceeding upriver to Paraná, it will not be levied with VAT. A similar scenario exists when a ship partially loads upriver and bunkers before continuing loading in a southern port (eg, Necochea or Bahia Blanca).