Tax Update Shipping & Offshore - September 2026
The past few months have seen a number of interesting developments affecting the shipping, and offshore sectors. A recurring theme is the continued expansion of source-country taxing rights and the growing focus of tax authorities on the location of assets and activities. This can be seen in the recent Ørsted arbitration concerning the allocation of taxing rights over offshore wind farms, the publication of the 2025 update to the UN Model Tax Convention introducing a new article for natural resource activities, and updated guidance on the international shipping exclusion under Pillar Two in the UK.
At the same time, jurisdictions continue to adapt their tax frameworks to remain attractive locations for maritime and offshore investment. Examples include Lithuania’s proposal to extend its tonnage tax regime by another decade, Angola’s introduction of additional fiscal incentives for deepwater and ultra-deepwater oil developments and Mauritius’ further implementation of the OECD Pillar Two framework.
In this edition, we discuss these developments and their potential implications for shipping companies, offshore contractors, energy groups and investors active in the maritime and offshore sectors.
We hope you enjoy reading this update.
Table of Contents
- 1. UK obtains taxing rights over Ørsted offshore wind farms
- 2. United Nations publishes 2025 Model Tax Convention
- 3. Lithuania proposes extension of tonnage tax regime until 2036
- 4. Angola approves additional tax incentives for offshore oil developments
- 5. Mauritius issues detailed QDMTT regulations
- 6. United Kingdom updates Pillar Two guidance on international shipping
1. UK obtains taxing rights over Ørsted offshore wind farms
An important development for the offshore energy sector concerns the taxation of large-scale offshore wind projects. Danish renewable energy group Ørsted recently announced that an advisory commission established under the EU Arbitration Convention has issued its final opinion in the long-running dispute between the Danish Tax Agency and HM Revenue & Customs concerning the taxation of the Walney Extension and Hornsea 1 offshore wind farms.
According to the commission, the projects have a genuine legal and economic presence in the United Kingdom and should therefore primarily be taxed in the UK, where the wind farms are located and generate their revenues. The dispute dates back to 2015, when Ørsted sought agreement between the Danish and UK tax authorities regarding the allocation of taxing rights in order to avoid double taxation. When the authorities failed to reach agreement, the case was referred to arbitration.
The final opinion largely confirms the position applied by Ørsted throughout the life of the projects. While the decision results in a limited upward adjustment of the company’s Danish tax position, this is expected to be largely offset by corresponding tax reductions in the United Kingdom.
From a tax treaty perspective, the case is particularly interesting because it concerns the allocation of profits derived from offshore assets situated on the UK continental shelf. The decision appears to support the principle that profits attributable to offshore energy projects should primarily be taxed in the jurisdiction where the assets are physically located and operated, rather than where financing, management or ownership structures are established. As offshore wind, carbon capture and other offshore energy projects continue to expand internationally, the outcome may prove influential in future cross-border disputes involving offshore infrastructure.
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2. United Nations publishes 2025 Model Tax Convention
The trend towards greater source-country taxation is also reflected in the recently published 2025 update of the UN Model Tax Convention. One of the most significant developments for the offshore and extractive industries is the introduction of new Article 5A, Income from the Exploration for, or Exploitation of, Natural Resources.
Under this provision, a non-resident enterprise carrying out exploration or exploitation activities in another state will generally be deemed to have a permanent establishment in that jurisdiction where those activities exceed an aggregate threshold of 30 days within a twelve-month period. For offshore drilling contractors, seismic operators and service providers active in the natural resources sector, this represents an important expansion of source-state taxing rights.
The update goes beyond natural resource activities alone. It also introduces a new subject-to-tax mechanism, a broader source-based taxing rule for services under new Article 12AA, a new Article 12C concerning insurance premiums and revisions to Article 8 dealing with international transport income. Taken together, these amendments further strengthen source-country taxing rights and are likely to influence future treaty negotiations, particularly in developing and resource-rich jurisdictions.
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3. Lithuania proposes extension of tonnage tax regime until 2036
While international discussions continue to evolve around taxing rights, a number of maritime jurisdictions remain focused on preserving the competitiveness of their shipping sectors. Lithuania has published draft legislation extending its tonnage tax regime until 31 December 2036.
The proposal would continue the existing fixed-profit taxation regime for qualifying shipping activities for an additional ten years beyond its current expiry date in 2026. In addition, the draft legislation removes certain restrictions on intra-group bareboat charter arrangements, providing greater flexibility for shipping groups operating centralized fleet structures.
According to the explanatory materials accompanying the proposal, the amendments are intended to strengthen the competitiveness of Lithuania's maritime sector and provide long-term certainty for companies operating under the tonnage tax regime. The proposal follows a broader European trend whereby countries continue to modernise and refine their maritime tax regimes in order to remain attractive locations for shipping activities.
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4. Angola approves additional tax incentives for offshore oil developments
Resource-rich jurisdictions continue to use targeted fiscal measures to attract investment into increasingly complex offshore projects. In this context, the Angolan National Assembly has approved legislation authorising the President to introduce additional tax incentives for a number of offshore oil concession areas, including several deepwater and ultra-deepwater blocks.
According to the government, the measures are intended to support investments in projects facing significant technical complexity, elevated development costs and substantial geological risks. The incentives cover concession areas including Blocks 17/25, 19, 32/21, 33/24, 34 and 35.
The authorities have indicated that the objective is to attract investment, preserve production levels and support the continued development of Angola’s offshore petroleum sector. The measures form part of a broader strategy aimed at maintaining competitiveness as exploration increasingly shifts towards more challenging deepwater projects requiring substantial capital expenditure and specialised offshore expertise.
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5. Mauritius issues detailed QDMTT regulations
Against the backdrop of the global implementation of Pillar Two, Mauritius has issued comprehensive regulations implementing its Qualified Domestic Minimum Top-Up Tax (QDMTT).
The regulations provide detailed guidance on the calculation of GloBE income, adjusted covered taxes, substance-based income exclusions, safe harbours, transition rules and compliance requirements. The QDMTT applies to multinational groups meeting the EUR 750 million consolidated revenue threshold and is intended to ensure that income arising in Mauritius is subject to an effective tax rate of at least 15%.
For many international groups active in shipping, offshore services, infrastructure and energy investments, Mauritius continues to play an important role as a holding and investment jurisdiction. The regulations therefore complete an important part of the country's Pillar Two framework and provide greater certainty regarding the operation of the domestic minimum tax regime.
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6. United Kingdom updates Pillar Two guidance on international shipping
Another development relevant for international shipping groups concerns the application of Pillar Two to shipping income. HM Revenue & Customs has updated its guidance on the international shipping income exclusion under the UK’s Multinational Top-up Tax and Domestic Top-up Tax rules.
Under the guidance, qualifying core international shipping income is excluded from the effective tax rate calculation, while ancillary shipping income may qualify for exclusion subject to a cap of 50% of the relevant core shipping income. The guidance therefore provides important clarification on one of the key sector-specific exclusions included within the Pillar Two framework.
HMRC has also provided further guidance on the requirement that the strategic or commercial management of each ship must be effectively carried on from the jurisdiction in which the relevant group entity is located. As the test applies to vessels operated under different ownership and leasing arrangements, shipping groups may wish to revisit existing operational and management structures to ensure continued compliance with the exclusion requirements.
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