Limit for charter in of tonnage - Section 115VV

Limit on charter in tonnage restricts chartered in proportion and can terminate a company's tonnage tax option.

Section 115VV and Rule 11S restrict a tonnage tax company so that not more than 49% of the net tonnage of qualifying ships may be chartered in during a previous year, with average net tonnage computed by reference to chartered in ton days divided by total ton days. If the chartered in net tonnage exceeds the limit for a year, the company's total income for that year is computed as if the tonnage tax option did not apply; two consecutive years of breach cause the option to cease from the beginning of the subsequent previous year. Bareboat charter cum demise charters are excluded from chartered in treatment.