The China based ships of Royal Caribbean Cruises, Ltd (RCCL) group, the world's second largest cruise shipping company, are managed and operated from the company's offices in the UK and are entered in the UK tonnage tax, RCCL said in its 2014 annual report.

"Our UK tonnage tax company operates ships in international transportation in China. The income earned from this operation is exempt from taxation in China under the UK/China double tax treaty and other circulars addressing indirect taxes," RCCL said.

"Changes to or failure to qualify for the treaty or circular could cause us to lose the benefits provided which would have a material impact on our results of operations. Our Chinese income from non-shipping activities or from shipping activities not qualifying for treaty or circular protection and which are considered insignificant, remain subject to Chinese taxation," RCCL stated.

RCCL operate 14 of its 43 ships under companies which have elected to be subject to the United Kingdom tonnage tax regime. "Companies subject to UK tonnage tax pay a corporate tax on a notional profit determined with reference to the net tonnage of qualifying vessels. Normal United Kingdom corporate income tax is not chargeable on the relevant shipping profits of a qualifying UK tonnage tax company."

"The requirements for a company to qualify for the UK tonnage tax regime include being subject to United Kingdom corporate income tax, operating qualifying ships, which are strategically and commercially managed in the United Kingdom, and fulfilling a seafarer training requirement.
Failure to meet any of these requirements could cause us to lose the benefit of the tonnage tax regime which will have a material effect on our results of operations," RCCL concluded.