Abstract
The German “KG System” is an almost unique national model to finance ships. It has been one of the cornerstones of the resurgence of the German merchant fleet after World War II. Germany counts today the largest container shipping fleet in the world. The vehicle to finance this remarkable growth has been the KG. The article investigates the historical emergence of the model, its various incarnations and practical applications, especially in conjunction with different tax models. Particular focus is put on the combination with the tonnage tax. The article further investigates the fund-vehicles that commonly used the combination of KG and tonnage tax, describes the participants and finally gives an outlook on the prospects of the model.
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Notes
- 1.
This is also referred to as KG-model or simply KG, which have the same meaning.
- 2.
With the changes to the German Commercial Code Handelsgesetzbuch that came into force on 25 April 2013, the incorporation of a Partenreederei has ceased to exist. Those that had been incorporated before can continue based on grandfather clause.
- 3.
He came in 1952 from Denmark.
- 4.
The 30,000 GT passenger ship had already had a colorful history as “Empress of Scotland”, “Empress of Japan”, and “Scotland”, when it was sold in 1958. It could accommodate almost 1,350 passengers. The usual route for the Hamburg Atlantic Line led from Cuxhaven to New York.
- 5.
The two leaders discussed the fall of the Berlin wall at this summit.
- 6.
Serious early movers in the new market were companies like DIVAG (1968), Conti (1970) and Norddeutsche Vermögen (1975) or Hansa Treuhand (1983).
- 7.
It should be noted in this context that whilst usually the term “tax loss” is used to describe the effects of this type of investment, it would be more appropriate to call this scheme “tax deferral,” as subsequent to the initial losses, taxable profits were to be generated by the ship-owning company.
- 8.
The “Flottenfonds” refers to a fleet of two or more ships.
- 9.
Some of the more prominent syndicators are Conti, HCI, MPC, Lloyd Fonds, König & Cie. and Nordcapital.
- 10.
This could also comprise profit realization or tax optimization.
- 11.
However, the historical returns for ships under the KG-system have been positive for more than 94 % of the projects from 2000 until 2011, with an average capital growth of 11.3 %.
- 12.
The latest study conducted by the government from 2006 showed in that year alone a fiscal net benefit from shipping of €167 million even in booming years for the industry. The net benefit has been much larger since the downturn.
- 13.
Nettoraumzahl or NRZ.
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© 2015 Springer-Verlag Berlin Heidelberg
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Johns, M., Sturm, C. (2015). The German KG System. In: Schinas, O., Grau, C., Johns, M. (eds) HSBA Handbook on Ship Finance. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-43410-9_4
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DOI: https://doi.org/10.1007/978-3-662-43410-9_4
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