2018 Annual Report for Norwegian Cruiseline Holdings - 31

Our revenue is seasonal, owing to variations in passenger fare rates and occupancy levels at different times of the year. We may not be
able to generate revenue that is sufficient to cover our expenses during certain periods of the year.
The demand for our cruises is seasonal, with the greatest demand for cruises generally occurring during the Northern Hemisphere's summer
months. This seasonality in demand has resulted in fluctuations in our revenue and results of operations. The seasonality of our results is
increased due to ships being taken out of service for Dry-docks, which we typically schedule during off-peak demand periods for such ships.
Accordingly, seasonality in demand and Dry-dock periods could adversely affect our ability to generate sufficient revenue to cover the
expenses we incur during certain periods of the year.
Risks Related to the Regulatory Environment in Which We Operate
Future changes in applicable tax laws, or our inability to take advantage of favorable tax regimes, could increase the amount of taxes we
must pay.
We believe and have taken the position that our income that is considered to be derived from the international operation of ships as well as
certain income that is considered to be incidental to such income ("shipping income"), is exempt from U.S. federal income taxes under
Section 883, based upon certain assumptions as to shareholdings and other information as more fully described in "Item
1-Business-Taxation." The provisions of Section 883 are subject to change at any time, possibly with retroactive effect.
We believe and have taken the position that substantially all of our income derived from the international operation of ships is properly
categorized as shipping income and that we do not have a material amount of non-qualifying income. It is possible, however, that a much
larger percentage of our income does not qualify (or will not qualify) as shipping income. Moreover, the exemption for shipping income is
only available for years in which NCLH will satisfy complex stock ownership tests or the publicly traded test under Section 883 as described
in "Item 1-Business- Taxation-Exemption of International Shipping Income under Section 883 of the Code." There are factual
circumstances beyond our control, including changes in the direct and indirect owners of NCLH's ordinary shares, which could cause us or
our subsidiaries to lose the benefit of this tax exemption. Finally, any changes in our operations could significantly increase our exposure to
either the Net Tax Regime or the 4% Regime (each as defined in "Item 1-Business-Taxation"), and we can give no assurances on this
matter.
If we or any of our subsidiaries were not to qualify for the exemption under Section 883, our or such subsidiary's U.S.-source income would
be subject to either the Net Tax Regime or the 4% Regime (each as defined in "Item 1- Business- Taxation). As of the date of this filing,
we believe that NCLH and its subsidiaries will satisfy the publicly traded test imposed under Section 883 and therefore believe that NCLH
will qualify for the exemption under Section 883. However, as discussed above, there are factual circumstances beyond our control that could
cause NCLH to not meet the stock ownership or publicly traded tests. Therefore, we can give no assurances on this matter. We refer you to
"Item 1-Business-Taxation."
We may be subject to state, local and non-U.S. income or non-income taxes in various jurisdictions, including those in which we transact
business, own property or reside. We may be required to file tax returns in some or all of those jurisdictions. Our state, local or non-U.S. tax
treatment may not conform to the U.S. federal income tax treatment discussed above. We may be required to pay non-U.S. taxes on
dispositions of foreign property or operations involving foreign property that may give rise to non-U.S. income or other tax liabilities in
amounts that could be substantial.
The various tax regimes to which we are currently subject result in a relatively low effective tax rate on our worldwide income. These tax
regimes, however, are subject to change, possibly with retroactive effect. For example, legislation has been proposed in the past that would
eliminate the benefits of the exemption from U.S. federal income tax under Section 883 and subject all or a portion of our shipping income to
taxation in the U.S. Moreover, we may become subject to new tax regimes and may be unable to take advantage of favorable tax provisions
afforded by current or future law, including exemption of branch profits and dividend withholding taxes under the U.S. - U.K. Income Tax
Treaty on income derived in respect of our U.S.-flagged operation.
We are subject to complex laws and regulations, including environmental laws and regulations, which could adversely affect our
operations and any changes in the current laws and regulations could lead to increased costs or decreased revenue.
Increasingly stringent and complex international, federal, state, and local laws and regulations addressing environmental protection and
health and safety of workers could affect our operations. The IMO, a United Nations agency with responsibility for the safety and security of
shipping and the prevention of marine pollution by ships, the Council of the European Union, individual countries, the United States, and
individual states have implemented and are considering, new laws and rules to manage cruise ship operations. Many aspects of the cruise
industry are subject to international treaties such as SOLAS, an international safety regulation, MARPOL, IMO's requirements governing
environmental protection, and STCW, an IMO regulation governing ship manning. In the United States, the Environmental Protection
Agency and the U.S. Coast Guard both have regulations addressing cruise ship operations.

2018 Annual Report for Norwegian Cruiseline Holdings

Table of Contents for the Digital Edition of 2018 Annual Report for Norwegian Cruiseline Holdings