European Commission Gives State Aid Approval to Belgian Maritime Transport Package
On 6 November 2017, the European Commission approved, under the European Union's State aid rules, various Belgian tax measures designed to assist the maritime transport sector.
In essence, the Commission approved, under the EU State aid rules, the prolongation until end of 2022 of various Belgian support measures for maritime transport including measures to encourage shipping companies to register their ships in the EU and to ensure higher social, environmental and safety standards.
As part of the approval process, Belgium committed to a number of changes to its scheme to prevent any discrimination between shipping companies and registries of different European Economic Area ("EEA") States and to avoid undue competition distortions. This was because the European Commission (as guardian of the EU treaties) must ensure that there is no discrimination between nationals of the EU/EEA.
Under the approved Belgian scheme, a shipping company is taxed on the basis of ship tonnage (i.e., based on size of shipping fleet) rather than the actual profits of the company – this is the so-called "tonnage tax" concept which is now used by several States. In particular, tonnage taxation will be applied to a shipping company's:
- core revenues from shipping activities, such as cargo and passenger transport;
- certain ancillary revenues that are closely connected to shipping activities (which are now capped at a maximum of 50% of a ship's operating revenues); and
- revenues from towage and dredging as well as onshore ship management activities, subject to certain conditions.
The Belgian scheme requires that if a shipping company wants to benefit from the scheme, a significant part of its fleet flies the flag of an EU or EEA State (and not just Belgium). In this regard, Belgium has committed to extend the benefit of tonnage tax to all eligible ships that fly an EEA flag. This will prevent any discrimination between shipping companies and registries of different EEA States and preserve internal market rules on freedom of establishment.
In its press release, the Commission stated that it had assessed the amended measures under EU State aid rules, in particular its 2004 Guidelines on State aid to Maritime Transport. The 2004 Guidelines were entitled the "Community guidelines on State aid to maritime transport". The 2004 Guidelines were recently updated.
The Commission concluded that the Belgian scheme is in line with EU State aid rules, because it will provide incentives to maintain maritime jobs within the EU, while preserving competition within the EU's Single Market. More specifically, it will encourage shipping companies to register their ships in Europe and thus commit to high social, environmental and safety standards.
This decision prolongs the earlier European Commission decision to approve the Belgian tax measures in favour of maritime transport until 31 December 2012 in State aid case C 20/2003. It also follows a line of recent decisions including the Swedish tonnage tax scheme, a German scheme for the reduction of social contributions for seafarers and the Lithuanian tonnage tax scheme.
In general, the European Commission has been favourably disposed towards Member States' State aid schemes which help promote the maritime sector in the EU/EEA provided such schemes operate on a non-discriminatory basis.
Date published: 13 November 2017