Gert-Jan Koopman

Deputy-Director General State aid Policy

European Commission

KEYNOTE SPEECH

1
 EU maritime transport matters for the EU economy

• EU maritime transport continues to contribute to economic

growth and prosperity in the EU
 90% of freight exchanges of the EU with the RoW are seaborne
 Over 400 million sea passengers a year are travelling through EU ports
 Contribution to sustainable energy, food and commodities supplies in
the EU
 EU ownership/control of 37% of the world fleet by gross tonnage in
2017
 Direct employment of 183,000 EU seafarers in 2015
 23.7% of seafarers (officers only) globally were EU nationals in 2015

2
 Maritime Guidelines contribute to the EU as
an attractive location for maritime transport

Since the 80's, vessels flagged
out of the EU and shipping
companies relocated to low-tax
third countries
Several factors impact the
attractiveness of a location for
maritime transport: fiscal
incentives, skills base, quality of
the shipping register, ease of doing
business, etc.
What is the aim of the MG, which
allow for a more competitive fiscal
and social regime for EU maritime
transport under the State aid
rules?
 Encourage ship
registration in the EU
 Help the EU shipping
industry to remain
competitive on the global
market
 Preserve employment,
improve maritime know-
how and promote high
environmental standards

3
 Maritime Guidelines are a "one of a kind" SA instrument
• MG address (fierce) competition from third countries
 The fiscal and social regimes allowed under the MG constitute operating aid,
financing part of the day-to-day operations of a company
 The Commission generally considers operating aid to be particularly distortive.
However, these measures are allowed under certain conditions in the maritime
transport to increase the maritime transport EU competitiveness on a global
market

• State aid Modernization objectives

 The 2012 State aid Modernization ('SAM') exercise aimed to:
 Foster growth in a strengthened, dynamic and competitive internal market
 Focus enforcement on cases with the biggest impact on the internal market
 Streamline rules and faster decisions
 The 2004 MG pre-date the 2012 SAM and were not reviewed in this context
 However, the 2004 MG were subject to a public consultation in 2012. Based on
the results thereof, the Commission decided:
 Not to modify the MG for the time being, as the MG fostered EU employment and EU
competitiveness; and
 To provide further clarity on certain MG conditions through its decisional practice
4
 The Article 107(3) c TFEU State aid balancing test
forms the basis for the Maritime Guidelines application

+ -

5
 Maritime Guidelines Harmonized Standards

2009 GL No MG
Based on Development Consistent
review
on SA to ship 2012 public Harmonized application
2004 MG during
management consultation, Standards Harmonized
current COM
companies no review since 2012 Standards
mandate

6
Looking ahead
• The Commission progressively developed Harmonized Standards
since 2012 and has systematically enforced these, also in
recent decisions (e.g. Malta, Portugal). Examples include
clarification on:
• Eligibility conditions for service vessels
• Flag link requirements
• Eligibility conditions for bareboat chartering out

• The Commission is determined to pursue this line in the

medium-term and the aim of this meeting is to present these
standards to the MS today and sector representatives on 21 June

• The Commission will continue to assess each maritime

transport scheme on its own merits and will take into account
any relevant factor, even if this is a new element not yet
anticipated in the standards, in its assessment of compatibility

• The Commission confirms there will be no review during the

current Commission mandate

• We may consider to evaluate the 2004 MG at some point on the

basis of facts and figures to demonstrate e.g. the impact of the
MG, distortive effects within the EU, etc.
• From this perspective, the Commission considers a continued
open and transparent dialogue with stakeholders to be key

7
European Commission

MARITIME TRANSPORT
REGIMES -
INTRODUCTION
8
Current EU Maritime transport schemes
assessed under State aid rules
What fiscal measures to eligible operators are covered?

• The Maritime Guidelines apply to all tax

relief measures of a MS for eligible
maritime transport operators:
– Tonnage Tax = eligible maritime
transport operator pays an amount
of tax linked directly to the tonnage
operated, irrespective of the
company's actual profits or losses
– Other corporate fiscal incentives
to eligible maritime transport
operator

10
 What labour-cost reductions are covered?

• The Maritime Guidelines apply to the

following employment cost action by
Member States in the maritime transport
sector:
– Social security contributions
reductions for Community
seafarers employed on ships
registered in a MS
» Due by Employer and/or
» Due by Seafarer
– Income tax reductions for
Community seafarers on board
ships registered in a MS

 Specific objective of the Maritime Guidelines for seafarer schemes:

stimulation of the sector and employment, rather than general financial
assistance

11
Member States may choose to lower labour costs in 2 ways

Member States may choose to lower labour costs for

Community seafarers in 2 ways:

Apply reduced rates

Reimburse shipowners for these costs, provided:

1. There is clear link to the labour-cost levies
2. There is no element of overcompensation
3. The system is transparent and not open to abuse

12
 Duration of maritime transport regimes

RULE: According to established case law, (case C-67/09 P Nuova Agricast) aid
schemes cannot be approved as compatible aid under Article 107(3) TFEU
for an unlimited duration. Schemes must be subject to a regular review of
their effectiveness and impact.

• This rule applies irrespective of whether a MS adopts tonnage tax and

seafarer measures within one scheme through one general law or not

• In line with recent case practice, the Commission will accept a duration of
up to 10 years both for tonnage tax and seafarer schemes

13
European Commission

TONNAGE TAX SCHEMES

14
 TONNAGE TAX SCHEMES

• Scope of the MG
• Chartering (time, voyage and bareboat)
• Level of the tonnage tax
• Aid ceiling
• Hidden tax liabilities
• Preferential tax treatment of capital gains &
dividends for shareholders in shipping companies
• Flag link requirements

15
 What is the scope of the Maritime Guidelines?

• When assessing whether a measure falls within the

scope of the MG, three questions must be assessed:

1. Are the vessels eligible?

2. Are the operators of the vessel eligible?
3. Are the revenues of the vessel eligible?

16
Eligible vessels
Eligible operators
Eligible revenues

Which vessels may benefit?

General rule in MG:
• Only vessels involved in Maritime Transport
activities, i.e. the transport of goods and persons by
sea b/n ports, as well as b/n a port and an offshore
installation/structure

Also accepted in MG:

• Dredgers: if 50% consists of maritime transport
involving the transport of extracted materials at deep
sea
• Tugboats: if 50% of the towage activity during a
given year constitutes maritime transport

Accepted by analogy in case practice:

• Eligible "service vessels" (cable-laying vessels,
pipeline-laying vessels, crane and research vessels,
vessels providing rescue at sea and marine assistance
on the high seas)

17
Eligible vessels
Eligible operators
Eligible revenues

Ring-fencing of eligible vessels

Application • Certain service vessels are considered to be eligible for State aid,
by analogy although their main activity is not maritime transport, provided they
share three important common characteristics with vessels that
perform maritime transport:

1. they operate in regulatory environments in the EU similar

to that of EU maritime transport in terms of labour protection,
technical requirements and safety; and
2. they operate in a global market where they are subject to
international competition; and
3. there is a high risk of de-flagging and relocation

18
Eligible vessels
Eligible operators
Eligible revenues

Which operators of eligible vessels qualify?

Qualifying operators:

 Ship-owning companies

 Ship managers providing technical and/or crewing

services under certain conditions

19
Eligible vessels
Eligible operators
Eligible revenues

Ship managers: clear economic link w/ the Community

Economic link with the Community

Common  Economic link b/n ship management and the Community
eligibility
 Economic link b/n managed ships & the Community
conditions for
both  Compliance w/ Int'l & Community standards
technical and
crew ship  EEA flag entry requirement
managers

Additional  Adequate training of seafarers

eligibility
 Respect of social conditions
conditions for
crew ship
managers

Mere commercial ship managers

do not qualify!
20
Eligible vessels
Eligible operators
Eligible revenues

Which
Whichrevenues
revenuesofofeligible
eligiblevessels
vesselsqualify?
qualify?

Revenues from an eligible vessel

Core revenues from maritime transport

Ancillary revenues to maritime transport

Non-eligible revenues

+ "50%-rule" for dredging and towing activities

21
Eligible vessels
Eligible operators
Eligible revenues

50% rule for dredger and tugboats

Rules • Step 1: A dredger or tugboat is eligible only IF for more than 50% of
their annual operational time, their activities qualify as "maritime
transport", i.e. non-port specific activities
Non-exhaustive list

 Transport at deep sea of extracted  Towing barges b/n ports

materials  Towing barges b/n a port & off-
 Sailing b/n the port and the shore installation
extraction site Assisting a self-propelled
Dredging vessel to reach a port
Sailing while dredging Towage activities in a port

• Step 2: Only those revenues which qualify as "maritime

transport" are considered as eligible revenues
22
Eligible vessels
Eligible operators
Eligible revenues
Ring-fencing of eligible revenues
CORE revenues
• Ticket sales
• Cargo transportation
• Letting of cabins (maritime
voyage)
• Sale of food and drinks for
immediate consumption on
board
• Chartering activities (under
certain conditions)
ANCILLARY revenues
• Rental of advertising billboards
on-board
• Provision of services
customarily offered on
passenger ships, incl. spa,
hairdresser services, gambling
and other entertainment
services
• Renting out of ship premises to
shop and services' operators
Ring-fencing measures
Non-exhaustive list
NON-ELIGIBLE
revenues
• Activities whose purpose is not
transporting goods or
passengers, such as fishing
activities
• Acquisition of cars, livestock,
property
• Scheduled passenger transport
activity in inland or river
waters
23
 TONNAGE TAX SCHEMES

• Introduction
• Scope of the MG
• Chartering (time, voyage and bareboat)
• Level of the tonnage tax
• Aid ceiling
• Hidden tax liabilities
• Preferential tax treatment of capital gains &
dividends for shareholders in shipping companies
• Flag link requirements

24
There are different types of chartering

25
 When are chartering activities eligible?

• Key questions:
– Does the lessor (chartering-out the vessel) or the lessee
(chartering-in the vessel) carry out maritime transport
activities?
– Do the activities (otherwise) contribute to the objectives of the
MG?
• The following activities are therefore excluded in any case:
– Pure leasing activities
– Chartering-in of a purely non-EEA flagged fleet
• Under strict conditions, the Commission considers the following
activities as eligible:
– Chartering-in
– Bareboat chartering out

26
 When are chartering-in activities eligible?

Chartered • These chartering activities (i.e. bareboat chartering-in) contribute to

vessels the objectives of the MG (development of the EEA flag or preservation
equipped, of EU know-how or a combination of the two) and are considered
eligible
crewed
and/or
managed by
charterer

Chartered • The Commission has considered these chartering activities (i.e. time or
vessels NOT voyage chartering-in) to contribute to the MG objectives and
equipped, therefore to be eligible, for instance, if:
crewed or − For at least 20% of the fleet of the tonnage tax beneficiary, the
managed by crew and technical management is ensured by the beneficiary, or
charterer − At least 25% of the beneficiary's entire fleet is EEA-flagged
• In addition, the beneficiary must commit to maintain/increase the
share of EEA-flagged tonnage of its fleet

27
 When are bareboat charter-out activities eligible?
Rule • In principle, bareboat chartering-out is not a maritime transport
activity, but rather a leasing activity (main transport risk rests w/
lessee)
• Therefore, to limit unfair competition towards genuine leasing
companies, BBO activities may only be eligible for tonnage tax if they
address an ancillary temporary leasing activity (in particular a
situation of temporary overcapacity). The Commission has considered
this to be the case if the following conditions are fulfilled cumulatively:
 Bareboat chartering-out contracts are restricted to a maximum
period of three years
 The temporary chartering-out activity is related to the
beneficiary's own shipping services (this means that excess
capacity specifically acquired (bought or chartered) for chartering-
out purposes is ineligible for tonnage taxation); and
 At least 70% of the tonnage taxed fleet is still operated by the
tonnage tax beneficiary

• Intra-group bareboat charter activities are always eligible without

restrictions, since the beneficiary as a group performs maritime transport
through an intra-group leasing structure
28
 TONNAGE TAX SCHEMES

• Scope of the MG
• Chartering (time and voyage in, bareboat in and
out)
• Level of the tonnage tax
• Aid ceiling
• Hidden tax liabilities
• Preferential tax treatment of capital gains &
dividends for shareholders in shipping companies
• Flag link requirements

29
The Maritime Guidelines cap the the level of tonnage tax

RULE 1: The Commission will only approve tonnage tax schemes giving rise
to a tax-load for the same tonnage fairly in line with the schemes already
approved

RULE 2: Full tonnage tax exemption, even on a temporary basis, goes

against the principles of the Maritime Guidelines, because the tonnage tax
is due irrespective of whether any profit is made

Going forward, the Commission will therefore compare the taxation level of
tonnage tax schemes to verify that is not below what was accepted by the
Commission so far:

• on the basis of tax-loads/tonnage only (tonnage tax

reductions/rebates included) – this is the effective tax burden

• on the basis of calendar days only

30
 Parameters affecting the comparison

Comparison • Tonnage tax methodology: Tax base vs Tax load

• National corporate tax rates

• Currencies (euro or other)

• Vessel age

• Yearly adjustments

• Calendar days vs Operational days

• etc…
 TONNAGE TAX SCHEMES

• Scope of the MG
• Chartering (time and voyage in, bareboat in and
out)
• Level of the tonnage tax
• Aid ceiling
• Hidden tax liabilities
• Preferential tax treatment of capital gains &
dividends for shareholders in shipping companies
• Flag link requirements

32
 What is the maximum amount of aid?

Rule
• To ensure:

 A level playing field between Member States

 Member States do not enter into a subsidy race to attract

maritime transport activities

• The amount of aid under any (i.e. also other than tonnage tax)
corporate taxation measures of shipping activities can
never exceed:

• A reduction of corporate taxation to a tax load which is

fairly in line with the schemes already approved by
the Commission

33
 TONNAGE TAX SCHEMES

• Scope of the MG
• Chartering (time, voyage and bareboat)
• Level of the tonnage tax
• Aid ceiling
• Hidden tax liabilities
• Preferential tax treatment of capital gains &
dividends for shareholders in shipping companies
• Flag link requirements

34
Why are hidden tax liabilities relevant under the SA rules?

• Standard taxation regimes foresee that tax deferred

because of accelerated depreciation of ships is compensated
– by subsequent under-depreciation or
– by subsequent capital gains realised upon the sale of the ship
• Where a ship is over-depreciated and then enters into a TT
scheme, this subsequent compensation is avoided

• Therefore, the Commission requires a compensation

mechanism for over-depreciated ships entering into TT
schemes to avoid:
– that over-depreciated ships bought before the entry into TT
schemes would receive an additional advantage compared to
over-depreciated ships remaining under the standard taxation
regime

35
 What compensation mechanism is required?

Rules • Step 1: Determine the amount of the hidden liabilities at the time of
entry into the TT based on the amount of tax deferred A-B, with

A = the book value of the ship if it had been depreciated normally or

the market value of the ship; and

B = the actual book value of the ship

• Step 2: Settlement of the hidden liabilities and payment of corporate

profit tax on the remainder of the hidden liabilities:

 Preferred timing: at the time of entry into the TT, or

 Upon the expiry of 10 years from the entry into the tonnage tax
scheme or when the vessel is sold, whichever comes first
• In these cases, the hidden liabilities may be reduced by
10%/yr (up to the aid ceiling)

36
 TONNAGE TAX SCHEMES

• Scope of the MG
• Chartering (time, voyage and bareboat)
• Level of the tonnage tax
• Aid ceiling
• Hidden tax liabilities
• Preferential tax treatment of capital gains &
dividends for shareholders in shipping
companies
• Flag link requirements

37
 Dividends and capital gains from the sale of shares in
shipping companies are not eligible

Rule • The fiscal advantages permitted by the Maritime

Guidelines are restricted to revenues from maritime
transport activities

• Therefore, a Member State's normal tax levels apply to

the personal remuneration of shareholders and
directors of shipping companies (i.e. dividends and
capital gains from the sale of shares in shipping
companies)

38
 TONNAGE TAX SCHEMES

• Scope of the MG
• Chartering (time and voyage in, bareboat in and
out)
• Preferential tax treatment of capital gains &
dividends for shareholders in shipping companies
• Hidden tax liabilities
• Level of the tonnage tax
• Aid ceiling
• Flag link requirements

39
3 types of "flag link" requirements in TT schemes

There are 3 types

of flag link
requirements for
TT schemes:

I. EEA flag link

requirement

II. TT EEA flag

entry level

III.EEA flag entry

floor for new
entrants in TT
schemes

40
 I. EEA flag link requirement in TT schemes (1)

Rule • The scope of the TT scheme cannot be restricted to

national-flagged vessels only, but has to cover all EEA-
flagged vessels

41
 I. EEA flag link requirement in TT schemes (2)

Rationale • A restriction to national-flagged vessels is

discriminatory and prohibited under the internal
market rules (Art. 45, 49 and 63 TFEU).

• DG TAXUD has the power to launch an infringement

procedure against such restrictive schemes and has
pursued infringement procedures against Greece and
Italy in 2014. Both MS have since abandoned the
national-flag restrictions.

• DG COMP cannot declare such restrictive schemes

compatible under the State aid rules.

• The EEA flag link requirement reflects the spirit of the

MG, i.e. promote the competitiveness of the EU shipping
sector and the EU/EEA flag on the world market.

42
 II. TT EEA flag entry level
Rule
General rule
*
• If the tonnage share of EEA-flagged vessels of the entrant's fleet is below 60%:

 The beneficiary must commit to maintain or increase this share

 If the tonnage share falls below this level: no further tax relief for
additional non-Community flagged vessels

• *
If the share of EEA-flagged vessels of the entrant's fleet is above 60%:
*
 there is no such obligation for the beneficiary, as long as the share remains
above 60%

Derogation possible if
• No decrease in Community-flagged share of the global eligible tonnage in the MS
during the 3-yr period from the date when the relief was granted

• MS must report the award of such derogation to the Commission every 3 years

• Beneficiary complies w/ reporting obligations to MS

• No derogation possible for Tugboats & Dredgers

*On the date of entry into force of the 2004 MG or on the date of the COM's approval decision 43
 III. EEA flag entry floor for new entrants in TT scheme

Rule • The Commission recommends MS to include an EEA

flag tonnage share entry floor for new entrants of at
least 25%.

• Several MS have included such entry floor in their TT

regimes to promote the competitiveness of the EU
shipping sector and the EU/EEA flag on the world
market

44
European Commission

COST REDUCTION SCHEMES

FOR SEAFARERS

45
 COST REDUCTION SCHEMES FOR SEAFARERS

• Eligible seafarers
• Eligible vessels and activities
• Aid ceiling
• Flag link requirement

46
 Which seafarers are eligible?

Rule • Only "Community Seafarers" are eligible:

1. Community/EEA citizens liable to income taxation

and/or social security contributions in a Member
State, in the case of seafarers working on board
vessels (including roll on-roll off ferries) providing
scheduled passenger services between ports of
the Community; and

2. All seafarers liable to taxation and/or social

security contributions in a Member State, in all
other cases

47
 COST REDUCTION SCHEMES FOR SEAFARERS

• Eligible seafarers
• Eligible vessels and activities
• Aid ceiling
• Flag link requirement

48
 Which vessels/activities are eligible?

Rules • Labour-cost reductions for Community seafarers qualify

provided they are employed on vessels which:

 Are registered in a EU Member State

 Are eligible vessels accepted under tonnage tax

regimes

• Moreover, labour-cost reductions may only apply in

relation to eligible maritime transport activities
accepted under tonnage tax regimes

49
 COST REDUCTION SCHEMES FOR SEAFARERS

• Eligible seafarers
• Eligible vessels and activities
• Aid ceiling
• Flag link requirement

50
 What is the maximum amount of aid
in a seafarer scheme?

Rule
The amount of aid under a Seafarer scheme can never
exceed:

• a reduction to zero of income taxation and social charges

for seafarers

51
 COST REDUCTION SCHEMES FOR SEAFARERS

• Eligible seafarers
• Eligible vessels and activities
• Aid ceiling
• Flag link requirement

52
"flag link" requirement in seafarer schemes

There is 1 flag
link requirement
for TT schemes:

I. EEA flag link

requirement

53
 EEA flag link requirement in seafarer schemes (1)

Rule • The scope of the seafarer scheme cannot be restricted

to national-flagged vessels only, but has to cover all
EEA-flagged vessels.

54
 EEA flag link requirement in seafarer schemes (2)

Rationale • A restriction to national-flagged vessels is

discriminatory and prohibited under the internal
market rules (Art. 45, 49 and 63 TFEU).

• DG Taxud has the power to launch an infringement

procedure against such restrictive schemes and has
pursued infringement procedures against Greece and
Italy in 2014. Both MS have since abandoned the
national-flag restrictions.

• DG COMP cannot declare such restrictive schemes

compatible under the State aid rules.

• The EEA flag link requirement reflects the spirit of the

MG, i.e. promote the competitiveness of the EU shipping
sector and the EU/EEA flag on the world market.

55
Susana Batista
Deputy Director-General of Natural Resources, Safety and
Maritime Services, Portugal

RECENT CASE:
PORTUGUESE MARITIME
TRANSPORT SCHEME
56
DISCUSSION

57
Henrik Mörch
Director for Transport, Post & Other Services

CLOSING REMARKS

58
This document has been prepared for the European Commission; however, it reflects the views
only of the authors, and the Commission cannot be held responsible for any use which may be
made of the information contained therein.

59