State aid — maritime transport

SUMMARY OF:

Communication C(2004) 43 — Community guidelines on State aid to maritime transport

Communication updating the annex to Communication C(2004) 43 — Community guidelines on State aid to maritime transport

WHAT IS THE AIM OF THE COMMUNICATIONS?

They aim at further ensuring a favourable tax environment for ship owners to counter international competition by open registers* and flags of convenience*.

KEY POINTS

Scope

The guidelines:

cover all aid given to maritime transport by EU countries or via public monies:
- includes all financial benefits, in whatever form, funded by the public authorities, extending to public companies and state-controlled banks;
do not cover aid granted to shipyards;
confirm that State aid may only be granted for ships registered in EU countries.

The communication updating the annex updates the list of ship registers located in EU countries.

Objectives

The guidelines are designed to ensure that the companies and individuals are aware of their rights and obligations and to clarify what State aid schemes may be introduced in order to support the EU maritime interest, with the aim of:

improving a safe, efficient, secure and environmentally friendly maritime transport;
encouraging the flagging or re-flagging of ships to EU registers;
contributing to the consolidation of the maritime cluster established in EU countries while maintaining an overall competitive fleet on world markets;
maintaining and improving seafaring know-how and protecting and promoting employment for European seafarers.

Taxation of shipping companies

To combat tax incentives offered by several non-EU countries, a number of EU countries have taken steps to make their tax environment more attractive to shipping companies. Such tax abatements are considered to be State aid.
To comply with the aim of boosting the competitiveness of EU fleets in the world market for sea transport services, any tax concession must be:
- linked with the flag of an EU country; and
- restricted to maritime transport activities.

Salary costs

Cutting labour costs for maritime transport may be considered compatible with the common market as long as it supports the aim of reducing the costs and tax burdens borne by EU ship owners and seafarers to levels comparable with those in the rest of the world.
In this respect, the European Commission advocates authorising a reduction in:
- social contributions made by EU seafarers working on board ships flying an EU country flag;
- income tax paid by EU seafarers working on board ships flying an EU country flag.

Investment aid

Investment in new vessels must obey the rules that apply to shipbuilding. Other forms of investment aid may be authorised in accordance with EU policy on safety at sea where it is a matter of:

improving on-board equipment;
promoting the use of reliable, non-polluting ships.

Public service obligations and contracts

Compensation for the operating losses directly incurred by meeting certain public service obligations does not constitute aid within the meaning of Article 107(1) of the Treaty on the Functioning of the European Union (TFEU). Notification under Article 108(1) TFEU is therefore not necessary if:
- there has been a public invitation to tender;
- the call for tenders was accompanied by adequate publicity;
- there has been no over-compensation or cross-subsidy.

Restrictions on aid

The current approach lays down a maximum aid level corresponding to:

the calculation of the tax and social charges applying to seafarers;
the cancellation of the tax on shipping company turnover.

To avoid any distortion of competition it should not be possible for greater benefits to be conferred by means of other aid systems.

FROM WHEN DO THE GUIDELINES APPLY?

They have applied since 17 January 2004.

KEY TERMS

Open register: a registry which does not have a nationality or residency requirement for ship registration.

Flag of convenience: a business practice whereby a ship’s owners register a merchant ship in the registry of a country other than their own, and the ship flies the flag of that country.

MAIN DOCUMENTS

Commission communication C(2004) 43 — Community guidelines on State aid to maritime transport (OJ C 13, 17.1.2004, pp. 3-12)

Communication from the Commission — Updating the annex to Commission Communication C(2004) 43 — Community guidelines on State aid to maritime transport (OJ C 120, 13.4.2017, pp. 10-11)