Community approach to State aid for transport by sea

This instrument aims to improve transparency and determine which State aid programmes may be launched in order to support Community maritime interests.

ACT

Community approach to State aid for transport by sea [Official Journal C 205, 05.07.1997].

SUMMARY

Historical background

The aim of the Community's maritime policy has been to ensure freedom of access to maritime transport markets throughout the world for safe, non-polluting ships, if possible flying the flags of Community Member States and crewed by nationals of Member States. This approach has enabled markets to be opened up and a broad spectrum of maritime transport operations to be offered to the consumer. However, for many reasons the number of ships flying Member State flags and the number of Community seafarers employed have shrunk considerably.

The lack of competitiveness of Community flags was recognised in the late 1980s and, in the absence of Community harmonising measures, the Member States unilaterally took action in order to safeguard their seafaring interests. In 1989 the Commission mapped out the initial approaches in order to ensure a certain consistency among the Member States' activities. Those approaches have been re-examined, particular account being taken of, their fiscal aspects.

Scope and general aims of the revised approaches to State aid

The current approaches cover all of the aid given to maritime transport by the Member States of the Community or via public monies. That includes all financial benefits, in whatever form, funded by the public authorities, that concept extending to public companies and State controlled banks.

The existing approaches do not cover aid granted to shipyards under Directive 90/684/EEC, nor do they draw any distinction between recipient types in terms of their legal status (companies, partnerships, private individuals), nor between the public and private sectors.

Without exception State aid may only be granted for ships registered in Member States. The reasons for this are as follows:

• to safeguard Community jobs throughout the seafaring sector;
• to maintain Community seafaring know-how and to develop seafaring skills;
• to improve safety.

Taxation of shipping companies

Several non-member countries offer tax incentives that attract shipowners. They see in this good reasons for switching flags and contemplating relocation. In order to combat this fiscal competition several Member States have taken action that is intended to make their tax environment more attractive to shipping companies. Such tax abatements are considered to be State aid.

Since the aim of State aid within the common transport policy is to boost the competitiveness of Community fleets on the world market for sea transport services, tax concession systems require, without exception, a link with a Community flag.

Moreover, since the aim is also to help to expand the maritime transport sector and the number of jobs within that sector in the Community's interest, the tax incentives must be restricted to maritime transport activities. The Member States' normal taxation practice is maintained for all other activities, shareholder dividends and directors' pay.

Salary costs

In terms of State aid and the cutting of labour costs maritime transport is a particular case since such aid may be considered to be compatible with the common market (Commission Notice on monitoring of State aid and reduction of labour costs - Official Journal C 1, 03.01.1997).

However, the aim of support for the maritime sector must be to reduce the costs and tax burdens borne by Community shipowners and seafarers (i.e. those subject to the tax system and/or social security contributions in a Member State) to levels comparable with those in the rest of the world.

As part of its approach the Commission advocates authorisation of the following:

• reducing the social contributions made by Community seafarers working on board ships flying a Member State flag;
• reducing the income tax paid by Community seafarers working on board ships flying a Member State flag.

Crewing relief

The aid for crewing relief is intended to lower the cost of employing seafarers on board ships sailing in distant waters. That aid may be granted in the form of payments or of reimbursing the cost of repatriating Community seafarers working on ships flying Member State flags.

Investment aid

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

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

Training

Where training includes State aid components this must be notified. State aid for training is authorised when this meets the Commission's general criteria such as proportionality, non-discrimination and transparency.

Public service obligations (PSO) and contracts

In its assessment of the contracts concerning PSO the Commission feels that making good the operating losses directly incurred by meeting certain public-service obligations does not constitute aid within the meaning of Article 92(1) of the Treaty. Notification under Article 93 (1) 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.

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

Last updated: 14.09.2007