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Brussels, 30 October 2003

Commission gives strong support to European maritime transport sector

The Commission unveiled the new Guidelines on State aid to maritime transport. These guidelines follow the same approach as their former 1997 version but they are strongly reinforcing the monitoring of the effects of State aid and provide new guidance on tax exemptions rules for seafarers and public support to Short Sea Shipping. The new framework will continue to allow Member States to support the European maritime industry by means of favourable tax environments while ensuring a level playing field in the internal market. “Maritime Transport is of great importance for the EU due to its impact in economic and social terms, but also on environmental grounds” explained Loyola de Palacio, European Commission vice-president in charge of transport and energy. “The new framework will significantly contribute to its promotion and give the needed instruments for maintaining a competitive and of quality EU flag. This will also have a relevant impact on employment and maritime safety issues” she added.

The Commission has adopted yesterday a new Communication on State aid Guidelines to maritime transport that aims at further ensuring a favourable tax environment for ship-owners to counter international competition by open registers and flags of convenience. Tonnage tax schemes, reduced fiscal and social security contributions for seafarers and training aid will be allowed to this effect. Shipping companies may continue to benefit from those measures as far as they respect safety, environmental and social standards on their ships.

As for the new provisions contained in the 2003 guidelines, they include:

New, clearer provisions on seafarers tax exemptions. As a matter of principle, the new communication allows such cost alleviation for all seafarers, irrespective of their nationality or residence. However, in the case of seafarers serving on board ships providing regular passenger services between ports of the Union, such schemes shall only apply to EU/EEA citizens, as most EU citizens are employed on this kind of ships.

A still flexible but more effective « flag-link » principle for tax arrangements. The flag-link is the requirement that ships fly the flag of a Member State in order to qualify for State aid. Even though tax arrangements such as tonnage taxes may continue to be "flag-neutral“,shipping companies operating less than 60% of their tonnage under an EU flag will have to maintain under an EU flag at least the same tonnage which they will have when the new communication enters into force. Otherwise they will not be able to benefit of the measure for any non EU-flagged vessel added to their fleet. Member States may derogate from this rule only if their EU tonnage is not decreasing. Moreover, they will have to provide the Commission with regular reports to this effect as well as with proof of the respect of the other requirements for derogating from the flag-link principle.

New specific rules for Short Sea Shipping. Guidance for State aid to Short Sea Shipping has been introduced. Aids may be granted for the launching phase of new services and must be of a kind to permit transport (of cargo essentially) by road to be carried out wholly or partly by sea. They must be limited in time (3 years maximum). Recipients have to be selected in a transparent and non-discriminatory manner.

Other features regard: new guidance on tonnage taxes and other similar tax arrangements as well as specific provisions for towage and dredging for which the actual operation of vessels at sea is the main criterion for eligibility.


    Fighting against flagging-out

The Union has been fighting against the flagging-out of European fleets for many years. For this purpose, the Commission already adopted two communications, in 1989 and in 1997, laying down the requirements that Member States have to fulfil when providing State aid to this sector. The objective is to maintain as many ships as possible under an EU flag whilst ensuring a level playing field in the internal market.

    Assessment of the existing guidelines

The Commission assessed the existing guidelines in 2002. The exercise started with a questionnaire sent to the Member States in January last year. Both a study of the replies to the questionnaire and a wide consultation of stakeholders were carried out.

The consultation and the study revealed that the present guidelines gave satisfactory results and contributed to reverse the trends of abandoning EU flags. Therefore the EU Commission intends to maintain and strengthen its policy. Nevertheless, it also showed that some measures had to be more detailed and new considerations had to be added, as the promotion of short-sea shipping and the clear definition of the seafarers.

    Aid schemes in the Member States

The main schemes adopted by the Member States in this sector are the so-called tonnage taxes, as well as the tax alleviation schemes for seafarers. Tonnage tax means that the shipowner pays an amount of tax linked directly to the tonnage operated: it will be paid irrespective of the company's actual profits or losses. Tonnage tax schemes exist in Belgium, Denmark, Finland, France, Germany, Ireland, Greece, Netherlands, Spain, UK. Labour cost related measures are in force in Belgium, Denmark, France, Finland, Germany, Italy, Greece, the Netherlands and Sweden.

According to the replies of the Member States to the Questionnaire sent in January 2002 and to recent data(1), the Member States which introduced aid measures, in particular by means of tax relief, obtained good results in terms of a significant volume of tonnage being re-flagged. In terms of percentage, the fleet registered in the registers of the Member States increased on average by 0.4% per year in number of ships, and of 1.5% in tonnage. This percentage raises to 12,4% in the case of container ships. In spite of this, the share of the world tonnage registered in the Member States has slightly decreased.

    Public service obligations and contracts

In the field of maritime cabotage, public service obligations may be imposed or public service contracts may be concluded provided they and their compensations fulfil the conditions of EC Treaty and procedures as interpreted by the Court of Justice. The Commission also accepts that if an international transport service is necessary to meet imperative public transport needs, public service obligations may be imposed or public service contracts may be concluded, provided that any compensation is also subject to EC Treaty state aid rules and procedures.

The duration of public service contracts should be limited to a reasonable and not overlong period, normally in the order of six years, since contracts for significantly longer periods could entail the danger of creating a (private) monopoly. Current tenders remain into force and specific rules for small islands are also considered in a separate legislation (see IP/03/1483)

(1)ISL, Shipping Statistics 2001

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