On 6 November 2017, the European Commission approved Belgian tax measures supporting maritime transport, finding them in line with EU rules on State aid as they provide incentives to maintain maritime jobs within the EU, whilst preserving competition within the EU Single Market.
To address the risk of flagging out and relocation of shipping companies to low-tax countries outside of the EU, the Commission’s Guidelines on State aid to maritime transport of 2004 allow Member States to adopt measures that improve the fiscal climate for shipping companies. One of the most important measures provided for is tonnage tax, whereby shipping companies can apply to be taxed based on a notional profit or the tonnage they operate, instead of being taxed under the normal corporate tax system.
In this respect, under the Belgian scheme, a shipping company is taxed on the basis of ship tonnage rather than the actual profits of the company. In particular, tonnage taxation will be applied to a shipping company’s core revenues from shipping activities, such as cargo and passenger transport; to certain ancillary revenues that are closely connected to shipping activities; and to revenues from towage and dredging as well as onshore ship management activities, subject to certain conditions.
For a shipping company to benefit from the Belgian scheme, a significant part of its fleet shall fly the flag of an EU or European Economic Area (EEA) State. Therefore, in order to prevent any discrimination between shipping companies and registries of different EEA States and preserve internal market rules on freedom of establishment, the Belgian authorities have committed to extend the benefit of tonnage tax to all eligible ships that fly an EEA flag.
The measures have been prolonged until the end of 2022 and encourage shipping companies to register their ships in Europe, therefore ensuring higher social, environmental and safety standards.