In-depth investigation into Maltese tonnage tax regime
By Isabelle Smets | Wednesday 25 July 2012
Malta may have to review its tonnage tax system. The European Commission has doubts as to whether it is compatible with EU state aid rules. The Commission therefore announced, on 25 July, that it had opened an in-depth investigation.
Tonnage tax is a favourable tax scheme, which is very common in the EU. It allows maritime companies to pay a fixed tax calculated according to the tonnage of their fleet, instead of paying the conventional corporate income tax.
In the Commission’s view, the scope of the Maltese tonnage tax scheme seems too wide, as it includes fishing vessels, yachts, oil rigs, ship owners without any shipping activity of their own (ie pure lessors) and financial institutions providing loans and guarantees to ship owners, operators, managers or administrators. “This seems neither justified from a competition perspective, nor appropriate in times of high budgetary constraints,” said Joaquín Almunia, the commissioner in charge of competition policy.
Given the multitude of exemptions and reductions available, the level of tax burden for a given tonnage is lower in Malta than in other member states. This could potentially make the Maltese tonnage tax system more attractive than the ones applied in the rest of the EU. Moreover, no sufficient safeguards are established to ensure that benefits available under the tonnage tax do not spill over to non-shipping activities of the beneficiaries.
The Commission therefore has concerns that the Maltese scheme may lead to distortions of competition in the EU by potentially attracting companies and vessels from other member states.