Contributions from Nctm Offices Around the World | Shipping & Transport Bulletin February – March 2020

Taxation of Ports in Spain and in Italy

EU state aid policy recognises that ports are key infrastructure for the EU economy and thus are entitled to state aids so long as they come within the criteria set by the Commission. The non-taxation of profits from commercial activities is not allowed. The Commission has not requested that Italy, as from 1 January 2020, remove the exemption from tax of the commercial and profit-making activities of Italian ports. While the exemption in Spain was somewhat different, Spain has also been requested to bring its tax regime into line. Similar decisions were made in relation to France, Belgium and the Netherlands. The Commission continues to investigate the situation in the remaining EU member states.

New Commissioner for Transport: maritime sector to come within Carbon cap and trade

The Romanian, Adina-Ioana Valean, has been appointed as Commissioner for Transport in the new Von der Leyen Commission. She is an ex member of the European Parliament and is therefore an experienced Brussels hand. Each Commissioner has been given a Mission Letter setting out what the Commissioner must achieve over the next five years.
For Valean the Mission Letter says that she must work towards:

  • Sustainable and smart mobility,
  • Extend the Carbon Emissions Trading System to the maritime sector,
  • Work towards global emissions reduction in airline and all sectors,
  • Work towards zero emissions in the EU,
  • To review the Energy Taxation Directive,
  • Complete the trans-European networks,
  • Ensure the respect for passenger rights,
  • Sustainable and Competitive tourism.

Each of these objectives must be achieved in cooperation with the other 26 Commissioners (the UK did not nominate a Commissioner due to the exit from EU). On that point, the last objective mentioned in the Mission letter is to contribute to achieving an ambitious and strategic partnership with the UK.

Foreign Investment, State Aids and the Belt and Road initiative

The new Von der Leyen Commission which took office in December 2019 has made dealing with unfair trade practices one of its primary objectives for the next five years. Unfair trade practices in goods can be addressed in anti-dumping, anti-subsidy and safeguard actions. In 2019 the EU introduced a new instrument to monitor inward investments for national security reasons.

None of the existing instruments addresses subsidised investments in the EU or in third countries (in both goods and services) which allow government backed or owned enterprises to undercut EU enterprises in bidding to acquire other companies or to set up new manufacturing capacity.

In late 2019 the government of the Netherlands suggested that one way of dealing with the problem would be to change the EU’s state aid rules so that they could apply to foreign investment. It is understood that this idea has been taken up by the Commission and proposals will be made in the course of 2020.

For many years the EU has sought to have effective rules on inward investment mostly working in the OECD and the WTO but to no avail. It seems that this Dutch imitative might finally give the Commission the tools it considers it needs to review Chinese investments in Italy.

State Aids for Maritime transport

The Commission has approved five schemes in Cyprus, Denmark, Estonia, Poland and Sweden which encourage ship registrations in Europe. Essentially EU state aid rules allow Member States to give tax breaks to shipping companies to register ships in the EU. The most prominent of such measures 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. This can reduce the overall level of taxes paid and increase their predictability for the companies.

Estonia, Cyprus, Poland, Denmark and Sweden have seafarer schemes, under which labour costs (i.e. income tax and social security contributions) for seafarers employed on board vessels flying the flag of EU or European Economic Area (EEA) Member State may be partly or totally reduced.

In its application of the Maritime Guidelines, the Commission is determined to ensure consistency and equal treatment of shipping companies throughout the EU whilst at the same time making sure that any beneficial tonnage tax and seafarer schemes do not contravene internal market rules. The Commission ensures in particular that there is no spill-over of the favourable tax treatment of shipping companies into other sectors unrelated to maritime transport, that there is no discrimination against other EU or EEA State registries and that the aid does not exceed the ceiling set out in the Maritime Guidelines.

Carbon Border Measures

The European Green Deal sets out the EU’s ambition to be carbon neutral by 2050. Achieving this target is ambitious and there is talk of a €1 trillion investment fund to facilitate the decarbonisation of the EU economy.

One element of the package is the possible introduction of a charge, to be imposed on the border, on the carbon emitted in the production of goods about to be imported into the EU. The approach to charging carbon intense imports will be tested in two sectors, steel and cement.

It is clear that a carbon border measure will be complex in itself and even more complex in its implementation. This means, in effect, that the EU will need mechanisms to verify claims by importers as to the exact emissions associated with the good to be imported and any carbon costs that have already been incurred. If you think anti-dumping and anti-subsidy is complex, wait till we see what carbon verification will be like.

The Commission has set itself the target of coming up with proposals in 2021. This issue will be one of the key elements in the EU achieving carbon neutrality and will ultimately be at the core of the EU’s climate policy.


This article is for information purposes only and is not intended as a professional opinion.
For further information, please contact Bernard O’Connor.

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