Ports in Italy are fully exempt from corporate income tax. In the Basque region of Spain, ports are also fully exempt from corporate tax. In the rest of Spain ports are exempt from corporate tax on their main sources of revenue such as port fees or income from rental or concession contracts. The selective exemption from having to make a payment, such as a tax, is the same, in legal terms, to the receipt of a payment from the state.
The EU Commission, which has competence to control the aids states give to enterprises operating in their territories, considers that this tax exemption can provide ports with a competitive advantage to the extent that their activities are commercial. The activities of ports such as maritime traffic control or safety or air pollution surveillance are not considered commercial activities.
The Commission considers that the tax exemption on the income from commercial activities is selective and can be considered a state aid but that the EU state aid rules do not apply to these activities.
In April 2018 the Commission informed both Italy and Spain of their concern that the tax exemption were state aids to the ports in Italy and Spain. On 8 January 2019, the Commission has announced that it has taken the preliminary decision that the selective tax exemption (it is selective because it does not apply to all enterprises in Italy and Spain) is in fact a form of state aid. On that basis the Commission has invited Italy and Spain to change their tax legislation by 1 January 2020 so as to remove the exemption. In earlier decisions the Commission had made the same request to the Netherland, Belgium and France. The Commission is currently examining the situation in other Member States.
If Italy and Spain do not accept the Commission’s invitation to change their laws, the Commission may take a further step to open an in-depth investigation and order, at the end of the investigation, Italy and Spain to actually make the change.
The exemption from corporate taxes for ports pre-dates the formation of the EU and thus it is considered ‘existing’ aid. Unlike other state aids, recipients of existing aid are not required to pay back the monies received. Thus, the downside for Italian and Spanish ports is for the future and does not affect the past. That situation could change if the Commission makes a definitive finding that the exemptions are in fact state aids.
In its announcement the Commission was keen to point out that its decision does not mean that ports can no longer receive aids from the state. The Commission press release states:
Removing unjustified tax advantages does not mean that ports can no longer receive State support. Member States have many possibilities to support ports in line with EU State aid rules, for example to achieve EU transport objectives or to put in place necessary infrastructure investment which would not have been possible without public aid. In this regard, in May 2017, the Commission simplified rules for public investment in ports. As a result of the Commission extending the General Block Exemption Regulation to non-problematic investment in ports, Member States can now invest up to €150 million in sea ports and up to €50 million in inland ports with full legal certainty and without prior verification by the Commission. The Regulation allows public authorities to, for example, cover the costs of dredging in ports and access waterways. Furthermore, EU rules enable Member States to compensate ports for the cost of undertaking public service tasks (services of general economic interest).
What steps Italy or Spain or the other Member States will now take is not known. What is clear is that the business model of ports will need to change. It is possible that the Member States could argue that the fact that all Members give similar tax exemptions competition between Member States cannot be affected. This argument may well run foul of the fact that the exemptions are not quite the same in all countries and that the difference might give a competitive advantage.
What is clear is that ports will need to address this problem alongside the state and become involved in the resolution and plan for the changes (however deep or shallow) that will inevitably follow this initiative.
The European Maritime Safety Agency (EMSA) located in Lisbon but part of the network of EU agencies for most commercial sectors (medicines, chemicals, transport etc.), has publicized a training event from October 2018 showing close cooperation between shipping industry and the agency. EMSA organised a two-day advanced training course on Directive (EU) 2016/802 relating to a reduction in the sulphur content of certain liquid fuels. As part of the event, EMSA arranged a visit on board the MSC Seaview which had docked in Lisbon for the first time.
The goal of the visit on board was to provide field training to 30 inspectors from EU member states, Norway and Canada by way of a mock inspection of the vessel’s compliance with the EU Sulphur Directive. The inspectors were given the opportunity to verify the required documentation of the ship, examine the fuel system and take a sample of the fuel. In addition, during the visit a demonstration of an active exhaust gas cleaning system was provided. EMSA would like to thank MSC for their support and help in providing this practical training and look forward to furthering this partnership in the future.
The EU Commission notified the WTO in early January 2019 that it intends to make definitive the provisional measures imposing a 25% import duty on the imports into the EU of 26 different steels. The 25% will only apply when the level of existing trade flows for each exporting country is exceeded. A vote by the Member States to confirm the EU’s position will take place in mid-January and the definitive measures are likely to start from the beginning of February. Provisional measures, slightly different from the definitive measures, have been in place since July 2018 and lapse on 4 February.
These safeguard measures apply to all exports to the EU will operate along-side the existing anti-dumping and anti-subsidy measures on a number of specific steels from a limited number of specific countries.
In the wake of the ongoing US decision to block the appointment of judges to the main appeal court of the WTO, thus undermining the function of the institution, the EU has set out an ambitious proposal to modernise the WTO looking not only at the Appellate Body but also at some of the substantive trade rules and disciplines that could be improved. The WTO has not seen significant changes since it came into operation in 1995 (Marrakesh Agreement of April 1994) and many WTO members consider that the current rules do not reflect economic realities in today’s world. The EU has been transparent in its ambitions setting out a broad programme for reform and announcing that it will submit a variety of papers to the WTO over the next months and years.
At the same time the EU continues to promote its ambition to have bilateral (with one country) or plurilateral (more than one country but not all countries) trade agreements in place as soon as possible given the tensions on multilateral (all countries) trade negotiations within the WTO. At the end of 2018 the EU announced a comprehensive Economic Partnership Agreement with Japan that will come into effect on 1 February 2019. Like the Canada (CETA) Agreement the Japan agreement seeks to remove all remaining tariffs on trade between the two entities as well as remove market access impediments caused by standards behind the frontier. With these agreements the EU hopes to set the standard for future multilateral trade deals.
This article is for information purposes only and is not intended as a professional opinion. For further information, please contact Bernard O'Connor.
