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European Commission Approves Extension Of Danish Tonnage Tax Scheme

The European Commission on Friday announced the approval under EU State aid rules to extend the existing Danish tonnage tax scheme to additional types of vessels.

The measure is expected to encourage ship registration in Europe and contribute to the global competitiveness of the sector without unduly distorting competition.

By the latest fiscal measure Denmark is also to amend its existing scheme to ensure that it applies only to genuine maritime shipping activities by limiting revenues from non-core activities to an acceptable level.

Speaking on the latest measure, the EU Commissioner in charge of competition policy, Margrethe Vestager said: “Denmark’s revised tonnage tax scheme will help the shipping industry remain competitive on the global market. It will preserve jobs and promote high environmental standards in the maritime transport sector.

The scheme complies with the Commission’s State aid guidelines and contains new safeguards to ensure equal treatment of European shipping companies and avoid distortions of competition”, she added.

Under tonnage tax schemes, maritime transport companies pay taxes on the basis of the ship tonnage rather than on the basis of their actual taxable profits. Such schemes can be approved by the Commission under EU State aid rules.

It would be recalled that in May 2016, Denmark notified the Commission of its plans to extend its existing tonnage tax scheme to cover guard vessels, vessels servicing off-shore installations and vessels for raising, repairing and dismantling windmills as well as pipeline- and cable-laying vessels, ice management vessels and accommodation vessels.

The Commission decided that those types of vessels were involved in maritime activities that are subject to the same legal requirements and competitive conditions as maritime transport. It therefore approved the extension of the scheme to these vessels under EU State aid rules (the Commission’s 2004 Guidelines on State aid to maritime transport).

In addition, the approval also confirms that Denmark will amend certain aspects of its existing tonnage tax scheme to align it with the Commission’s current interpretation of the Guidelines on State aid to maritime transport.

According to a press statement issued by the European Commission on the decision, in the past years, the Commission has been requesting Member States to revise their tonnage tax schemes to ensure equal treatment amongst European shipping companies and to keep pace with the evolution of the shipping sector whilst avoiding undue distortions of competition globally.

In particular, Denmark will amend its tonnage tax rules as they relate to ancillary services that are closely connected to shipping activities. The services will be subject to tonnage taxation only if they account for less than 50% of a ship’s total tonnage-taxed income,

The tonnage tax rules will also apply to revenues from bare boat charter out activities (the leasing of ships without crew). The services of the latter will be subject to tonnage taxation provided that the beneficiary self-operates at least 50% of the tonnage tax fleet and that the vessel is not leased out for a period longer than three years.

The Commission assessed the amended Danish tonnage tax scheme under its Guidelines on State aid to maritime transport and concluded that it is in line with EU State aid rules.

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