2005/417/EC: Commission Decision of 30 June 2004 concerning a series of tax measures which Belgium is planning to implement for maritime transport (notified under document number C(2004) 2040)   (Text with EEA relevance)
Date: 2004-06-30
Institutions: European Commission
Subjects: Belgium, State aid, control of State aid, corporation tax, maritime transport, tax relief, tax system

10.6.2005

EN

Official Journal of the European Union

L 150/1

II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 30 June 2004

concerning a series of tax measures which Belgium is planning to implement for maritime transport

(notified under document number C(2004) 2040)

(Only the Dutch and French texts are authentic)

(Text with EEA relevance)

(2005/417/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

(2)

Having regard to the Treaty establishing the European Commu-
nity, and in particular the first subparagraph of Article 88(2)
thereof,

Having regard to the Agreement on the European Economic Area,
and in particular Article 62(1)(a) thereof,

Having called on interested parties to submit their comments pur-
suant to the provisions cited above (1) and having regard to their
comments,

Whereas:

1. PROCEDURE

1.1. Procedural overview

(1)

By letter of 14 June 2002 from its Permanent Representa-
tion, the Belgian Government gave notification, in accor-
dance with Article 88(3) of the Treaty, of a series of tax
measures for the merchant navy contained in a draft pro-
gramme act. All these measures have been registered in the
register of notified aid under N 433/2002. Before the Com-
mission could take a decision, the measures in question
were included in the programme act of 2 August 2002.

On 19 March 2003 the Commission decided (2) to initiate
the formal investigation procedure provided for in Article
6 of Council Regulation (EC) No 659/1999 of 22 March
1999 laying down detailed rules for the application of
Article 93 of the EC Treaty (3) against particular aspects of
the programme act of 2 August 2002 (with the dossier
now registered under the new number C 20/2003) and to
approve the remainder of the provisions of the programme
act for the maritime transport sector.

(3)

By Royal Decree of 7 May 2003 the Belgian authorities
implemented all the provisions of the programme act for
the maritime sector (Articles 115 to 127 of the said pro-
gramme act), specifying in the preamble to the Royal
Decree that the decree provided ‘no legal basis to taxpay-
ers for claiming vis-à-vis the tax administration or before
the national courts the application of the fiscal aid mea-
sures whose compatibility is being investigated by the
Commission’ in accordance with the Commission’s deci-
sion of 19 March 2003.

(4)

By letter of 7 May 2003 the Belgian authorities submitted
their comments on the Commission’s decision of 19 March
2003.

(1) OJ C 145, 21.6.2003, p. 4.

(2) See note 1.
(3) OJ L 83, 27.3.1999, p. 1.

L 150/2

EN

Official Journal of the European Union

10.6.2005

(5)

(6)

(7)

By letter of 26 June 2003 the Commission put a number
of additional questions to the Belgian authorities. After the
Commission had sent a reminder on 18 August 2003, the
Belgian authorities replied by letter of 12 September 2003.

— a flat-rate taxation scheme based on tonnage for per-
sons managing ships on behalf of third parties that
provide services on behalf of shipowners.

On 17 January 2004 new Community guidelines on State
aid to maritime transport were published in the Official
Journal of the European Union (4). They entered into force on
the same day.

(11) Under the tonnage-based flat-rate taxation scheme (5) the
tax base used to calculate corporation tax for shipping
companies that have opted for this scheme is replaced by
a flat-rate amount determined on the basis of the tonnage
of the fleet concerned. The present scheme does not impose
any conditions as regards the flag flown by the ships.

1.2. Title of the aid

This decision concerns the tax measures for maritime
transport
of
2 August 2002, Title V — Finance, Chapter I — Maritime
navigation.

programme

contained

the

act

in

(12) A similar mechanism, leading to an even more favourable
flat-rate amount, is laid down for persons managing ships
for third parties, but it is subject to the condition that
three quarters of the fleet thus managed flies the Belgian
flag.

1.3. Recipient of the aid

2.1.

Flat-rate taxation scheme

(8)

The beneficiaries of the various aid schemes are undertak-
ings established in Belgium that are engaged in maritime
transport, exploitation of maritime resources and towage.

(13)

Ships may be eligible under the flat-rate taxation scheme if
they are used for the following eligible activities:

1.4. Purpose of the aid

(9)

The main purpose of the planned tax measures is to bring
ships back under the Belgian flag since the entire Belgian
merchant has been flagged out.

— operating a ship for the carriage of goods or passen-
gers by international maritime transport and for the
exploration or exploitation of natural maritime
resources,

2. DETAILED DESCRIPTION OF AID

— profits accruing from operating a ship, with clearance
certificate, for towage, assistance and other activities at
sea,

(10)

The programme act provides for a series of tax measures
for maritime transport in Belgium:

— all activities directly connected with the abovemen-

tioned operation.

— a flat-rate taxation scheme based on shipping com-

pany tonnage,

— a package of measures designed to benefit shipping
companies that did not opt for flat-rate taxation based
on tonnage,
including accelerated depreciation of
ships, relief from tax on capital gains resulting from
the sale of ships subject to reinvestment conditions,
and tax deductions for the purchase of ships,

— abolition of registration duties payable for the regis-

tration of mortgages on ships,

(4) OJ C 13, 17.1.2004, p. 3.

(14)

By letter of 5 September 2002 the Belgian authorities
pointed out that activities of the fishery sector could not be
eligible.

(15)

The amount of corporation tax for shipping companies (6)
that have opted for this scheme is fixed at a flat rate on the
basis of the net tonnage of their eligible ships. The tax base
for corporation tax is equal to the sum of the amounts
obtained for each eligible ship (7) in accordance with the
following scale determined per tranche of 100 net tonnes

(5) Called Tonnage Tax in English.
(6) See section 2.8 of the Commission’s decision of 19 March 2003.
(7) See note 6.

10.6.2005

EN

Official Journal of the European Union

L 150/3

(NT) and per 24-hour period started, whether or not the
ship is operational:

2.2. Tax measures for shipping companies that
have not opted for the flat-rate taxation scheme

up to 1 000 net tonnes

between 1 001 and 10 000 net tonnes

between 10 001 and 20 000 net tonnes

between 20 001 and 40 000 net tonnes

40 001 net tonnes and over

(EUR per 100 NT)

1,00

0,60

0,40

0,20

0,05

(20)

For all tax periods in which a shipping company has not
been subject to flat-rate taxation, it may benefit from three
types of tax concessions which derogate from the Belgian
Income Tax Code 1992.

2.2.1. Accelerated depreciation (8)

(16) Once shipping companies have opted for this flat-rate
taxation scheme, they remain subject to it for a period of
10 years. At the end of this period, the scheme is tacitly
renewed for another 10-year period except if the company
concerned has served prior notice of its wish to leave the
scheme.

(21)

Ships acquired new or second-hand which become the
property of a Belgian taxpayer for the first time, parts of
such ships and expenses incurred for major repairs and
alterations carried out when acquiring second-hand ships
may be depreciated as follows:

(17) Moreover, the scheme makes provision for additional tax
relief for the newest ships. Article 119(2) of the pro-
gramme act provides that taxable profits determined on a
flat-rate basis in accordance with the above rates are
reduced to:

— 20 % for the accounting year when the ship is taken

into service;

— 50 % of the flat rate per day for ships that are less than
five years old, to be counted from the date of delivery;

— 75 % of the flat rate per day for ships that are at least
five years old but less than 10 years old, to be counted
from the date of delivery.

(18)

The age of a ship is determined on the basis of the date of
delivery as fixed by the registrar of maritime and inland
waterway ships’ mortgages or the competent registration
authority.

(19) Under Article 120(2) of the programme act, losses sus-
tained in previous financial years may not be deducted
from the tax base determined on a flat-rate basis. Any part
of losses from maritime navigation not taken into account
by the time when the tax base for maritime activities is for
the first time determined in relation to tonnage may again
be deducted from future profits upon expiry of the period
in which the tax base has thus been determined. By way of
derogation, however, business losses incurred in the same
period by another division of the company may be
deducted from the tax base determined on a flat-rate basis
provided that, and to the extent that, such losses could not
be deducted from the profits of any other division of that
company not subject to flat-rate taxation.

(8) Provided for in Article 121 of the programme act of 2 August 2002:

‘Article 121
(1)
Subject to the derogations mentioned in this section, deprecia-
tion on new or second-hand ships shall be determined in accordance
with Articles 61 to 64 of the Income Tax Code 1992.
(2)
The following depreciation percentages are allowed for new
ships, co-ownership shares in new ships and shares in new ships: 20 %
for the accounting year of entry into service, 15 % for each of the fol-
lowing two accounting years, and subsequently 10 % per accounting
year until full depreciation.
(3)
Depreciation shortfalls during the first three accounting years,
counting from that in which the ship was taken into service, are recov-
ered during the tax periods following the one in which the shortfall
occurred, even if outside the normal depreciation period in accordance
with paragraph 2, provided that total annual depreciation per ship
does not in any case exceed 20 % of the investment or purchase value.
(4)
Ships that are depreciated in accordance with the scheme pro-
vided for in this Article cannot benefit under the optional degressive
depreciation scheme provided for in Article 64 of the Income Tax
Code 1992.
(5)
Ships, co-ownership shares in ships and shares in ships that
were not acquired when the ship was new may benefit from deprecia-
tion as provided for in paragraphs 1 to 4 if these ships come into the
possession of a Belgian taxpayer for the first time. Ships that are not
acquired new and which, in accordance with paragraph 1, cannot ben-
efit from depreciation as provided for in paragraphs 1 to 4 may be
depreciated linearly over the period of normal usage. Depreciations as
provided for in paragraphs 1 to 4 shall also apply to expenses incurred
for major repairs and alterations made upon acquiring second-hand
ships.
(6)
The provisions of this Article do not apply in the period during
which profits from maritime navigation are determined on the basis
of tonnage.
(7)
In the event of disposal after the end of the period in which
profits from maritime navigation are determined on the basis of ton-
nage, the net tax value shall, for calculating the gains referred to in
Article 122, be established on the basis of the normal depreciation
rules for tax purposes, including for the period in which profits from
maritime navigation are determined on the basis of tonnage.’

L 150/4

EN

Official Journal of the European Union

10.6.2005

— 15 % for each of the next two accounting years;

— 10 % for each subsequent accounting year until full

depreciation.

than five years at the time of sale and consequently that an
amount at least equal to the sales value is re-invested within
five years in the purchase of ships, co-ownership of ships,
shares in ships or shares in shipping companies which have
their headquarters in the Community and exclusively
engage in eligible activities (10).

(22) Depreciation shortfalls during the first three accounting
years, counting from that in which the ship is taken into
service, may be recovered during taxable periods follow-
ing that in which the shortfall occurred, even beyond the
depreciation period, provided that the total annual amount
of depreciation per ship in no case exceeds 20 % of the
investment value.

(27)

If there is no re-investment in accordance with the condi-
tions described, the gains realised are considered as profits
in the taxable period during which the re-investment
period expired.

(23)

Ships thus depreciated may not benefit from the digressive
depreciation scheme provided for in Article 64 of the Bel-
gian Income Tax Code 1992.

(28)

(24)

Ships that are not acquired new and do not become the
property of a Belgian taxpayer for the first time may nev-
ertheless be depreciated linearly over the normal length of
use.

The investment taken into account for re-investment
should be retained as an asset for at least five years. How-
ever, the said investment may be replaced within three
months if it is sold. If the investment taken into account
for re-investment has been replaced in this way, the same
rules on gains shall apply for the disposal of the asset
acquired as a replacement.

(25)

The special depreciation scheme provided for in the pro-
gramme act lays down in legislation an administrative
measure which has already been applied in Belgium for
several decades. This measure has been recorded in legis-
lation to enhance its legal certainty and ensure continuity
of the system.

(29)

In the event of a sale after the end of the period in which
the tax base is determined in relation to tonnage, for the
calculation of gains, the net tax value shall be established
on the basis of the normal rules on depreciation, including
for the period in which profits from shipping are deter-
mined in relation to tonnage.

2.2.2. Exemption for gains on the sale of ships

(26) Article 122 (9) provides that gains realised on the sale of
ships are exempt from taxation provided that the ships
sold have remained fixed assets of the company for more

(9) Article 122 of the programme act of 2 August 2002 reads as follows:

‘Article 122
Subject to the derogations provided for in this section, the pro-
(1)
visions laid down in Article 190 of the Income Tax Code 1992 apply
to gains realised on ships by resident companies or Belgian branches
of non-resident companies which engage exclusively in the activities
described in Article 115(2).
(2) When an amount equal to the sales value is re-invested in the
way and within the periods indicated below, the gains realised on the
sale of ships are exempt provided that the ships sold were fixed assets
for more than five years prior to their sale.
(3)
The re-investment must be in ships, co-ownership of ships,
shares in ships or shares in a shipping company/shipping operator
which has its registered office in the European Union.

(4)
The re-investment must be made at the latest at the cessation
of the professional activities and within a period of five years from the
first day of the taxable period in which the gains were realised or the
first day of the penultimate taxable period preceding that in which the
gains were realised.
(5)
In order to justify application of the tax scheme referred to in
paragraph 1, the taxpayer must enclose a statement in conformity
with the model laid down by the Minister of Finance or his represen-
tative with his income tax declaration for the tax year relating to the
taxable period in which the gains were realised and each subsequent
tax year until the re-investment has been effected in accordance with
paragraphs 2 to 4.
(6)
If there is no re-investment in the manner and within the
period provided for in paragraphs 1 to 4, the gains realised shall be
regarded as profits in the taxable period in which the re-investment
deadline has expired.
(7)
The investment taken into account as re-investment must be
retained as part of the assets for at least five years but can, where
appropriate, be replaced within three months in the event of sale. If
the investment taken into account as re-investment has been replaced
in this manner, the provisions of this Article apply in respect of the
sale of the asset acquired as replacement.
(8)
The provisions of this Article do not apply to the period in
which profits from maritime navigation are determined in relation to
tonnage.’

(10) See section 2.8.2 of the Commission’s decision of 19 March 2003.

10.6.2005

EN

Official Journal of the European Union

L 150/5

2.2.3. Tax deductions for purchase of ships (11)

(30)

Resident companies or Belgian branches of non-resident
companies which exclusively engage in eligible activi-
ties (12) may benefit from an investment deduction of 30 %
of the purchase price when buying new or second-hand
ships which become the property of a Belgian taxpayer for
the first time.

(33) Under the current Belgian scheme, the charges made for
registering a mortgage (in addition to a number of very
limited fixed duties) are, on the one hand, a 0,052 % fee
payable to the registrar of mortgages and, on the other
hand, a 0,5 % registration duty payable on the amount of
the mortgage. According to the Belgian authorities, this lat-
ter duty is a disincentive for registering ships under the Bel-
gian flag. Under the new scheme, the registration duty
payable on registering a mortgage is changed to the gen-
eral fixed duty of €25 provided for in Article 11(2) and (3)
of the Belgian Code on registration, mortgage and court
registry duties.

(31) A tax deduction not granted because of a lack of profit or
because of
insufficient profits in the corresponding
accounting year shall be successively carried forward to the
profits of subsequent taxable periods. In accordance with
the provisions applicable to losses carried forward on join-
ing the flat-rate taxation scheme, any part of the invest-
ment deduction not applied by the time when profits from
maritime shipping are determined in relation to tonnage
for the first time may again be deducted from the profit
after expiry of the period in which the tax base has thus
been determined.

(34)

The transfer of a mortgage on a vessel following debt trans-
fer against payment, contractual subrogation or any other
agreement against payment is also subject to 0.5 % regis-
tration duty in accordance with Article 92(2) (13) of the
said Code. In accordance with Article 93 of the Code, this
registration duty is paid from the amount of the sums
guaranteed by the mortgage, excluding interests or arrears
over the three years guaranteed by Article 87 of the Mort-
gages Act of 16 December 1951.

2.2.4. Reduction of registration duties for mortgages on ships

2.2.5. Tonnage-based flat-rate taxation scheme applicable to
persons managing ships on behalf of third parties (14).

(32)

The Belgian Code on registration, mortgage and court reg-
istry duties is amended so that the raising of mortgages on
a ship is no longer subject to the payment of proportional
registration duties, irrespective of whether the ship is or is
not subsequently subject to the flat-rate taxation scheme.
This reduction of registration duties concerns mortgages
on vessels for maritime shipping and those for inland
waterway navigation.

(11) Article 123 of the programme act of 2 August 2002 reads as follows:

‘Article 123
(1)
By derogation from Articles 68 and 201 of the Income Tax
Code 1992, resident companies or Belgian branches of non-resident
companies which engage exclusively in the activities provided for in
Article 115 relating to ships acquired new or second-hand ships
which become the property of a Belgian taxpayer for the first time
may benefit from an investment deduction of 30 % of the purchase
price of these ships.
The provisions of this Article are not applicable during the
(2)
period in which profits from maritime navigation are determined in
relation to tonnage.
(3)
If in a taxable period there is no or insufficient profits to be
able to apply the investment deduction, the exemption not granted
for that taxable period shall be successively carried forward to the
profits of the following taxable periods.
(4)
Any part of the investment deduction not applied by the time
when the profits for maritime navigation are determined in relation
to tonnage for the first time may again be deducted from the profits
after expiry of the period in which the profits were thus determined.’
(12) See section 2.8.2 of the Commission’s decision of 19 March 2003.

(35) Under Article 124 of the programme act, persons manag-
ing ships on behalf of third parties are also covered by a
flat-rate taxation scheme but with a scale of rates ten times
more advantageous than that provided for in the scheme
applicable to shipping companies because the same rates
apply in this case to the ships being managed not per
100 NT tranche but per 1 000 NT tranche:

Up to 1 000 net tonnes

Between 1 001 and 10 000 net tonnes

Between 10 001 and 20 000 net tonnes

Between 20 001 and 40 000 net tonnes

40 001 net tonnes and over

(EUR per 1 000 NT)

1,00

0,60

0,40

0,20

0,05

(36) However, coverage by the scheme is subject to the condi-
tion that at least 75 % of the ships managed are registered
under the Belgian flag.

(13) Amended by Article 17 of Royal Decree No 12 of 18 April 1967 and

by Article 64 of the Act of 22 December 1998.
(14) Article 124 of the programme act of 2 August 2002.

L 150/6

EN

Official Journal of the European Union

10.6.2005

(37)

Those managing ships on behalf of third parties are in gen-
eral service companies which prepare the ships, fit them
out as required and provide crews on behalf of the ship-
owner. Article 115(4) of the programme act defines the
person managing a ship on behalf of third parties as the
‘taxpayer [who] ensures the technical management and/or
equipment of a ship on behalf of third parties’. These man-
agers acting on behalf of third parties are not transport
undertakings as such. The Belgian authorities confirmed in
their letter of 5 December 2002 that management of ships
on behalf of third parties constitutes provision of services
for the benefit of shipowners and that persons managing
ships on behalf of third parties do not sell transport ser-
vices either for goods or for passengers.

2.3. Other aid for maritime transport

(38) Maritime transport in Belgium also benefits from three

other aid schemes:

— the scheme for exemption from the payment of
employers’ social security contributions and partial
exemption from the payment of employed persons’
contributions (approved by the Commission by deci-
sions of 24 February 1998 (15) and 23 June 1999 (16));

— the scheme for exemption from the advance payment
on earnings (approved by the Commission by decision
of 27 June 2000 (17)).

2.4. Reasons for initiating the procedure

(39)

the Commission
In its decision of 19 March 2003,
approved the aid measures provided for in the programme
act with the exception of seven specific points of the latter,
in respect of which the Commission voiced doubts as to
their compatibility with the common market. Four of these
seven points concern the flat-rate taxation scheme and
three concern the other aid measures provided for by the
programme act.

2.4.1. Flat-rate taxation scheme for shipowners

2.4.1.1. R a t e s f o r s h i p s o v e r 4 0 0 0 0 t o n n e s

intra-
40 000 tonnes could lead to a distortion of
Community competition as none of the flat-rate taxation
schemes previously approved by the Commission make
provision for such advantageous rates for ships exceeding
this tonnage.

(41)

The following table shows,
for the flat-rate taxation
schemes already approved by the Commission, the rates
for the determination of the tax base which is itself subject
to the corporation tax rate.

Table 1:

Rates for determining the tax base in flat-rate taxation
schemes of particular Member States

Rates in euros per tranche of 100 tonnes and per day

NL

DE DK UK

ES

IE

FI

FR

0-1 000 NT

0,91 0,92 0,94 0,97 0,9

1

1,38 0,93

up to
10 000 NT

up to
25 000 NT

above
25 000 NT

0,67 0,69 0,67 0,73 0,7

0,75 1,03 0,71

0,46 0,46 0,4

0,48 0,4

0,5

0,69 0,47

0,23 0,23 0,27 0,24 0,2

0,25 0,57 0,24

Source: Commission

(42) Accordingly, by letter of 30 October 2002 the Commis-
sion asked Belgium to provide all the information and
arguments that may justify the EUR 0,05 rate for ships
over 40 000 tonnes, bearing in mind that the rates which
the Commission had previously accepted for recent flat-
rate taxation schemes in other Member States range from
EUR 0,20 to EUR 0,25 for the highest tonnages.

(43)

In their letter of 5 December 2002, the Belgian authorities
provided the following information to justify the introduc-
tion of a specific rate for ships over 40 000 tonnes.
According to the figures provided by the Belgian authori-
ties, the total number of ships over 40 000 net tonnes
worldwide was 1 257 in November 2002, of a total world
fleet of 28 155. Even though this type of ship represents
only 4,5 % of the world fleet in terms of number of ves-
sels,
it accounts for 34,17 % in terms of carrying
capacity (18).

(40) While the Community guidelines allow such a rate in prin-
ciple, the Commission has considered whether introduc-
ing a EUR 0,05 rate per tranche of 100 tonnes above

(15) Letter SG(98) D/1660. Case NN 98/97.
(16) Letter SG(99) D/4583. Case NN 35/99.
(17) Letter SG(2000) D/105460. Case N 142/2000.

(44) Only 143 of these ships, i.e. 0,5 % of the world’s fleet in
number of vessels and 3,5 % in capacity, are registered in a
Member State, as shown in the following table supplied by
the Belgian authorities.

(18) 253 430 610 NT of the world fleet’s total of 741 600 000 NT.

10.6.2005

EN

Official Journal of the European Union

L 150/7

Table 2:

Number of ships over 40 000 tonnes in the Member States

Country

Number
of ships

108

Greece

Spain

Italy

Britain

France

Germany

Netherlands

Luxembourg

Portugal

Source:

Belgian authorities.

Comments

of a Greek fleet of 3 261 ships, of which 2 476 (75 %) fly a foreign flag according
to UNCTAD

(36 ships > 60 000 NT of which 17 > 100 000 NT)

6 oil tankers < 48 933 NT + 1 oil tanker of 60 120 NT

2 oil tankers of 45 740 NT + 4 bulk carriers or ore carriers < 47 584 NT + 1 bulk
carrier 56 579 NT

4 container ships < 48 880 NT + 1 oil tanker of 41 316 NT + 1 oil tanker of
105 889 NT

1 bulk carrier of 56 709 NT + 2 oil tankers <100 000 NT + 1 oil tanker of
108 708 NT

2 container ships 46 660 NT + 2 container ships of 48 880 NT

4 container ships < 42 233 NT

3 oil tankers between 84 545 NT and 95 323 NT

1 bulk carrier of 49 344 NT

7

6

6

4

4

4

3

1

(45) According to the Belgian authorities, the above figures bear
out the view that the other flat-rate taxation schemes,
although they have a digressive rate based on ships’ ton-
nage, do not sufficiently take account of large ships. Tank-
ers (53 % of ships over 40 000 tonnes) and bulk carriers
(41.7 % of ships over 40 000 tonnes), in particular, occupy
an important position in the fleet of Belgian shipowners. In
support of these data, the Belgian authorities claim that the
largest ships of Belgian owners will continue to fly flags of
convenience if no attractive rate were introduced for ships
over 40 000 tonnes.

(46)

In its decision of 19 March 2003, however, the Commis-
sion expressed its concern that the introduction of such a
low rate would encourage some non-Belgian shipowners
to transfer their ships from a Community register to the
Belgian register. Consequently, the Commission considers
that this rate may thus lead to a distortion of competition
within the Community. This is why the Commission has
initiated the investigation procedure in respect of the intro-
duction of the EUR 0,05 rate per tranche of 100 net tonnes
applicable to ships over 40 000 tonnes.

2.4.1.2. A n c i l l a r y a c t i v i t i e s w i t h o u t a d i r e c t

l i n k w i t h t r a n s p o r t

letter of 5 December 2002, the Belgian authorities pro-
vided a list of eligible activities, for some of which the
Commission has had strong doubts as to whether they
have a direct link with transport, namely:

— ancillary and temporary activities carried out by the
company in order to make full use of the personnel
and assets assigned to the company’s principal activ-
ity, to the extent that these activities are minimal com-
pared with that principal activity,

— sale of products not intended for consumption on
board such as luxury goods and provision of services
not directly linked with maritime transport such as
gambling, gaming tables and casinos and excursions
for passengers,

— advertising and marketing,

— revenue from short-term investment of operating
capital, excluding, however, revenue from financial
fixed assets,

— ship brokerage activities for its own ships,

(47)

The Commission has so far refused to accept that tonnage-
based flat-rate taxation schemes could also cover activities
not directly connected with maritime transport. In their

— disposal of operating assets such as immovable prop-
erty which serves management purposes and operat-
ing resources used to load and unload ships operated.

L 150/8

EN

Official Journal of the European Union

10.6.2005

(48)

The Commission considers that such ancillary activities are
not directly connected with maritime transport and do not
directly contribute to providing a transport service.

(54)

(49)

In this case, the Commission therefore expressed doubts in
its decision of 19 March 2003 as to whether the extension
of the flat-rate taxation scheme to the abovementioned
activities is compatible with the common market.

2.4.1.3. D e d u c t i o n f r o m t h e f l a t - r a t e t a x o f
s u f f e r e d b y o t h e r d i v i s i o n s
t o t h e f l a t - r a t e t a x a t i o n

l o s s e s
n o t s u b j e c t
s c h e m e

(50) According to the information currently available to the
Commission, the flat-rate taxation schemes approved by
the Commission in the other Member States have not
introduced mechanisms similar to the one provided for in
Article 120(1) of the programme act (19). Article 120(1)
provides for the possibility for companies simultaneously
engaged in eligible and non-eligible activities to deduct
from the tax determined at a flat-rate on the basis of ton-
nage any losses incurred by other company divisions to the
extent that such losses could not be deducted from the
profits of any other division for the relevant accounting
year.

(51)

(52)

The Commission has taken the view that this rule was in
conflict with the general principle that eligible activities
should be strictly separated from non-eligible activities for
the determination of tax, a principle which has been
observed in the other flat-rate taxation schemes already
approved.

Consequently, the Commission has expressed its doubt on
the advantage that would thus be granted to shipping com-
panies subject to Belgian tax and has sought the views of
the other Member States and of any other interested party
on the possible consequences which this provision might
have for competition. This is why the Commission has also
initiated the formal investigation procedure in respect of
the provisions of Article 120(1) of the programme act.

2.4.1.4. D e d u c t i o n f o r n e w e r s h i p s

In its decision of 19 March 2003, the Commission consid-
ered whether this additional advantage would really be an
incentive for registering the newest ships under the Belgian
flag as such ships are in general more likely to meet the
safety conditions required under the Belgian flag than older
ships. The Commission notes that it is in fact more likely
that older ships are registered under flags of convenience.
Moreover, this provision would lead to a distinctly lower
flat-rate tax for ships less than 10 years old than would
have been the case for these ships in other Member States
that have introduced a flat-rate taxation scheme approved
by the Commission.

(55)

For this reason, the Commission has initiated the formal
investigation procedure with regard to the deductions pro-
vided for in Article 119(2) of the programme act for ships
less than 10 years old.

2.4.2. Measures outside the flat-rate taxation scheme for

shipowners

2.4.2.1. A c c e l e r a t e d d e p r e c i a t i o n o f

s h i p s
n o t i n t e n d e d f o r m a r i t i m e t r a n s p o r t

(56)

Contrary to the requirements of the Community guide-
lines, the accelerated depreciation scheme does not make
provision for links with eligible activities. In its decision of
19 March 2003, the Commission therefore expressed
doubts about the compatibility of this depreciation scheme
as regards its application to ships other than those intended
for maritime transport and those carrying out eligible
activities.

2.4.2.2. R e d u c t i o n o f

r e g i s t r a t i o n d u t y f o r

m o r t g a g e s o n s h i p s

(57)

The reduction of the duty payable on the registration of
mortgages applies only to mortgages on ships for maritime
shipping or inland navigation and not to mortgages on
other types of investment such as immovable property. In
its first analysis, the Commission took the view that this
reduction seemed to be selective in that it applies only to a
part of the types of assets on which a mortgage can be
taken and promotes, even at a low level, activities for which
ships are used. Accordingly, the Commission expressed
doubts on whether such a reduction constitutes State aid
or a general measure.

(53) None of the flat-rate taxation schemes previously approved
by the Commission provides for a deduction according to
the ship’s age for the purpose of determining the tax base.

(58)

(19) ‘Article 120

(1)
Business losses incurred during a taxable period by another
division of the company may be deducted from the profits deter-
mined at a flat rate for the same taxable period in accordance with
Article 119 to the extent that these losses could not be deducted from
the profits of any of the company’s other divisions.’

Should it appear that the measure is aid within the mean-
ing of the Treaty, the Commission would have strong
doubts as to its compatibility with the common market
since this measure would not only be conductive to mari-
time activities overall, including those not coming under
maritime transport but also activities appertaining to
inland navigation, which are not subject to the aforemen-
tioned Community guidelines but to Council Regulation

10.6.2005

EN

Official Journal of the European Union

L 150/9

(EEC) No 1107/70 of 4 June 1970 on the granting of aids
for transport by rail, road and inland waterway (20). The
said regulation does not allow the grant of such aid.

(59)

In its decision of 19 March 2003 the Commission there-
fore expressed doubts that the reduction of registration
duty for ships other than those intended for maritime
transport activities is compatible with the common market.

(60)

(61)

(62)

(63)

2.4.2.3. F l a t - r a t e t a x a t i o n s c h e m e a p p l i c a b l e
t o p e r s o n s m a n a g i n g s h i p s o n b e h a l f
o f

t h i r d p a r t i e s

Firstly, with regard to the scheme applicable to persons
managing ships on behalf of third parties, the Commission
noted in its decision of 19 March 2003 that their activity
could not be treated as an activity of maritime transport,
at least with regard to the way this sector is organised in
Belgium. Only maritime shipping companies are covered
by the Community guidelines (21). It would appear that
Belgium would be the first Member State wishing to apply
a flat-rate taxation scheme to subcontractors of maritime
transport companies.

Secondly, the Commission has noted that the same ship
could at the same time qualify for the flat-rate taxation
scheme via its owner and its manager, with the latter, as
pointed out above, benefiting from rates that are 10 times
lower than those applicable to the former for the flat-rate
determination of the tax base.

Thirdly, Belgium has not provided any information show-
ing that the scheme applicable to persons managing ships
on behalf of third parties could enhance the competitive-
ness of ships flying a Community flag. In particular, it has
not been shown that this scheme could indirectly be
favourable to Belgian shipowners through a reduction of
the price of services which the managers perform on their
behalf.

Fourthly, even if the manager is in Belgium and the activi-
ties he performs are therefore pursued from Belgian terri-
tory, it is not certain that all of his on-shore activities
relating to the management of ships are pursued from
within the territory of the Community. A part of these ser-
vices, such as business and strategic management, which
are not provided by the managers on behalf of third par-
ties, could be performed from a third country.

(20) OJ L 130, 15.6.1970, p. 1. Regulation last amended by Regulation

(EC) No 543/97 (OJ L 84, 26.3.1997, p. 6).

(21) In section 3.1 entitled ‘Fiscal treatment of shipowning companies’, the
Community guidelines refer to fiscal schemes for ‘shipowning com-
panies’ and ‘shipowners’.

(64)

(65)

Fifthly, before the procedure was initiated Belgium had not
furnished any economic arguments to justify the fact that
the tax base for persons managing ships on behalf of third
parties is ten times lower
than that applicable to
shipowners.

Finally, the Commission wondered whether persons man-
aging ships on behalf of third parties work exclusively for
Belgian or Community shipowners. The proposed scheme
only requires that three quarters of the ships managed be
registered in the Belgian register. If it is possible for man-
agers to offer their services to shipowners not subject to
tax in the Community for up to one quarter of their man-
aged fleet, this may well be tantamount to an economic
advantage being granted to non-Community maritime
transport companies.

(66)

For all of the above reasons, the Commission expressed
doubts, in its decision of 19 March 2003, on the compat-
ibility of the scheme applicable to persons managing ships
on behalf of third parties (22).

(22) ‘Article 124

At the taxpayer’s request, the taxable profits from the manage-
(1)
ment of ships on behalf of third parties shall, by derogation from
Articles 183, 185, 189 to 207, 233(1) and 235 to 240 of the Income
Tax Code 1992, be determined at a flat rate on the basis of the ton-
nage of the ships covered by the management.
The request referred to in paragraph (1) shall be submitted by
(2)
the taxpayer to the tax office which shall take a decision within three
months of the date on which it received the request. This deadline
may be extended by common agreement between the taxpayer and
the tax office. The tax office shall decide on the request by an appeal-
able decision.
(3)
If the request referred to in paragraph (1) is accepted, the
scheme for determining profits from maritime shipping on the basis
of tonnage shall, in accordance with this Article, take effect from the
taxable period following that in which the request was submitted. The
taxpayer may waive coverage under the said scheme not later than
three months after the expiry of the taxable period closed during the
10th calendar year, or a multiple thereof, after that in which the
request was submitted.
(4)
Per ship, per day and per 1 000 net tonnes, the profits for the
taxable period from the management of ships on behalf of third par-
ties shall be determined in accordance with the amounts specified in
the following table:
EUR 1,00 for the tranche up to 1 000 net tonnes;
EUR 0,60 for the tranche between 1 000 net tonnes and 10 000 net
tonnes;
EUR 0,40 for the tranche between 10 000 net tonnes and 20 000 net
tonnes;
EUR 0,20 for the tranche between 20 000 net tonnes and 40 000 net
tonnes;
EUR 0,05 for the tranche above 40 000 net tonnes.
(5)
Any non-allocated part of the losses incurred in managing
ships on behalf of third parties remaining at the time when the prof-
its are determined for the first time on the basis of tonnage may again
be deducted from the profits after the expiry of the period in which
the profits have thus been determined.
(6)
The scheme provided for in this Article is reserved for taxpay-
ers managing ships on behalf of third parties provided that at least
75 % of the number of ships managed on behalf of third parties are
registered in the Belgian register of ships. Companies wishing to make
use of the scheme provided for in this Article may not pursue any
activity other than the management of ships.’

L 150/10

EN

Official Journal of the European Union

10.6.2005

3. COMMENTS FROM INTERESTED PARTIES

3.1. Comments from the Union Royale des
Armateurs Belges

(73) With regard to the reduction of registration duties for reg-
istering mortgages on ships other than those intended for
maritime transport activities, the Union Royale points out
that this tax does not exist in most of the other Mem-
ber States. It argues that not accepting this reduction would
be detrimental to the competitive position of owners of
Belgian ships. The Union Royale further stresses that the
measure would help to improve the competitive position
of the inland shipping sector.

(67)

(68)

By letter of 26 August 2003 the Union Royale des Armateurs
Belges (hereinafter referred to as the Union Royale), a non-
profit-making association of Belgian shipowners, transmit-
ted to the Commission its comments on all the points
covered by the formal investigation procedure.

The Union Royale first of all emphasises that the low rate
applicable to the tranche above 40 000 tonnes is designed
to bring ships above this tonnage back under a Commu-
nity flag, recalling that these ships represent only 4,5 % of
the world fleet (1 257 units of a total number of 28 155
units worldwide) but account for 34,17 % of worldwide
of
(253 430 610
carrying
741 600 000 tonnes deadweight).

capacity

total

of

a

(69) With regard to the tax deduction for newer ships (50 % for
ships less than five years old and 25 % for those between
five and ten years old), the Union Royale stresses that it is
primarily intended to promote young fleets with safer and
more environmentally friendly ships. It adds that these
reductions may also contribute to maintaining attractive
and high-quality jobs in the maritime sector and on shore
and maintaining maritime know-how in Europe.

(75)

(70) According to the Union Royale, prohibiting the possibility
for a maritime shipping company to deduct losses incurred
in its other divisions from the flat-rate tax would lead to
discrimination among Belgian companies as companies
that do not have a maritime division may offset the losses
of the year incurred in particular divisions against profits
from other divisions whereas such losses cannot be
deducted from profits based on tonnage.

(71) With regard to the list of ancillary activities on which the
Commission has expressed doubts, the Union Royale
points out that the Belgian Government took its cue from
the OECD’s commentary and tonnage tax schemes in the
Netherlands and the United Kingdom. It emphasises in par-
ticular that ship brokerage activities performed for a com-
pany’s own ships are perfectly consistent with the spirit of
the Community guidelines.

(74) With regard to the management of ships on behalf of third
parties, the Union Royale emphasises that the proposed
scheme requires that at least 75 % of the ships managed fly
the Belgian flag. It also points out that it is normal that the
managers should be entitled to flat-rate taxation different
from that applicable to shipowners as the managers do not
pursue the same profession and do not run the same risks
as shipowners.

3.2. Comments from the Zentralverband der
Deutschen Seehafenbetriebe

By letter of 3 July 2003, the Zentralverband der Deutschen
Seehafenbetriebe (Federation of German sea port companies,
hereinafter referred to as the Federation) transmitted its
comments to the Commission. It takes the view that aid to
maritime transport should not lead to distortion of intra-
Community competition in the towage sector. The Federa-
tion points out that the competitiveness of Europe’s ports
depends to a large extent on towage costs. It maintains that
it is desirable to foster competition among towage compa-
nies in the same port and between ports as this contrib-
utes to maintaining the competitiveness of the various
ports. Nevertheless, however desirable this competition
may be, it must take place under similar conditions of
competition.

(76)

The Federation regrets that the flat-rate taxation scheme
also applies to Belgian towage companies. In general, the
Federation takes the view that schemes to alleviate wage
costs for towage companies are not compatible with the
Community guidelines. Finally, it asks that all aid schemes
for the towage sector be declared incompatible with the
common market.

3.3. Comments from the Handelskammer Hamburg

(72) With regard to the scheme for accelerated depreciation of
ships, the Union Royale notes that it was in fact the Union
Royale itself which had asked the Belgian Government to
confirm through legislation a tax scheme which, it argues,
already existed before the entry into force of the Treaty in
order to enhance legal certainty with regard to this scheme.

(77)

By letter of 18 July 2003, the Handelskammer Hamburg
(Hamburg Chamber of Commerce) transmitted its com-
ments to the Commission as the representative of the
Hamburg economy and its companies.

10.6.2005

EN

Official Journal of the European Union

L 150/11

(78)

The Handelskammer Hamburg is concerned that the Belgian
tonnage-based flat-rate taxation scheme distorts competi-
tion not only between towage companies but also between
the ports of northern Europe. In its opinion, the Commu-
nity guidelines should not be applicable to inland shipping,
nor to activities in and around sea ports. Consequently, it
asks that the formal investigation procedure be extended to
the application of the scheme to the towage sector.

3.4. Comments from Bugsier

(83)

(79)

By letter of 2 June 2003, the Bugsier company (Bugsier
Rederei- und Bergungs-Gesellsschaft mbH) transmitted to the
Commission its comments as an interested party, asking
that all its letters sent to the Commission between 2000
and 2003 be taken into account. In particular, it considers
that the conditions laid down in the programme act in
respect of towage, in particular the criteria ‘at sea with a
clearance certificate’, are insufficient to prevent unfair com-
petition within the Community in the port towage sector,
asking the Commission to extend the formal investigation
procedure also to this aspect of the programme act.

4. COMMENTS FROM BELGIUM

(80)

Pursuant to Article 6(2) of Regulation (EC) No 659/1999,
the Commission has sent the following documents to the
Belgian authorities for its comments:

— the comments from the Zentralverband der Deutschen

Seehafenbetriebe by letter of 7 August 2003,

— the comments from the Handelskammer Hamburg by

letter of 7 August 2003;

— the comments from Bugsier Rederei- und Bergungs-

Gesellschaft mbH by letter of 7 August 2003,

— the comments from the Union Royale des Armateurs

Belges by letter of 17 September 2003.

(81)

The Commission has not received any observations from
the Belgian authorities on the comments transmitted.

(82)

By letter of 7 May 2003, the Belgian authorities transmit-
ted to the Commission their observations on the Commis-
sion’s decision of 19 March 2003 to initiate the formal
investigation procedure with regard to certain aspects of
the planned fiscal measures for maritime transport.

4.1.

Flat-rate taxation scheme for shipowners

4.1.1. Low rate beyond 40 000 tonnes for the flat-taxation

scheme (23)

In its decision of 19 March 2003, the Commission consid-
ered whether the introduction of a EUR 0,05 rate per
tranche of 100 tonnes above 40 000 tonnes could, even
though not prohibited by the Community guidelines on
aid to maritime transport (24), lead to a distortion of intra-
Community competition. None of the flat-rate taxation
schemes previously approved by the Commission have laid
down measures that are equally favourable for ships over
40 000 tonnes. Moreover, the Commission has endeav-
oured to keep the tax rates of the schemes previously
approved within a relatively narrow range, as shown in
Table 1, to ensure a high degree of convergence among the
various taxation schemes throughout the Community.

Belgium emphasises that this rate is as such not contrary
to the Community guidelines. The Belgian authorities also
note that the purpose of this measure is not to distort
intra-Community competition but to promote the return
under the Belgian flag of ships over 40 000 tonnes.

The Belgian authorities recall that ships of more than
40 000 tonnes represent only 4,5 % of the world fleet,
namely 1 257 units. Only 143 of them are registered in the
Community, or 11,38 %. Most of these (108 ships or
75,52 % of the ‘European’ fleet over 40 000 tonnes) are
registered in Greece. Taking account of the small number
of ships involved, the Belgian authorities assume that the
other Member States have hitherto not introduced specific
measures for this type of ship.

(84)

(85)

(86) Nevertheless, Belgium has wished to attract large-capacity
ships to its flag by granting a rate that is, among other
things, adapted to their specific features. The Belgian
authorities point out that even after the introduction of the
flat-rate taxation scheme as planned by Belgium, the tax
burden would still be tantamount to 2 or even 2,5 times
the amount of tax levied in third countries with flags of
convenience or in countries such as Malta and Cyprus. As
regards these two countries, the Belgian authorities main-
tain that it is much more their accession to the European
Union that will bring about a distortion of competition
rather than the introduction in Belgium of a specific rate
for high-tonnage ships.

(23) Article 119(1) of the programme act.
(24) Former version (OJ C 205, 5.7.1997, p. 5).

L 150/12

EN

Official Journal of the European Union

10.6.2005

(87) According to the Belgian authorities, the fact that other
Member States have not shown a specific interest in high-
capacity ships, probably because of the small number or
total absence of such ships in these Member States, should
not prevent Belgium from pursuing a different policy in
this respect.

(88)

Finally, the Belgian authorities refer to the Community
guidelines which provide in the second paragraph of sec-
tion 3.1 that ‘the creation of conditions allowing fairer
competition with flags of convenience seems the best way
forward’.

4.1.2. Application of the flat-rate taxation scheme to profits
from particular activities without a direct link with
transport activities

(89)

In compiling the list of eligible activities included in the
reply which it sent to the Commission on 5 Decem-
ber 2002, Belgium referred to the following:

— the OECD commentary on the model convention with
respect to taxes on income and on capital, and in par-
ticular the comments concerning Article 8 on ship-
ping and air transport,

description of the measure has likewise been modelled on
the tonnage-based flat-rate taxation scheme of
the
United Kingdom.

(93) With regard to advertising and marketing, the Belgian
authorities emphasise that points 7 and 8 of the commen-
tary on the OECD model tax convention includes advertis-
ing and commercial propaganda among the additional
activities connected with the direct operation of ships (26).

(94) With regard to revenue from short-term investment of
operating capital, ship brokerage (27) for the company’s
own ships and the disposal of operating assets such as
immovable property for management purposes and oper-
ating facilities for loading and unloading ships, the Belgian
authorities have based their arguments on the explanatory
memorandum (28) pertaining to the Dutch tonnage-based
flat-rate taxation scheme (29).

4.1.3. Provisions allowing losses of other divisions that could not
be deducted from the profits of any other division of the
company to be deducted from the tonnage-based flat-rate
tax

— the tonnage tax schemes established by the Nether-
lands and the United Kingdom, approved by the Com-
mission by decisions of 20 March 1996 and
2 August 2000.

(95)

Belgian fiscal law on corporation tax provides that com-
panies are taxable on their total profits. This means that
profits and losses in a particular tax year can be offset
among all the divisions and/or branches of the company.

(90) As the list of eligible activities is based on certain existing
schemes, the Belgian authorities consider that the Commis-
sion ought to treat them in the same way as it has done for
the other Member States.

(91)

Specifically, the Belgian authorities note that for the con-
nected and temporary activities which a company pursues
in order to make full use of the personnel and assets
assigned to the company’s principal activity, if these activi-
ties are minimal compared with that principal activity, the
text has been modelled on the tonnage-based flat-rate taxa-
tion scheme of the United Kingdom (25).

(92) With regard to the sale of products not intended for con-
sumption on board such as luxury articles and the provi-
sion of services not directly linked with maritime transport
such as gambling, gaming tables and casinos and excur-
sions for passengers, the Belgian authorities argue that the

(26) ‘7.

8.

Shipping […] enterprises […] often engage in additional activi-
ties more or less closely connected with the direct operation of
ships […]. Although it would be out of the question to list here
all the auxiliary activities which could properly be brought under
the provision, nevertheless a few examples may usefully be
given.
The provision applies, inter alia, to the following activities:
[…]
(c)
[…]’

advertising and commercial propaganda;

(27) In Dutch also called ‘cargadoor’.
(28) Lower House of the Dutch Parliament, Parliamentary Year 1995 to
1996, 24 482, No 3. Unofficial translation made by the Belgian
administration of the passage in the Dutch explanatory memoran-
dum [and here translated into English from the Dutch original]: ‘For
the purposes of this article, profits from maritime shipping includes
profits made in activities directly connected with the operation of the
abovementioned ships. These activities include loading and unload-
ing under the shipowner’s own management and ship brokerage
activities carried out under his own management. Such directly con-
nected activities come under the scheme only to the extent that they
are performed for the ships operated by the taxpayer. Moreover,
directly connected activities also include the disposal of assets used by
the taxpayer in the course of operation. This concerns not only ships
operated by the taxpayer but, for instance, also buildings in which
management takes place and the company’s assets used for loading
and unloading ships.’

(25) Commission Decision of 2 August 2000, Case N 790/1999.

(29) Commission Decision of 20 March 1996, Case N 738/1995.

10.6.2005

EN

Official Journal of the European Union

L 150/13

(96)

The Belgian authorities recall that the flat-rate scheme does
not determine the tonnage-based flat-rate tax but the tax-
able profits accruing from maritime shipping.

(97) Moreover, the Belgian authorities take the view that the
position adopted by the Commission would lead to dis-
crimination between Belgian companies as companies
which do not have a maritime division may offset the year’s
losses incurred in some divisions against profits from other
divisions whereas such losses cannot be deducted from
profits determined on the basis of tonnage.

4.1.4. 50 % tax deduction for ships less than five years old and
25 % for ships between five and ten years old

(102)

(98)

(99)

The Belgian authorities stress that the Community guide-
lines do not lay down any rule on the applicable rates
which Member States may introduce in flat-rate taxation
schemes nor on the possibility of introducing incentives
for new ships. In the opinion of the Belgian authorities, the
fact that the other schemes recently approved do not pro-
vide for such a deduction cannot prevent Belgium from
introducing such an incentive.

In its decision of 19 March 2003, the Commission states
that it knows from experience that there is a greater ten-
dency to register older ships under flags of convenience.
The Belgian authorities maintain that these arguments are
contrary to reality and are without foundation and they
refer to an extract from the Review of Maritime Transport of
2002 (30) which they enclosed with their letter of 7 May
2003.

4.2. Tax measures outside the flat-rate taxation
scheme for shipowners

4.2.1. Scheme for accelerated depreciation

(100) According to the Belgian authorities, the accelerated depre-
ciation scheme was set up in 1951 and has already under-
gone several amendments, most recently in 1996. The
scheme therefore dates back to before the signing of the
Treaty. The scheme was transposed into legislation
through the programme act of 2 August 2002 to enhance
its legal certainty.

(101) The Belgian authorities have provided the Commission
with documentary proof showing that the scheme existed
before the entry into force of the Treaty of 1 January 1958.
The Belgian authorities enclosed with their letter of 7 May
2003 an internal instruction from the Ministry of Finance
dated 24 August 1951 laying down the procedure for
implementing the specific depreciation scheme for ships
and a letter from the Ministry of Finance to the general
shipowners’ association dated 13 January 1967 indicating
that the said scheme was still applicable.

4.2.2. Reduction of registration duties on mortgages on ships

not intended for maritime transport

In general, tax incentives may be accepted provided that
they are confined to maritime transport activities. The Bel-
gian authorities take the view that the reduction of the reg-
istration duty for ships used in maritime transport is
compatible with section 3.1 of the Community guidelines
if it should appear that the measure constitutes aid within
the meaning of the Treaty.

(103) The Belgian authorities have indicated that the main rea-
son for introducing this measure was the absence of simi-
lar taxes for registering mortgages on ships in the
Netherlands and the Grand Duchy of Luxembourg.
According to the Belgian authorities, the absence of such a
tax in two of Belgium’s neighbouring countries places the
Belgian fleet in an unfavourable competitive position.

4.2.3. Scheme applicable to managers acting on behalf of third

parties (31)

(104)

In response to the observations made by the Commission
in the decision of 19 March 2003, the Belgian authorities
indicate, referring to the explanatory memorandum to the
draft for the programme act, that the flat-rate taxation
scheme was established in order to make the technical
management of ships more competitive and to make it
possible to make crews available on the basis of a manage-
ment contract. According to the Belgian authorities, there
is a huge market for such activities in which Belgium has
so far played only a very small part.

(105) According to the Belgian authorities, the Community
guidelines explicitly mention the relocation of ancillary
activities (such as management of ships) to third countries
(section 1.2, fifth paragraph), involving even higher losses
of jobs, at sea and on shore. The programme act provides
that at least 75 % of ships managed must be registered in
the Belgian register of ships. The Belgian authorities point
out that such a condition does not exist under the flat-rate

(30) Report of the UNCTAD Secretariat: UNCTAD/RMT/2002 UNITED
NATIONS PUBLICATION Sales No E.02.II.D.23 ISBN 92-1-
112571-5 ISSN 0566-7682.

(31) Article 124 of the programme act.

L 150/14

EN

Official Journal of the European Union

10.6.2005

taxation scheme for maritime transport companies. In
order to benefit under the scheme, managers may not pur-
sue activities other than ship management.

(106) Moreover, the Belgian authorities recognise that for the
determination of the flat-rate tax the same ship may be
taken into account twice, once for the shipowner and once
for the manager. As these are two different legal person-
alities who pursue different activities, the Belgian authori-
ties deem it normal that in this case income is determined
and taxed separately. According to the Belgian authorities,
the fact that different rates are applied is justified because
different
different
remuneration.

entitlement

activities

give

to

5. EVALUATION OF THE AID

5.1. Existence of aid within the meaning of the
EC Treaty

(107) Under Article 87(1) of the Treaty, any aid granted by a
Member State or through state resources in any form what-
soever which distorts or threatens to distort competition
by favouring certain undertakings or the production of cer-
tain goods is incompatible with the common market inso-
far as it affects trade between Member States.

(108) Through tonnage-based flat-rate taxation, the Belgian
authorities intend to grant advantages to certain undertak-
ings through state resources. These subsidies threaten to
distort competition and could affect trade between Mem-
ber States. For the above reasons, the various measures in
question which are the subject of the formal investigation
procedure constitute State aid within the meaning of
Article 87(1) of the Treaty.

(109) The scheme for accelerated depreciation of ships, offering
depreciation rules that are even more generous than those
provided for in Articles 61 to 64 of the Belgian Income
Tax Code 1992, is specific in that it applies only to a lim-
ited category of assets. The measure is in effect State aid
within the meaning of Article 87(1) of the Treaty.

(111) The Commission notes that this registration duty is paid
for mortgages taken out on immovable property and that
the scheme in question is not confined to ships, whether
used for maritime transport or inland navigation. The
Commission points out that under the rules governing the
tax scheme for mortgage registration, it is logical that reg-
istration duties are levied in proportion to the amount of
mortgage, irrespective of the type of assets to which the
mortgage relates.

(112) The Commission therefore takes the view that the aboli-
tion or substantial reduction of this tax for only a part of
the sectors of activity concerned constitutes State aid
within the meaning of Article 87(1) of the Treaty as the
scheme continues to apply without change to the other
activities for which mortgages have to be registered. More-
over, the measure applies only to one category of assets
while categories of assets other than ships do not qualify
for such reduction. Consequently, this measure cannot be
treated as a general measure.

(113) Finally, the flat-rate taxation scheme for persons manag-
ing ships on behalf of third parties is specific, like that for
shipowners. It is therefore aid within the meaning of
Article 87(1) of the Treaty.

(114) Moreover, the Commission notes that it was already estab-
lished in the decision of 19 March 2003 that it is tanta-
mount to aid within the meaning of Article 87(1) of the
Treaty. In fact, the Belgian authorities have not disputed
this evaluation in the comments they submitted on the said
decision.

(115) As a general rule, the Commission considers that the aid
subject to the formal investigation procedure is unlawful as
there is no longer any legal or administrative impediment
to its implementation following the promulgation of the
Royal Decree of 7 May 2003, even though no advantages
have as yet been granted in practice. The Commission
regrets that Belgium has implemented these measures with-
out the Commission’s prior approval.

5.2. Legal basis

(110) Next, it should be ascertained whether the registration
charge levied on the establishment of a mortgage on ships
constitutes aid. The Belgian authorities have not supplied
any information to show that this registration duty is a
unique case in the Community and that none of the other
Member States have an equivalent tax on the registration
of a mortgage on a ship.

(116) Under Article 87(3)(c), aid to facilitate the development of
certain economic activities or of certain economic areas
may be regarded as compatible with the common market
if such aid does not adversely affect trading conditions to
an extent contrary to the common interest. The Commis-
sion considers Article 87(3)(c) as the appropriate legal basis
applicable in the case under scrutiny.

10.6.2005

EN

Official Journal of the European Union

L 150/15

(117) Aid for the maritime sector should be examined in particu-
lar in the light of the Community guidelines on State aid
for maritime transport. These guidelines describe schemes
for State aid that may be introduced to promote the inter-
ests of maritime transport in the Community in the pur-
suit of general objectives such as:

exclude all towage activities not covered by the definition
of maritime transport from benefiting from the tax con-
cessions. This view has been called into question by vari-
ous interested parties even though they were not invited in
the decision of 19 March 2003 to comment on this aspect
of the programme act. The Commission intends to deal
with this aspect of the programme act in another decision
on the basis of a more thorough examination of the impact
of the programme act on the Belgian towage sector.

— safeguarding employment in the Community (at sea

and on shore),

— improving safety,

(120)

In light of the observations submitted by the various inter-
ested parties and comments from the Belgian authorities,
the Commission will consecutively consider the seven
points in respect of which it initiated the formal investiga-
tion procedure on 19 March 2003.

— maintaining maritime know-how in the Community

5.3.1. Rates for ships over 40 000 tonnes

and improving maritime skills.

(118) As the measures examined in the formal investigation pro-
cedure have been implemented, the text that should be
examined is that which was in force on the date of entry
into force of various measures. Consequently, for all the
measures examined, the Commission used the Community
guidelines in force, i.e. those published on 17 January
2004 (32), to investigate whether the various planned fis-
cal measures are compatible. Be that as it may, the new
guidelines do not differ greatly from the former with regard
to aid measures relating to corporation tax (33), except as
regards the treatment of persons managing ships on behalf
of third parties. Where sectors other than maritime trans-
port could be affected by the measures investigated, the
Commission referred to Community texts applicable to
State aid in these sectors.

5.3. Analysis of measures under the flat-rate
taxation scheme

(119) First of all, the Commission takes cognisance of the com-
ments made by various interested parties on the need to
extend the formal investigation procedure to the applica-
tion of the tax measures to the dredging sector. The Com-
mission points out that this aspect of the programme act
cannot be covered by this decision as the decision to ini-
tiate the informal investigation procedure did not relate to
this aspect. This is because the Commission considered in
its decision to initiate the procedure that the conditions
to
laid down by the programme act were sufficient

(121) First of all, the Commission notes that the Belgian authori-
ties have given a commitment not to apply the EUR 0,05
rate so long as the Commission has not ruled on its com-
patibility with the common market following the outcome
of the formal investigation procedure. This measure has
therefore not been implemented.

(122) Furthermore, the Commission notes that none of the
tonnage-based flat-rate taxation schemes previously
approved by the Commission made provision for specific
treatment for very large ships and that the Community
guidelines leave a degree of discretion with regard to the
acceptable level of rates under the flat-rate taxation scheme.
Moreover, the Commission does not have sufficient expe-
rience with these schemes to know whether the rates have
been sufficiently attractive to encourage shipowners to
bring large-tonnage ships such as those covered by the
EUR 0,05 rate back from the flag of a third country to a
Community flag.

(123) The Commission considers incompatible with the com-
mon market the plan of the Belgian authorities to apply
the special EUR 0,05 rate for ships over 40 000 tonnes
also to ships already flying the flag of a Member State. The
aim of the guidelines is above all to strengthen the Com-
munity fleet and thereby create employment in the Com-
munity as well as ensuring that ships are subject to
Community rules with regard to safety. It is obvious that
this objective is already met by a ship which already flies
the flag of one of the Member States.

(32) See note 4.
(33) See section 3.1 of the Community guidelines.

(124) Care should be taken to prevent shipowners from never-
theless trying to benefit from the EUR 0,05 rate when
reflagging a ship from a Community flag to the Belgian flag

L 150/16

EN

Official Journal of the European Union

10.6.2005

by letting them sail temporarily under the flag of a third
country. In order to ensure that the introduction of the
EUR 0,05 rate does not lead to reflagging within the Com-
munity, the Commission deems it necessary to impose on
ships coming from registers of third countries a minimum
period of five years during which a ship reflagged to the
Belgian flag must have been previously registered under a
non-Community flag. Such a condition would make it pos-
sible to attain the objective laid down in the Community
guidelines to transfer ships controlled by Community ship-
owners and registered under the flag of a third country to
Community ships’ registers without running the risk of
adversely affecting intra-Community trade.

(125) Accordingly, the Commission considers the introduction
of a EUR 0,05 rate per tranche of 100 tonnes above
40 000 tonnes, such as provided for in Article 119(1) of
the programme act of 2 August 2002, as compatible with
the common market provided that the ships concerned are
new or else have been registered for at least the last five
years under a non-Community flag. If this condition is not
met, the Commission considers the measure incompatible
with the common market. If no such guarantees can be
given, there is a significant risk that the aforementioned
rate of EUR 0,05 leads to distortion of competition in
intra-Community trade.

5.3.2.1. A n c i l l a r y a n d t e m p o r a r y a c t i v i t i e s

(128) With regard to ancillary and temporary activities ‘carried
out by the company in order to make full use of the per-
sonnel and assets assigned to the company’s principal
activity, to the extent that these activities are minimal com-
pared with that principal activity’, the Commission notes
that the Belgian authorities have not furnished any argu-
ments to show that such activities were indispensable or
intrinsically linked with maritime transport activities. Nor
have they specified within what limits and under what con-
ditions certain activities which because of their particular
nature are not eligible could be covered by the flat-rate
taxation scheme.

(129) The Commission therefore takes the view that because
such activities cannot fall within one of the categories of
eligible activities they are ineligible activities. The Commis-
sion recalls the approach it has consistently adopted in its
recent decisions with regard to ineligible activities in order
to prevent abuse in the application of schemes for mari-
time transport.

5.3.2. Extension of the flat-rate taxation scheme to profits from

particular activities

(130) Finally, the Commission believes that the absence of clear
limits and rules for covering these ancillary and temporary
activities may be a significant potential source of devia-
tions from the scheme’s original objective.

(126) First of all, the Commission notes that the activities in
respect of which the formal investigation procedure was
instituted come from a list provided by the Belgian authori-
ties in their reply to the Commission of 5 December 2002.
As the Belgian authorities pointed out in their letter of
7 May 2003, Belgium took as the basis for this indicative
list the OECD model tax convention on income and on
capital and the tonnage tax schemes established by the
Netherlands and the United Kingdom.

(131) For all the above reasons, the Commission considers that
covering these activities by the flat-rate taxation scheme is
not compatible with the common market.

5.3.2.2. S a l e o f p r o d u c t s

a n d s e r v i c e s n o t
i n t e n d e d f o r c o n s u m p t i o n o n b o a r d

(127) The Commission notes that the list of activities in respect
of which the procedure was instituted includes income-
generating activities – for which the question whether
these activities are eligible or not is completely relevant –
and activities which only generate costs for shipowners, for
which this question does not appear to be relevant. The lat-
ter activities are in fact intrinsically linked with maritime
transport activities and it is therefore logical to include the
costs they generate in the accounts on the basis of which
the profits that are subject to the flat-rate taxation scheme
are calculated so as to ensure that such costs are not
deducted from profits calculated for any ineligible
activities.

(132)

It is necessary to ascertain whether the sale of products not
intended for consumption on board, such as luxury
articles, or the provision of services without a direct link
with maritime transport, such as gambling, gaming tables
and casinos and excursions for passengers, may be
regarded as eligible.

(133)

In order to maintain a level playing field in competition
within the Community in accordance with the objectives
of the Community guidelines, the Commission has in its
earlier decisions consistently pursued a policy of not
including in flat-rate taxation schemes the sale of articles or

10.6.2005

EN

Official Journal of the European Union

L 150/17

the provision of services that are not directly linked with
maritime passenger transport. It is the Commission’s view
that the sale of luxury articles and gambling, gaming tables
and casinos on board eligible ships could not be intrinsi-
cally linked with maritime passenger transport and that
these activities could therefore not be eligible. In accor-
dance with this principle, such activities have been explic-
itly excluded from the Irish (34), Finnish (35) and French (36)
flat-rate taxation schemes.

(134) The Commission is of the opinion that the Belgian authori-
ties cannot invoke implementing provisions pertaining to
a taxation scheme of a Member State if these provisions
have not been notified to the Commission and have not
been mentioned in the Commission’s decision approving
the relevant scheme. In other words, a Member State could
not invoke the existence of illegal aid, whether alleged or
real, in another Member State to justify the compatibility
of similar aid within its own territory.

(135)

In view of the above considerations, the Commission con-
siders that including the sale of products and services not
intended for on-board consumption in the flat-rate taxa-
tion scheme is not compatible with the common market.

5.3.2.3. A d v e r t i s i n g a n d m a r k e t i n g

(136) A distinction should be made between advertising and
marketing activities involving costs for the shipowner (ser-
vice provided by a third party) and those generating income
(service provided by the shipowner).

(137) Advertising and marketing should be covered by the flat-
rate taxation scheme if they entail costs connected with
maritime transport (expenditure on advertising and mar-
keting for the shipping company’s own activities). This is
because in this case advertising and marketing are eligible
activities in that they do not generate income for the ship-
ping company.

(138)

If advertising and marketing generate income for the ship-
it should be verified whether they are
ping company,
intrinsically linked with maritime transport. For instance,
the Commission is of the opinion, in light of the Commu-
nity guidelines, that only activities directly linked with

maritime transport can be eligible under flat-rate taxation
schemes and that ‘activities that have nothing to do with
maritime shipping’ cannot be eligible. The sale of advertis-
ing space on board passenger ships is a normal activity of
a company engaged in maritime passenger transport. In
this specific case, including this activity in the flat-rate taxa-
tion scheme may be considered compatible with the com-
mon market. However, if advertising and marketing are
ancillary activities for the shipping company that are not
directly linked with its maritime transport services, the
Commission takes the view that they cannot be considered
eligible.

5.3.2.4. S h o r t - t e r m i n v e s t m e n t r e v e n u e f r o m

o p e r a t i n g c a p i t a l

(139) As in every business, revenue from short-term investment
of operating capital within a shipping company results
from normal financial management. Moreover, this rev-
enue may be of particular importance for shipping com-
panies whose activities are affected by strong seasonal
variation.

(140) The short-term investment of ordinary cash resources is a
normal activity directly linked with the shipping compa-
ny’s principal activity. Accordingly, the Commission is of
the opinion that such revenue is eligible to the extent that
it corresponds to the financial products of the shipping
company’s normal working capital in connection with the
pursuit of eligible activities. If the financial products hail
from exceptional assets of the shipping company or if they
relate to long-term investment or originate from resources
generated by ineligible activities, the Commission is of the
opinion that the latter cannot be eligible under the flat-rate
taxation scheme.

(141) The Commission therefore considers that including short-
term investment revenue from operating capital is compat-
ible with the common market if such revenue relates to
financial products from the shipping company’s normal
working capital from eligible activities.

5.3.2.5. S h i p b r o k e r a g e
o w n s h i p s

f o r

t h e

c o m p a n y ’ s

(34) Commission decision of 11 December 2002, case N 504/02. See in

particular point 29.

(35) Commission decision of 16 October 2002, case N 195/02. See in

particular section 2.8.2.

(36) Commission decision of 13 May 2003, case N 737/02. See in par-

ticular point 26.

(142) Ship brokerage activities consist of looking for cargo in a
port on behalf of a shipowner and looking after the latter’s
interests. Ship brokerage activities on a company’s own
behalf consist of looking for additional cargo in a port to
supplement the cargo of its own ships.

L 150/18

EN

Official Journal of the European Union

10.6.2005

(143) The Belgian authorities have argued that they have taken as
a basis the explanatory memorandum to the Dutch law
establishing a tonnage-based flat-rate taxation scheme (37).
As indicated above, the Commission cannot take this argu-
ment into account to show that this activity is eligible.

(144) However, the Commission notes that this activity does not
generate revenue for the shipping company insofar as it is
a normal activity for a shipowner looking for as much
cargo as possible for his ships. This activity does not gen-
erate any turnover-increasing added value among the ship-
owner’s existing customers and cannot give rise to specific
remuneration from new clients supplying additional cargo.
It is a normal activity of a shipowner seeking to use his
assets to make a profit.

(145) For the above reasons, the Commission considers that the
inclusion in the flat-rate taxation scheme of ship broker-
age activities on the shipowner’s own behalf is compatible
with the common market.

5.3.2.6. D i s p o s a l o f o p e r a t i n g a s s e t s

(146) Disposal of operating assets such as operating equipment
used for the company’s own purposes in loading and
unloading ships operated may be regarded as an activity
directly linked with maritime transport for the same rea-
son that capital gains on ships are normally covered by a
flat-rate taxation scheme, if they are re-invested pro rata
temporis under the flat-rate taxation scheme.

(147) However, this does not apply in respect of capital gains on
office buildings which because of their very nature are not
intended to be used for maritime transport. The fact is that
such assets can be used by any other type of company. If
the disposal does not concern property which by virtue of
its nature is intended to be used in maritime transport
activities, capital gains from such sale cannot be included
in the flat-rate taxation scheme.

(148) The inclusion of capital gains which solely relate to prop-
erty which by its nature is intended for use in maritime
transport activities is therefore compatible with the com-
mon market.

— ancillary and temporary activities,

— the sale of products not intended for consumption on
board such as luxury articles and the provision of ser-
vices not directly linked with maritime transport such
as gambling, gaming tables and casinos and excur-
sions for passengers,

— income from investment that does not correspond to
revenue from the company’s ordinary cash resources,

— advertising and marketing that does not relate to the
sale of advertising space on board eligible ships,

— ship brokerage activities on behalf of ships of third

parties,

— disposal of operating assets if by virtue of their nature

they are not intended for maritime transport.

(150) However, the Commission considers inclusion in the flat-
rate taxation scheme of the following activities as compat-
ible with the common market:

— income from short-term investment of operating capi-
tal if it corresponds to revenue from the company’s
ordinary cash resources,

— advertising and marketing relating to the sale of adver-

tising space on board eligible ships,

— ship brokerage activities for one’s own ships,

— disposal of operating assets if they are by their nature

intended for maritime transport.

5.3.3. Deduction of losses of other divisions from the flat-rate

tax

5.3.2.7. C o n c l u s i o n s o n t h e e l i g i b i l i t y o f t h e

v a r i o u s a c t i v i t i e s e x a m i n e d

(149)

In conclusion, the Commission considers the inclusion in
the flat-rate taxation scheme of the following activities as
incompatible with the common market:

(37) See, in particular, the Commission’s decision of 20 March 1996, case

N 738/1995.

(151) The Commission recalls that in its earlier decisions it called
for the introduction of measures to prevent abuse (also
referred to as ring-fencing measures) so as to prevent ineli-
gible activities from benefiting from measures initially
intended for maritime transport. Such limiting measures
importance to ensure that protective
are of essential
mechanisms of the Community’s maritime transport sec-
tor do not lose their credibility and thereby their justifica-
tion in light of Community law when they are extended to
activities not subject to the international competitive pres-
sures which the maritime transport sector is subject to.

10.6.2005

EN

Official Journal of the European Union

L 150/19

(152) The Commission therefore considers it crucial to maintain
a strict separation of accounts between eligible and ineli-
gible activities for the determination of the taxation appli-
cable to each. The Commission has ascertained that this
principle is applied in the other flat-rate taxation schemes
it has approved.

(158)

In its previous decisions, the Commission has striven for
convergence of flat-rate taxation schemes towards com-
mon features and towards very similar tax levels, as shown
in the above Table 1. The fact that the Community guide-
lines do not indicate whether positive discrimination ben-
efiting the newest ships can or cannot be taken into
consideration does not remove the Commission’s scope for
discretion in determining which measures may lead to dis-
tortion to an extent contrary to the common interest. In
the Commission’s opinion, the introduction of reductions
for ships between zero and 10 years old may disrupt the
current balance among Member States with a flat-rate taxa-
tion scheme. Consequently, the Commission considers that
it is in the common interest not to authorise particular flat-
rate taxation schemes which deviate too much from the
characteristics of schemes previously approved and benefit
new ships in particular.

(159) Moreover, the Commission considers that there is no need
to make provision for additional advantages for the new-
est ships in order to contribute to the objectives of the
Community guidelines.

(160)

In view of the above, the Commission considers that the
reductions provided for in Article 119(2) of the pro-
gramme act are not compatible with the common market.

5.4. Analysis of measures not covered by the
flat-rate taxation scheme for maritime transport

5.4.1. Scheme for accelerated depreciation of ships not intended

for maritime transport

(161) The Commission recalls, first of all, that the measure is in
fact aid within the meaning of Article 87(1) of the Treaty
as it derogates from Articles 61 to 64 of the Belgian Income
Tax Code 1992 governing accelerated depreciation and
because it lays down depreciation rules that are even more
generous than those provided for in the said Articles.

(162) The Commission notes that the Community guidelines do
not prohibit accelerated depreciation for maritime trans-
port. However, the scheme in question is ‘existing aid’
within the meaning of Article 1(b) of Regulation (EC) No
659/1999.

(153) The Belgian authorities have not been able to show that to
calculate profits it was necessary to remove the barriers
between the maritime divisions, both with regard to the
maritime sector and the other sectors concerned.

(154)

In fact, the Commission fails to understand the argument
adduced by the Union Royale des Armateurs Belges that com-
panies which have not made the separation would be
penalised (38). In their letter of 5 September 2002, the Bel-
gian authorities gave a commitment that a company simul-
taneously engaged in eligible and ineligible activities would
keep separate accounts. The Commission regards this com-
mitment as a guarantee of compliance with the principle
of strict separation in the accounts between eligible and
ineligible activities. Consequently, the situation described
by the Union Royale could not arise.

(155) The Commission deems it necessary to maintain a strict
separation between the accounts for eligible and ineligible
the provisions of
activities and therefore considers
Article 120(2) of the programme act, under which any
losses suffered by other divisions that are normally taxed
may be deducted from tax determined on a flat-rate basis
as incompatible with the common market.

5.3.4. Deductions for ships more than 10 years old

(156) The Commission notes that the Belgian authorities intend
to favour newer ships in order to foster the development
of a safer and more environmentally friendly fleet. Never-
theless, it notes that none of the tonnage-based flat-rate
taxation schemes implemented by other Member States
and approved by the Commission comprise specific rates
varying according to the ship’s age.

(157) Moreover, the Commission notes that while the nominal
rates fixed by Belgium make the level of taxation compa-
rable with schemes of other Member States which the
Commission has previously approved, this is no longer the
case if 25 % or 50 % reductions are applied to the newest
ships. If these reductions were implemented, this would
make the tax level in Belgium very attractive in compari-
son with schemes already in force in other Member States.

(38) See section 3.1, point 70.

L 150/20

EN

Official Journal of the European Union

10.6.2005

(163) Outside maritime transport the various Community rules
applicable to the various sectors to which this reduction of
registration tax may apply, such as fisheries (39) and inland
shipping (40), do not permit the grant of such aid.

5.4.3. Flat-rate taxation scheme for persons managing ships on

behalf of third parties

(164) The Commission considers that the Decision of 19 March
2003 initiating the formal investigation procedure also
serves as an invitation to Belgium to submit its comments
under Article 17(2) of Regulation (EC) No 659/1999.

(168) The Commission notes that no interested party apart from
the Union Royale des Armateurs Belges has submitted com-
ments on the scheme for ship managers, even though it
was covered by the formal investigation procedure initi-
ated on 19 March 2003.

(165) Taking account of the unjustified advantage which this
scheme gives ships not engaged in eligible activities, the
Commission deems it necessary to make proposals for
appropriate measures in this case,
in accordance with
Article 18 of Regulation (EC) No 659/1999. By the present
decision, the Commission therefore proposes that Belgium
take the following appropriate measures: before 30 June
2005, Belgium should abolish the special option scheme
applicable to depreciations, as provided for by Article 121
of the programme act, in respect of all ships not engaged
in eligible activities. Before 31 December 2004, Belgium
should inform the Commission of its decision to abide by
the said appropriate measures.

5.4.2. Reduction of registration duty on mortgages on ships not

intended for maritime transport

(166) As in the case of the measure just examined, the Commis-
sion notes that outside maritime transport the various
Community rules applicable to the various sectors to which
this reduction registration tax may apply, such as fisher-
ies (41) and inland shipping, do not permit the grant of
such aid.

(167) While such investment aid may be accepted in the frame-
work of the Community guidelines, as the Commission
noted in its decision of 19 March 2003, this does not apply
in respect of ships which by their nature are not intended
to be used in maritime transport (tugs, dredgers, vessels for
inland shipping, etc.). Accordingly, the Commission con-
siders that the reduction of or the exemption from the pay-
ment of registration duty on mortgages on ships not
intended for maritime transport is State aid incompatible
with the common market.

(39) See the guidelines for the examination of State aid to fisheries and

acquaculture (OJ C 19, 20.1.2001, p. 7).

(40) See footnote 20.
(41) See footnote 39.

(169) The Commission wonders whether persons managing
ships on behalf of third parties engage in a maritime trans-
port activity. In Belgium, ship management on behalf of
third parties consists of providing a crew for a ship and,
where appropriate, fitting the ship out with the equipment
necessary for the planned maritime transport activities.
The person managing a ship on behalf of third parties pro-
vides a service to the shipping company or the shipowner:
he does not conclude any transport contract with a ship-
per. His activity can therefore not be treated as a transport
service.

(170) The new Community guidelines published on 17 January
2004 on aid to maritime transport provide that ship man-
agement companies may receive aid for the ships for which
they are responsible for crew management and overall
technical management (42). Such companies may be eli-
gible only if they assume full responsibility for the opera-
tion of the ship and all the duties and responsibilities
imposed by the ISM code (43). The Commission can there-
fore authorise only aid for ship managers meeting the con-
ditions laid down by the new Community guidelines.

(171) With regard to the level of taxation for persons managing
ships on behalf of third parties, the Commission notes, on
the basis of figures supplied by the Belgian authorities, that
at equal fleet tonnage a manager has a much lower turn-
over than a shipowner if only because of the capitals

(42) See in particular section 3.1 of the Community guidelines: ‘It is also
of interest to stipulate that whereas Community-based shipping com-
panies are the natural recipients of the above tax schemes, certain
ship management companies established in the Community may also
qualify under the same provisions. Ship management companies are
entities providing different kinds of services to shipowners, such as
technical survey, crew recruiting and training, crew management and
vessel operation. In some cases ship managers are assigned both tech-
nical and crewing management of vessels. In this case they act as clas-
sic “shipowners” as far as transport operations are concerned.
Moreover, as in the case of the shipping industry, this sector is expe-
riencing strong and increasing competition at an international level.
For these reasons, it seems appropriate to extend the possibility of tax
relief to that cateogry of ship managers.’

(43) ‘ISM Code’ means the international management code for the safe
operation of ships and for pollution prevention as adopted by the
International Maritime Organisation (IMO) by Resolution A.741(18).

10.6.2005

EN

Official Journal of the European Union

L 150/21

costs incurred by the shipowner which the manager does
not have to bear. According to the example provided by
the Belgian authorities, there is a 1:100 ratio between a
ship manager’s and a shipowner’s turnover for a ship of the
Very Large Crude Carrier (VLCC) type. This example also
shows that if the manager were subject to the flat-rate taxa-
tion scheme at the same rates as those applicable to the
shipowner, his flat-rate tax would be significantly higher
than that which he would have had to pay under the nor-
mal corporation tax scheme. The Commission is of the
opinion that if this claim can be substantiated in a more
detailed study on the relation between the respective turn-
overs of these two professions in respect of equalivalent-
ships, it could in fact be logical to apply lower tax rates to
managers than to shipowners. In the absence of such a
study, the Commission takes the view that on the basis of
the information currently at its disposal it cannot accept a
1:10 ratio in the taxation rates on the basis of tonnage
between shipowners and ship managers.

(172)

In view of the above and of the information available, the
Commission believes that a flat-rate taxation scheme for
persons managing ships on behalf of third parties, with
taxation based on the tonnage of the fleet managed, is
compatible with the common market if the rates relating
to tonnage are the same as those applicable to shipping
transport companies and if the managers in question are at
the same time responsible for crew management and tech-
nical management of ships, in accordance with the require-
ments of
the Community guidelines published on
17 January 2004 on aid to maritime transport.

6. CONCLUSIONS

(173)

In conclusion, the Commission considers with regard to
the flat-rate taxation scheme for shipowners as provided
for in the programme act of 2 August 2002 that:

(a)

the introduction of the EUR 0,05 rate per tranche of
100 tonnes above 40 000 tonnes (Article 119(1) of
the programme act) is compatible with the common
market, provided that the ships concerned are new or
else have been registered at least for the past five years
under a non-Community flag;

(b)

inclusion in the flat-rate taxation scheme of revenue
from the following activities (Article 115(2) of the
programme act) is incompatible with the common
market:

— the sale of products not intended for consump-
tion on board such as luxury articles, and the pro-
vision of services not directly connected with
maritime transport such as gambling, gaming
tables and casinos and excursions for passengers,

— short-term investment of operating capital if it
does not correspond to revenue from the compa-
ny’s normal cash resources accruing from eligible
activities (44),

— advertising and marketing provided that they do
not relate to the sale of advertising space on board
eligible ships,

— ship brokerage activities for ships of third parties,

— disposal of operating assets if by their nature they

are not intended for maritime transport.

(c)

inclusion in the flat-rate taxation scheme of revenue
from the following activities (Article 115(2) of the
programme act)
is compatible with the common
market:

— short-term investment of operating capital if it
corresponds to revenue from the company’s nor-
mal cash resources accruing from eligible
activities (45),

— advertising and marketing provided that they
relate to the sale of advertising space on board eli-
gible ships,

— ship brokerage activities for the company’s own

ships,

— disposal of operating assets if by their nature they

are intended for maritime transport.

(d) deduction, from taxation determined on a flat-rate
basis in relation to tonnage, of the losses of other divi-
sions which for the relevant accounting year could not
be deducted from profits of any of the company’s
other divisions (Article 120(1) of the programme act)
is incompatible with the common market;

(44) Eligible activities are described in section 2.8.2, points 66 to 75, of
the decision of 19 March 2003 and in point 173(c) of the present
decision.

— ancillary and temporary activities,

(45) See footnote 44.

L 150/22

EN

Official Journal of the European Union

10.6.2005

(e)

the reduced rates used to calculate the flat-rate tax on
ships less than ten years old (Article 119(2) of the pro-
gramme act) are incompatible with the common
market.

(174) With regard to the tax measures outside the flat-rate taxa-
tion scheme for shipowners, the Commission considers
that the following are incompatible with the common
market:

Article 2

The introduction in the flat-rate taxation scheme for shipowners
of a rate reduced to EUR 0,05 per 100 tonnes for the tranche
above 40 000 tonnes is compatible with the common market,
provided that the ships over 40 000 tonnes to which this reduced
rate is applied are new or have been registered under the flag of a
third country during the five years preceding their entry into the
flat-rate taxation scheme.

— the special depreciation mechanism provided for in
Article 121 of the programme act for all ships not
used for eligible activities,

Article 3

— reductions, for ships not intended for maritime ship-
ping, of the registration tax on mortgages on ships not
intended for maritime transport.

(175) On the basis of the information at its disposal alone, the
Commission cannot consider as compatible with the com-
mon market the flat-rate taxation scheme for persons man-
aging ships on behalf of third parties as provided for in
Article 124 of the programme act. This position can, where
appropriate, be reviewed in a future Commission decision
on the basis of a new notification and more complete and
relevant information.

(176) However, the Commission considers as compatible with
the common market the flat-rate taxation scheme for per-
sons managing ships on behalf of third parties provided
that the tonnage-related rates are the same as those appli-
cable to maritime shipping companies and that the man-
agers in question are simultaneously responsible for the
management of crews and the technical management of
ships in accordance with the requirements of the Commu-
nity guidelines published on 17 January 2004 on aid for
maritime transport.

(177) This decision is immediately enforceable, including with
regard to the recovery of any individual aid illegally
granted, without prejudice to the possibility that this aid
may, where appropriate, not be qualified as State aid
because the four criteria laid down in Article 87(1) of the
Treaty are not all met or because the aid may be regarded
as aid compatible with the common market by virtue of its
own characteristics,

HAS DECIDED AS FOLLOWS:

Article 1

Revenue accruing from the following activities is not eligible

1.
under the flat-rate taxation scheme for shipowners:

(a) ancillary and temporary activities;

(b)

the sale of products not intended for consumption on board,
such as luxury articles, and the provision of services not
directly connected with maritime transport such as gambling,
gaming tables and casinos and excursions for passengers;

(c)

revenue from short-term investment of operating capital if it
does not correspond to income from the company’s ordinary
cash resources accruing from eligible activities;

(d) advertising and marketing if these do not correspond to the

sale of advertising space on board eligible ships;

(e)

ship brokerage activities on behalf of ships of third parties;

(f) disposal of operating assets if by their nature they are not

intended for maritime transport.

Their inclusion in the flat-rate taxation scheme for shipowners is
incompatible with the common market.

Revenue accruing from the following activities is eligible

2.
under the flat-rate taxation scheme for shipowners:

(a)

revenue from short-term investment of operating capital if it
corresponds to income from the company’s normal cash
resources accruing from eligible activities;

(b) advertising and marketing if these correspond to the sale of

advertising space on board eligible ships;

The fiscal measures laid down in the Belgian programme act
of 2 August 2002 in respect of which a formal investigation
procedure has been initiated by Commission decision of
19 March 2003 constitute State aid within the meaning of
Article 87(1) of the Treaty.

(c)

ship brokerage activities on behalf of the company’s own
ships;

(d) disposal of operating assets if by their nature they are

intended for maritime transport.

10.6.2005

EN

Official Journal of the European Union

L 150/23

Their inclusion in the flat-rate taxation scheme for shipowners is
compatible with the common market provided that the condi-
tions set out in this paragraph are complied with.

Article 4

Deduction of losses of other divisions of a company liable for
taxation that are not subject to the flat-rate tax from the tonnage-
based flat-rate tax for ship owners is incompatible with the com-
mon market.

Article 5

Reductions of tax rates of flat-rate taxation for shipowners in
respect of ships less than 10 years old are incompatible with the
common market.

Article 6

Application of the scheme for the accelerated depreciation of
ships to ships that by their nature are not intended for maritime
transport is incompatible with the common market.

As appropriate measures, it is proposed that Belgium abolish the
special option scheme applicable to the depreciation of ships not
intended by their nature for maritime transport before
30 June 2005.

Before 31 December 2004 Belgium shall inform the Commission
of its decision to adopt the said appropriate measures.

Article 7

Reduction of or exemption from the payment of the registration
duty on mortgages on ships which by their nature are not intended
for maritime transport is incompatible with the common market.

Article 8

The tonnage-based flat-rate taxation scheme for persons manag-
ing ships on behalf of third parties is compatible with the com-
mon market provided that
the latter are simultaneously
responsible for the management of crews and the technical man-
agement of ships, in accordance with the provisions of the Com-
munity guidelines in force on aid for maritime transport and
provided that the tonnage-related rates are the same as those
applicable to maritime transport companies.

Article 9

Within two months of the notification of this decision, Belgium
shall inform the Commission of the measures taken to ensure that
the programme act of 2 August 2002 is in conformity with the
present decision and, where appropriate, recover incompatible aid
granted illegally under the said programme act. Interest shall be
calculated in accordance with Commission Regulation (EC)
No 794/2004 (46), in particular Articles 9, 10 and 11 thereof.

Article 10

This decision is addressed to the Kingdom of Belgium.

Done at Brussels, 30 June 2004.

For the Commission,
Loyola DE PALACIO
Vice-President

(47) OJ L 140, 30.4.2004, p. 1.