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EC Scrutinizes Tax Breaks For Polish Shipyards

by Ulrika Lomas,, Brussels

15 January 2018

The European Commission has opened an in-depth investigation into a Polish tax scheme for shipyards, which it says could give shipbuilders an unfair competitive advantage over rivals.

According to the Commission, the measure under investigation gives shipyards operating in Poland an option to pay a one percent flat-rate tax on sales from the building and conversion of ships, instead of paying the generally applicable corporate tax of 19 percent. In addition, the payment of the flat-rate tax is postponed until the building or conversion of a ship is completed.

The Commission said on January 15 that it has concerns that the scheme would give some shipyards a selective advantage over competitors and therefore represent illegitimate state aid.

"The Commission does not question Poland's right to decide on its tax system," the Commission said. "However, under the EU Treaty the Commission has to verify that the tax system respects EU state aid rules and does not selectively favor certain companies over others."

The Commission confirmed that it is investigating further to determine whether its initial concerns are founded.

However, at this stage, it said it believes that the proposed flat-rate sales tax constitutes so-called operating aid – the use of public funds to relieve shipyards from costs they would otherwise have to bear in their day-to-day activities.

"Generally speaking, operating aid is not allowed under EU state aid rules, because it distorts competition on the merits without serving any objective of common EU interest," the Commission said.

"In the present case the Commission is concerned that the aid would harm shipyards in the EU, which are not eligible under the Polish tax scheme. In addition, the aid does not seem to be necessary, given that there are shipyards in Poland which are able to compete on the market on their own merits," it concluded.

TAGS: tax | marine | European Commission | sales tax | interest | corporation tax | Poland | Europe

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