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EU To Investigate Polish Tonnage Tax Scheme

by Ulrika Lomas, Tax-News.com, Brussels

13 September 2007


The European Commission has decided to open a formal investigation into certain aspects of a measure put in place by the Polish authorities, whereby entities liable for taxes in Poland and engaged in international maritime transportation can change the tax base for their operating profits.

Under the notified measure, companies fulfilling certain criteria will be permitted to opt for a tonnage tax based on the net tonnage of their fleet, in place of the usual corporation tax levied on the profits derived from their maritime activities. The notified scheme has been scheduled to run for ten years (from 2007).

While the EC has declared some tonnage tax regimes operating in the EU are compatible with state aid rules, it has announced that the Polish system differs from these in many respects, and therefore needs to be examined in more detail.

Specifically, the Commission is interested in whether the Polish tonnage tax covers the personal income tax liability of natural or legal persons, and whether it gives scope for the deduction of social security and health insurance deductions.

The EC is also questioning why companies entering into the Polish tonnage tax scheme must stay in the system for ten years rather than for five years, as is the norm with similar systems approved by Brussels.

Other aspects of the Polish scheme under scrutiny include: the unrestricted coverage of vessels for which the company does not cumulatively ensure, on its own account or for the account of a third party, the commercial management of vessels, their technical management and the management of crews; and the possibility to put under tonnage tax tugs and/or dredgers, even where they deliver services constituting maritime transport less than half of their operational time over a fiscal year.

The Commission stated that while the remainder of the scheme appears to comply with EC guidelines on state aid to maritime transport, it cannot at this stage approve the notified measure in its entirety.


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