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France Agrees Tonnage Tax Changes

by Ulrika Lomas, Tax-News.com, Brussels

06 February 2015


The European Commission has closed an in-depth investigation into French tax rules for maritime companies, after France said that it would enforce minimum flagging requirements for tonnage regime taxpayers.

The investigation into the French tonnage tax scheme was opened in November 2013, with the aim of examining whether, after changes to eligibility criteria, the regime remained in line with European Union (EU) state aid rules. The Commission was also concerned that the favorable fiscal benefits offered to certain vessels sailing under non-EU flags would run counter to the objectives of the EU's maritime transport policy.

Under the tonnage tax scheme, a shipping company can be taxed on the basis of the tonnage of its fleet, rather than its actual profits.

The scheme originally limited the eligibility of "time chartered" ships not flagged in the EU to no more than 75 percent of the fleet of a tonnage taxpayer. The Commission approved this scheme in May 2003, considering it to be in line with the 1997 EU guidelines on state aid for the maritime transport sector.

After the Commission adopted updated guidelines in 2004, France removed the specific flagging rules for time chartered vessels without informing the Commission.

The Commission said that, having examined the submissions received during its investigation, it came to the conclusion that, to date, no tonnage tax beneficiary in France has had more than 75 percent of its fleet composed of time chartered vessels flagged outside the EU or European Economic Area (EEA). At the same time, the Commission found that there was no guarantee that this would remain the case in future, as no minimum EEA flagging requirements were foreseen for new entrants to the scheme.

The Commission considered that this was not in line with the 2004 maritime guidelines. The guidelines do not impose specific limitations on time charterers, but the Commission said that it has always required in its case practice that time charterers wishing to benefit from tonnage taxation contribute to the objectives of the guidelines of preserving a minimum "maritime know-how" within the EU/EEA or promoting EU/EEA flagging of vessels.

The French authorities have committed to addressing the Commission's concerns. French tonnage taxpayers will now be required to have at least 25 percent of their fleet, by tonnage, EEA flagged. The Commission has accepted this commitment and has closed its investigation.

TAGS: tonnage tax | tax | marine | European Commission | law | tax thresholds | tax authority | tax rates | France | tax reform | European Union (EU) | services | Europe

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