*Updates with reference to publication of decision in EU Official Journal
The European Commission probe into Malta’s tonnage tax regime did not uncover a single case of illegal state aid, a document shows.
Despite more than five years of searching through documents, the Commission’s Directorate-General for Competition could not give a single example of a recipient receiving unlawful aid above the de minimis threshold.
The state aid investigation, triggered by an anonymous complainant, did however result in a legal precedent that could have far-reaching implications for tonnage tax beneficiaries in other countries.
The Commission’s December 2017 decision, attached as a file and published in February 2018, shows officials conducted an exhaustive trawl through Maltese legislation and concluded that the wording was not clear enough. Definitions of “tonnage tax” needed changing, officials said, and the rights of ministers to waive tax on discretion needed curtailing. Malta committed to making these changes and others designed, for example, to tighten rules related to cruise ship revenues. Commission concerns related to tourist vessels plying routes around the Mediterranean island, of which there are not many, proved unfounded.
The Decision was published in the EU’s Official Journal in July 2019 – more than a year and a half after it was taken. Official Journal publications can be delayed by translation backlogs.
The only problem of note regards Maltese residents, who were judged to have the right to illegally benefit from the flat-rate tax, though here too there were no concrete examples of this ever having occurred.
The document shows Malta will remove provisions that in theory allow Maltese residents to benefit from tax-free capital gains from the sale or transfer of ships and from share sales; from the exemption of duty on documents relating to shares; and measures related to ship financing. These benefits are thought to be enjoyed by many Greek residents under Greece’s tonnage tax rules.
The document also shows DG COMP refused to accept that Malta’s legislation was tacitly approved as part of the country’s pre-accession negotiations, despite the fact that the tonnage tax was discussed. This is thought to be part of a DG COMP ploy to deny legitimacy to any tax decision made by the predecessor to the Directorate-General for Mobility and Transport, which was considered too lenient with industry.
As the result of a multitude of state aid decisions of this type, the EU’s maritime state aid guidelines have become complex and bureaucratic.