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Malta > Legal Developments > Law firm and leading lawyer rankings


European Commission gives nod of approval to the Maltese Tonnage Tax Scheme

The European Commission has approved the revised Maltese tonnage tax scheme (exemption) under EU State rules for a period of 10 years, after an investigation and review lasting more than five years.

The European Commission has approved the revised Maltese tonnage tax scheme (exemption) under EU State rules for a period of 10 years, after an investigation and review lasting more than five years.

The European Commission had initiated an in-depth investigation and review into the Maltese tonnage tax (exemption) scheme in 2012 to examine whether the scheme was compatible with EU State aid rules. The Commission had concerns that the favourable tax treatment allowed by the EU Guidelines on State aid to maritime transport for the transport of passengers and freight by sea may have been extended to other categories of beneficiaries which were not entitled to lower taxes.

On the basis of the findings of the investigation, Malta committed to introduce a number of changes to the scheme to prevent any discrimination between shipping companies and to avoid undue competition distortions. "In particular, Malta agreed to restrict the scope of the scheme to maritime transport and to remove those tax exemptions for shareholders which constitute state aid," the Commission said. The revised scheme will therefore ensure a level playing field between Maltese and other European shipping companies, and will encourage ship registration in Malta.

Following the outcome of the investigation and review, the Commission confirmed the Maltese tonnage tax system, whereby a flat rate of tonnage tax is paid upon registration and annual renewal of registration of a ship. As a matter of practice, the tonnage tax benefit/exemption is granted to those companies owning or bareboat chartering ships which are registered in Malta (or the EU), provided that such ships are involved in the international carriage of goods and passengers.

The Commission assessed the amended measures under EU State aid rules, in particular its Guidelines on State aid to maritime transport. It concluded that the amended Maltese scheme is now in line with the EU State aid rules, as the tax relief granted is an appropriate instrument to address global competition and will provide the right incentives to maintain maritime jobs within the EU, whilst preserving competition within the EU Single Market.

EU Commissioner for Competition Margrethe Vestager recalled that "Tonnage tax systems are meant to promote the competitiveness of the EU shipping industry in a global market without unduly distorting competition. I am pleased that Malta committed to adapt it tonnage tax system to achieve this. Moreover, by encouraging the registration of ships in the EU, the scheme will enable the European shipping industry to keep up its high social and environmental standards".

The highly anticipated approval by the Commission is an important milestone in Malta's flourishing shipping sector, particularly on the registration front where Malta, as the home of the EU's leading ship register, is recognised by shipping companies as boasting a coveted flag for their ships to fly.

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