Worldwide: Contributions From Nctm Offices Around The World Shipping & Transport Bulletin June-July 2018

Last Updated: 12 June 2018
Article by Bernard O'Connor

On 6 April 2018, the Commission approved two measures for the purpose of encouraging ship registration in Europe and contributing to the competitiveness of maritime transportation. According to the newly introduced Portuguese tonnage tax scheme, maritime transport companies will pay taxes on the basis of the net tonnage, instead of being taxed under the normal corporate tax system. Specifically, the new method of taxation will be applied to core revenues form maritime transport activities, certain ancillary revenues and revenues from towage and dredging. The tonnage tax scheme falls within the terms of the Commission's 2004 Guidelines on State aid to maritime transport, which allows Member States to undertake actions to improve the fiscal climate for shipping companies in order to avoid their relocation to low-tax countries outside of the EU. The condition under which a company can benefit from the scheme is that a significant part of its fleet must fly the flag of a European Economic Area (EEA) state.

The second provision, the Portuguese seafarer scheme, exempts seafarers employed on vessels that are eligible under the tonnage tax scheme from paying personal income tax. In this way, the schemes will bolster ship registration in the EU whilst preserving the employment if the maritime transport sector.

Public support scheme to promote shift of freights from road to rail in Sweden

On 20 April 2018 the Commission approved a public support scheme of approximately €56 million to incentive a shift of freight transport from road to rail in Sweden. The Commission maintained that subsidies to railway companies are beneficial for both the environment and mobility, without affecting competition in the Single Market. In fact, the purpose of the Commission is to reduce the percentage of freight transported by road (40%) by increasing the one transported by rail (around 20%) to minimize pollution and road congestion.

Leave means leave?

"Leave means leave". This means that if no agreement is reached UK will be forced to trade with the EU under WTO rules which govern the vast majority of trade between countries in the world. Very few in the business world want this outcome. However, it is looking more and more likely despite a new proposal that Theresa May presented in mid-May. The idea is to keep the UK bound to some European customs rules to prevent a hard border on the island of Ireland, even though for a limited time. The plan aims to overcome the impasse in talks over the Irish border since both sides have agreed to avoid a hard border to what will become the frontier between the EU and UK.

May is trying to keep those politicians in her cabinet, the so called Brexiters, in line. They do not need to be worried, she says, as the customs compromise would just be "a bridge" to a deal, i.e. the post-Brexit customs scheme at the end of the transition period in 2021.  Such a temporary "backstop" would avoid a jolt for business whilst, on the other hand, it would temporarily freeze the UK's ability to initiate trade deals with non-EU countries. Boris Johnson called for Mrs. May to be given time to negotiate a deal that delivers on her promise to take Britain out of the customs union and single market, albeit between the lines of his comment it may be seen a veiled warning to the Prime Minister that she must not let the backstop to become a permanent solution. Watch this space. The negotiations will go down to the wire.

Restructuring aid for Croatian shipping company

On 2 May 2018, the Commission approved restructuring plans for the Croatian shipping company Jadroplov. The plan is designed to alleviate the financial pressure stemming from high-indebtedness. The aid takes the form of a subsidy and two State guarantees on bank loans for a total amount of approximately €14.2 million. The Commission based its consent on the fact that the restructuring plan will enable Jadroplov to become viable in the long term without continued State support and that the potential distortion of competition is mitigated by the asset sales made by the company.

IMO agreement on CO2 reductions in the maritime sector

The agreement reached on 13 April 2018 at the International Maritime Sector (IMO) endorses a strategy to reduce greenhouse gas emissions from international shipping by at least 50% by 2050. The EU acknowledges that currently shipping represent 2-3% of global CO2 emission and could increase to 10% if no action is taken. Beside the strategy to reduce greenhouse gas emissions, the agreement includes a comprehensive list of possible short-term reduction measures. The Commission underlines that it is crucial for this initial strategy to succeed, that effective reduction measures are swiftly adopted and put in place before 2023. The allocation of €10 million to the projects managed by the IMO shows the commitment of the Commission to the goal of Paris Agreement. The EU is determined to continue playing an active role and pursue strong global action on shipping emission.

Zero net CO2 emissions by 2050

Climate commissioner Miguel Arias Canete has revealed that the EU will push for a 2050 net zero emissions goal as part of its new long-term decarbonisation strategy. The zero emissions target would be in line with the obligation under the Paris agreement to limit global warming to 1.5°C and would reflect the position of the EU as leader in the worldwide clean energy transition. The high ambition for the future can be seen concretely today in the fact that the EU will meet its climate target for 2020 and that the clean energy transition and other related initiatives will represent 25% of EU spending under a 7-year EU budget plan submitted by the Commission on 2 May 2018. This resolution will provide an increase of €114 billion over the last budget and will help to send the right signals that will boost investor confidence that the EU is on track to implement the Paris agreement.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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