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State Aid

PR(07)63: EFTA Surveillance Authority opens the formal investigation procedure regarding state aid to maritime transport in Iceland


Today, the Authority raised several doubts towards 1) a tonnage tax system and 2) a grant system under which ship-owners may keep 90% of the taxes levied on seafarers. The Icelandic authorities notified these measures to the Authority in March 2007.

Under the notified tonnage tax scheme the ordinary corporate tax rate of 18% would be based on a notional tonnage rather than on actual profits. A more favourable tax rate for a certain sector, like undertakings in the maritime sector, constitutes state aid. The Authority assessed the compatibility of this measure with the EEA state aid provisions under the Authority’s Guidelines on Aid to Maritime Transport.

The Authority has inter alia raised the following doubts:

- Certain shipping activities which are eligible for tonnage tax, like time-charters, may not fulfill the conditions of the Guidelines for being included in a tonnage tax scheme,

- Only ships registered in the Icelandic International Shipregister will benefit from the tonnage tax, but not ships registered in any other EEA Shipregister, even if income earned from those activities is taxed in Iceland,

- Only companies fully tax liable in Iceland will benefit from the scheme, excluding companies that are partially tax liable; which might discriminate against foreign operators,

- Taxable income subject to the tonnage tax is very low compared to similar regimes in other EEA States.

With respect to the system of grants to ship-owners of tax levied on seafarers, the Authority has concerns related to ship registration and tax liability similar to those referred to above concerning the tonnage tax.

A decision to open the formal investigation procedure is without prejudice to the final decision to be adopted by the Authority. The opening decision will be published in the EEA Section of the Official Journal of the European Union and the EEA Supplement thereto, inviting interested parties to comment within one month from the date of publication. The Authority will take its final decision after having reviewed comments from the Icelandic Government and from any other interested parties.    

For further information, please contact:

Ms. Annette Kliemann
Deputy Director, Competition and State Aid Directorate
Tel. (+32)(0)2 286 18 80; or

Mr. Per Andreas Bjørgan
Deputy Director, Legal and Executive Affairs
Tel.(+32)(0)2 286 18 36

19 December 2007

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