The European Commission has opened an in-depth investigation to examine whether the Maltese tonnage tax scheme is compatible with EU state aid rules.

The Commission has 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 that are not suffering from the same handicaps and are therefore not entitled to lower taxes.

The opening of an in-depth inquiry gives interested parties the possibility to comment on the measures. It does not prejudge the outcome of the investigation.

In a statement this afternoon the Commission vice-president Joaquin Almunia said:

"The Commission acknowledges the contribution of the maritime transport sector to the EU economy. Given the high exposure to competition from third countries offering favourable tax treatment to their shipping companies, the EU allowed the possibility to reduce taxes for maritime transport activities.

"In the Maltese case, the support measures apply to yachts, bankers, ship lessors, amongst other beneficiaries. This seems neither justified from a competition perspective, nor appropriate in times of high budgetary constraints."

The Guidelines on state aid to maritime transport allow member states to reduce taxes for maritime transport of passengers or freight under certain conditions.

However, the scope of the Maltese tonnage tax scheme seems too wide and includes fishing vessels, yachts, oil rigs, ship-owners without any shipping activity of their own.

Given the multitude of exemptions and reductions available, it appears that in a number of cases the level of tax burden for a given tonnage is lower in Malta than in other member states.

This could potentially make the Maltese tonnage tax system more attractive than the ones applied in the rest of the EU. Moreover, no sufficient safeguards are established to ensure that benefits available under the tonnage tax do not spill-over to non-shipping activities of the beneficiaries.

The Commission said it, therefore, had concerns that the Maltese scheme may lead to distortions of competition in the EU internal market by potentially attracting companies and vessels from other member states.

"The Commission will now investigate in-depth to find out whether these concerns are confirmed or not."