Malta therefore committed to a number of changes in order to prevent discrimination between shipping companies and to avoid undue distortions of competition on the Single Market. This included restricting the scope of the scheme to maritime transport, and to remove all tax exemptions to shareholders which were considered to amount to State Aid.
Under the scheme, a shipping company is taxed on the basis of the vessel’s net tonnage rather than the actual company profit. In particular, tonnage taxation is applied to:
- core revenues of the company deriving from shipping activities, such as cargo and passenger transport;
- certain ancillary revenues of the company that are closely connected to shipping activities (which are, however, capped at a maximum of 50% of a ship's operating revenues); and
- company revenues from towage and dredging subject to certain conditions.
If a shipping company wants to benefit from the scheme, a significant part of its fleet must fly the flag of an European Economic Area (EEA) Member State. In addition, any new entrant to the scheme must have at least 25% of its fleet subject to tonnage tax under an EEA flag.
The Commission decision endorses the amended scheme as being compatible with its EU State Aid rules, in particular the Guidelines on State Aid to Maritime Transport. Further, it stated that the incentives are appropriate to address global competition and to retain maritime jobs within the EU, while preserving competition on the Single Market.
The Malta flag ranks among the top ten ship registers worldwide. Owing to its strategic position in the centre of the Mediterranean, the wide portfolio of services available to shipowners, as well as the service levels offered to clients, Malta is a flag of choice for many shipowners and shipping companies. The relative ease of incorporation, the advantageous tonnage tax scheme and the swift and efficient ship registration process all contribute to the success of the flag.