European Commission Investigates Tax Exemptions for Belgian and French Ports
The European Commission has opened two in-depth probes to check if corporate tax exemptions granted under Belgian and French law to ports’ economic activities are in line with EU state aid rules and whether they give companies in a certain sector an advantage over competitors in other member states.
The main activity of ports is the transfer of people and cargo, as well as the provision of infrastructure to shipping companies, shipbuilders and other companies. These commercial activities constitutes an economic activity for which ports would be expected to pay corporate tax, just like other companies do. But ports also carry out certain activities that are linked to the exercise of essential state responsibilities such as safety, surveillance and traffic control which fall outside the scope of EU state aid rules.
A corporate tax exemption for ports that earn profits from economic activities provides them with a selective advantage compared with their competitors in other member states and therefore involves state aid within the meaning of the EU rules.
“Our competition rules allow member states to support the construction or upgrade of port infrastructure through investment aid,” said Margrethe Vestager, the commissioner in charge of competition policy. “However, tax exemptions shouldn’t distort competition by giving an unfair advantage to some ports over others in Europe.”
In Belgium, a number of sea and inland waterway ports—including Antwerp, Bruges, Brussels, Charleroi, Ghent, Liège, Namur and Ostend, as well as ports along the canals in Hainaut Province and Flanders—are exempt from the general corporate income tax regime. These ports are subject to a different tax regime, with a different base and tax rates, resulting in an overall lower levels of taxation for Belgian ports on their commercial activities as compared to other companies in Belgium.
In France, most ports, notably the eleven “grands ports maritimes”—Bordeaux, Dunkerque, La Rochelle, Le Havre, Marseille, Nantes-Saint-Nazaire, and Rouen as well as Guadeloupe, Guyane, Martinique and Réunion, the “port autonome de Paris,” and ports operated by chambers of industry and commerce—are fully exempt from corporate income tax. This results in an overall lower level of taxation for French ports on their commercial activities as compared to other companies in France.
In January 2016, following its investigation into the functioning and taxation of ports in EU Member States, the Commission asked Belgium and France to bring their corporate tax law into line with EU state aid rules by abolishing their tax exemption for ports. As Belgium and France have not agreed to align their tax laws as the commission proposed, the commission has now opened in-depth investigations to assess whether its initial concerns are confirmed or not.
As both the Belgian and the French measures already existed before the establishment of the EU in 1958, the aid is regarded as existing aid. This means that the commission cannot ask Belgium and France to recover aid granted in the past, nor any aid granted up until the moment that a final decision is adopted by the Commission.
The Netherlands had earlier adopted a law making ports subject to corporate tax as of January 1, 2016, but that law maintained a tax exemption for six publicly-owned Dutch seaports.
The commission concluded that this latter exemption also had to be abolished.