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France and Belgium told to end tax exemptions for ports

The European Commission has told France and Belgium that they must abolish tax exemptions granted to their ports to comply with EU state aid rules. 28 Jul 2017

Profits by port operators must be taxed under normal national corporate tax laws to avoid distorting competition, the Commission said.

Most French ports, including the 11 "grands ports maritimes" of 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 currently fully exempt from corporate income tax under French law, the Commission said.

In Belgium, a number of sea and inland waterway ports including Antwerp, Bruges, Brussels, Charleroi, Ghent, Liège, Namur and Ostend, as well as canal ports in Hainaut Province and Flanders are subject to a different tax regime that results in an overall lower level of taxation for ports compared to other companies.

These exemptions provide the ports with a selective advantage, and do not pursue a clear objective of public interest, such as the promotion of mobility or multimodal transport, the Commission said.

"The tax savings generated can be used by the port operators to fund any type of activity or to subsidise the prices charged by the ports to customers, to the detriment of competitors and fair competition," it said.

If port operators generate profits from economic activities these should be taxed under the normal national tax laws to avoid distortions of competition, the Commission said.

Belgium and France have until the end of 2017 to remove the tax exemption and ensure that all ports are subject to the same corporate taxation rules as other companies from 1 January 2018.

The measures are considered as "existing aid" and the Commission cannot ask Belgium and France to recover the aid already granted.

Commissioner Margrethe Vestager, in charge of competition policy, stated: "Ports are key infrastructure for economic growth and regional development. Recently, the Commission has introduced new rules to save member states time and trouble when investing in ports and airports, whilst preserving competition. At the same time, the Commission decisions for Belgium and France – as previously for the Netherlands – make clear that unjustified corporate tax exemptions for ports distort the level playing field and fair competition. They must be removed."

State aid expert Caroline Ramsay of Pinsent Masons, the law firm behind Out-Law.com said: "This is a useful decision that sheds even more light on the complex issue of state aid in the port infrastructure sector. This decision, taken together with the recently amended and expanded General Block Exemption Regulation (GBER), really clarifies when, where and how a member state might be able to assist port infrastructure financing."

In May the Commission widened the scope of the 2014 GBER to cover ports and regional airports, culture and 'outermost regions'. Under the EU state aid rules member states must normally notify the Commission of state aid plans and wait for approval before the measure can be implemented. The GBER exempts some aid measures from this obligation.

Member states can now invest up to €150 million in sea ports and up to €50 million in inland ports without prior approval. The amount that can be invested will depend on whether the port is inland or maritime, and whether it is included in a "core network corridor", the Commission said. The aid must also not go beyond the "funding gap" needed to trigger the investment and only a certain percentage of investment costs can be subsidised, depending on the size, nature and location of the port.

In January 2016 the Commission said a corporate tax exemption granted to Dutch seaports was state aid, and required the Netherlands to subject its ports to corporate tax from 1 January 2017.

The Commission also made German seaports put a transparent financing structure in place separating public remit activities from economic activities to prevent cross-subsidisation from one to the other.