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The Belgian Shipping Policy

The Belgian Shipping Policy. Peter Verstuyft Managing Director Royal Belgian Shipowners’ Association http:// www.brv.be Tel: +32/3 232.72.32 E-mail: info@brv.be. Since the 1980’s, the shipping industry in Europe is under acute threat by :

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The Belgian Shipping Policy

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  1. The Belgian Shipping Policy Peter Verstuyft Managing Director Royal Belgian Shipowners’ Association http:// www.brv.be Tel: +32/3 232.72.32 E-mail: info@brv.be A.C.C.– Antwerpen- 25 november 2010

  2. Since the 1980’s, the shipping industry in Europe is under acute threat by : * Over-regulation, as this industry is poorly known. Overreactions by government decision-makers to accidents and the pressure of an ill-informed public opinion contribute in no small way to this state of affairs. * The implications of European regulations on wages and social security. * A prohibitive tax-environment Background 2

  3. Worldwide, 2 out of 3 merchant vessels is registered • under a foreign flag • Percentage of European controlled fleet, flying a foreign • flag in 1996 : • Greece 60,5 • UK 75,1 • Germany 66,0 • Sweden 85,6 • Denmark 42,5 • Italy 36,3 • France 44,4 • Netherlands 37,9 • Belgium 96,5 • Spain 80,8 Result : Flagging out 3

  4. Belgian merchant fleet flagged out to Luxemburg • 1988 : Flagging-out protocol • 1990 : Creation of a Luxembourg register for Belgian vessels • - 1994 : Opening up of the Luxembourg register to all nationalities 4

  5. European shipowners control about 41% of the world fleet. If the EU succeeds in bringing back all those vessels under European flags, Europe would become the world’s number one maritime block. Enabling the EU to largely determine international maritime policy. Preserving employment on board / on shore Preserving know-how and development of maritime skills Enhancing safety Strategic conclusions for Europe 5

  6. “Orientations on State Aid” 1997 Aim ensuring free market access to safe and environment-friendly vessels, preferably registered in Member States and with European crew. Keeping economic activities in the EU  criterion of measurable benefit Means Provide a normative framework based on a level-playing field with respect to wage costs and social legislation. Competition between Member States must not be allowed to be unfair. 6

  7. Maximum State Aids allowed in Europe : Zero-rated social charges (i.e. exemption) for employers and employees Zero-rated withholding tax on occupational income (i.e. exemption) “Orientations on State Aid” 1997 Applicable to vessels under European flags (meeting the economic link requirement) Measures for the wage cost section 7

  8. Maximum admissible State Aid in the EU: Zero-rated (i.e. exemption from) corporate tax EU State Aid Guidelines 1997 Applicable to vessels under EU flag (meeting the economic link requirement) Measures for the tax legislation section Conditional upon: transparent accounting 8

  9. Stages of Belgian shipping policy 1990 1997 1999-2000 2002 2003 2004 RD 7/5/2003 Exemption of personal income tax for seafarers A structural solution => The LUX register Law of 2/8/2002 Reduction of social security and pension funding costs for seafarers Law of 27/12/2004 9

  10. The importance of a suitable shipping policy for government • Preserving and attracting economic activity and employment • Ensuring shipping safety by dealing with ‘substandard shipping’ • Keeping control and developing a positive image for Belgium • Strategic & technological importance • Shipping as a springboard for shipping-related industries Losing a shipping cluster and the associated know-how is an irreversible process 10

  11. Importance of a suitable shipping policy to shipowners • A bona fide national register is commercially quantifiable • Constant input of highly qualified personnel • Preserving maritime know-how • Avoiding non transparant tax structures 11

  12. Strategic achievements WAGE COSTS Cost of crewmembers on board of ships flying the Belgian flag Employers’ contribution ==> exempt Income tax ==> exempt for EU registered vessels ==> partially exempt (amount superior to the pension level) Employee’s contribution Actual cost Net Income 12

  13. Corporate tax: a two-sided approach Strategic achievements The corporate tax for ocean-going shipping is subject to a two-sided approach: - Tonnage tax (lump-sum profit determination based on tonnage) - Conventional tax, i.e. • Accelerated depreciation • Exemption from tax on capital gains conditional upon reinvestment • Investment deduction amounting to 30% of the purchase price • Programme law of 2/8/2002 (O.J. of 29/08/2002 ed. 2) art 115 – art 127 • Programme law of 27/12/2004 (O.J. of 31/12/2004 ed. 2) art 321 – art 331 13

  14. Strategic achievements CORPORTATE TAXATION Tonnage tax: an alternative for conventional corporate tax • What is tonnage tax? • The yearly corporate tax of the shipowner is based on the net tonnages of the vessels he actually operates (V/C & T/C included up to a ratio of 1:3) and not based on the actual results of his shipping activities • Shipowners opting for tonnage tax do so for 10 year periods • Tonnage tax is flag/register blind • The profit of the taxable period resulting from ocean shipping is assessed per vessel, per day and per 100 net tons on the basis of the amount mentionned in the table below: • For the bracket up to 1000 net tons EUR 1,- • For the bracket between 1000 and 10.000 net tons EUR 0,60 • For the bracket between 10.000 and 20.000 net tons EUR 0,40 • For the bracket between 20.000 and 40.000 net tons EUR 0,20 • For the bracket over 40.000 net tons EUR 0,05 14

  15. Strategic achievements Tonnage Tax: managed from Belgium Purpose: avoiding brass plate companies • Law: Art 115§2.2°: “that is managed to a considerable extent in Belgium” • Elucidation of the Law: management as in art 115§2.2° refers to the main responsibility for the activities, among others, non-exhaustively listed below: • making agreements relating to the ship • taking care of the ship’s supplies • taking care of the ship’s maintenance • entering into insurance contracts • doing the bookkeeping • meeting administrative formalities • appointing Masters “considerable extent” refers tot the fact that the taxpayer carries out most activities or that he has them carried out • The RBSA has developed a self assesment matrix around 3 aspects of management (strategic & commercial, technical and crewing) with 36 items • For belgian registered & flagged vessels: majority of 2 of the 3 aspects + majority of the 36 items • For non-Belgian registered vessels: majority of all 3 aspects + majority of the 36 items Caveat: matrix serves as a guide only and the final decision lies with the IRS. When in doubt the Owner can always apply for a “ruling”. 15

  16. Strategic achievements FLAGSTATE GOVERNANCE “Flag State Contact Group” ensures permanent consultation between the authorities and the shipowners Common commitment, supported by “risk based flag state response”-tool 16

  17. Did it work ? Percentage of controlled fleet, flying a foreign flag (Percentage of total world fleet) 2009 – ranking UNCTAD 17

  18. 18

  19. Evolution of the student population at the Maritime Academy 19

  20. Total Economic ImpactShipping cluster: development of total added value 2001-2007 Total added value created by the cluster grew from € 930 million in 2001 to slightly over € 1.3 billion in 2004, reaching almost € 2.0 billion in 2007 20

  21. The New Belgian Shipping PolicyDevelopment of the merchant fleet controlled from Belgium Source: UNCTAD Review of Maritime Transport, 2001-2007 (based on data from Lloyd’s Register / Fairplay) Since the introduction of the new policy vessels have been returning to the Belgian flag. Moreover the total fleet controlled from Belgium has continued to grow. 21

  22. Royal Belgian Shipowners’ Association 22

  23. Maintenance of decision-making power in Belgium The new policy has generated a new drive The risk of key players leaving Belgium has been reduced to a minimum for the next few years (almost comprehensive re-flagging as well as new players) A fleet under the Belgian flag The tonnage tax has brought security and significant re-flagging / flagging-in The flag has become competitive within Europe (with Denmark, Germany, the Netherlands and the UK) Training has received a new impetus (with the largest body of students in 25 years at the maritime academy); enrolment has grown by 50% since 2001 Economic impact Employment (total/preservation in Belgium) Added value doubled in 5 years time Impact of Belgium’s new shipping policy 23

  24. Belgium is not Europe’s Liberia Aim: • Structural growth of the Belgian merchant marine • Developing new shipping activities Rationale: • Creating (direct & indirect) added value as well as (direct & indirect) jobs 24

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