A.C.C.– Antwerpen- 25 november 2010

The Belgian Shipping Policy

Peter VerstuyftManaging Director

Royal Belgian Shipowners’ Association

http:// www.brv.beTel: +32/3 232.72.32E-mail: info@brv.be

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Background

Since the 1980’s, the shipping industry in Europe isunder 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

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Result : Flagging out• 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

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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

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Strategic conclusions for Europe

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

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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 Keeping economic activities in the EU criterion of measurable benefitcriterion of measurable benefit

AimAim

MeansMeans 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.

“Orientations on State Aid” 1997

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Maximum State Aids allowed in Europe :Maximum State Aids allowed in Europe :– Zero-rated social charges (i.e. exemption) for employers and Zero-rated social charges (i.e. exemption) for employers and

employees employees – Zero-rated withholding tax on occupational income (i.e. exemption)Zero-rated withholding tax on occupational income (i.e. exemption)

Applicable to vessels under European flags (meeting the economic link requirement)

Measures for the wage cost section

“Orientations on State Aid” 1997

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• Maximum admissible State Aid in the EU:Maximum admissible State Aid in the EU:– Zero-rated (i.e. exemption from) corporate taxZero-rated (i.e. exemption from) corporate tax

Applicable to vessels under EU flag (meeting the economic link requirement)

Measures for the tax legislation sectionConditional upon: Conditional upon:

transparenttransparentaccountingaccounting

EU State Aid Guidelines 1997

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1990 1997 1999-2000 2002 2003 2004

A structural solution=> The LUX register

Reduction of social security and pension

funding costs for seafarers

Exemption of personal income tax

for seafarers

Law of 2/8/2002

Stages of Belgian shipping policy

Law of 27/12/2004

RD 7/5/2003

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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 Losing a shipping cluster and the associated know-how is an irreversible processknow-how is an irreversible process

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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

Employee’scontribution

Actual costNet Income

Incometax

Employers’ contribution

==> exempt

==> exempt for EU registered vessels

==> partially exempt (amount superior to the pension level)

Cost of crewmembers on board of ships flying the Belgian flag

Strategic achievements

WAGE COSTS

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Corporate tax: a two-sided approach

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

Strategic achievements

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 tonsEUR 0,60For the bracket between 10.000 and 20.000 net tonsEUR 0,40For the bracket between 20.000 and 40.000 net tonsEUR 0,20For the bracket over 40.000 net tonsEUR 0,05

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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 itemsCaveat: 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

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

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Did it work ?

1996 2009Greece 60,8 (17,4) 68,8 (15,33)

UK 75,1 (3,11) 63,9 (2,80)

Germany 66,0 (2,66) 83,4 (9,50) [CYPRUS]

Sweden 85,6 (2,15) 76,6 (0,67) [NO TT]

Denmark 42,5 (1,85) 62,2 (2,86) [DIS]

Italy 34,3 (1,77) 34,9 (1,79)

France 44,4 (1,14) 54,5 (0,59) [FIS]

Netherlands 37,9 (0,85) 49,8 (0,76)

Belgium 96,5 (0,63) 53,3 (1,22)

Spain 80,8 (0,50) 64,9 (0,40)

2009 – ranking UNCTAD 17

Percentage of controlled fleet, flying a foreign flag(Percentage of total world fleet)

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Evolution of the student population at the Maritime Academy

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Total Economic ImpactShipping cluster: development of total added value 2001-2007

0 200 400 600 800 1000 1200 1400 1600 1800 2000

toegevoegde waarde 2001

toegevoegde waarde 2004

toegevoegde waarde 2007

koopvaardij (direct)koopvaardij (indirect)sleepvaart (direct)sleepvaart (indirect)waterbouw (direct)waterbouw (indirect)

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

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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.

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Royal Belgian Shipowners’ Association

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Impact of Belgium’s new shipping policy

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

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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