On the 19^th December 2017, the European Commission conditionally approved the Maltese tonnage tax scheme for a period of 10 years under EU State aid rules with the scope of ensuring a level playing field between Maltese and other European shipping companies, thereby encouraging ship registration in Europe.

It is not surprising that the European Commission’s decision that the advantageous taxation system operated by Malta on tonnage and maritime services does NOT contravene European regulations is an important milestone in Malta’s flourishing shipping sector

Malta had been discussing this scheme and other tax measures with the Commission since October 2011. On the 26th July 2012, the European Commission decided to initiate a procedure over possible illegal aid measures applied by Malta in favour of shipping companies and their shareholders.  It appears that such a procedure was initiated due to the fact that Malta further extended advantageous rates which were initially attributable solely to merchant vessels, to the yachting sector and to owners who lease their yachts. In view of this the European Commission wanted to establish whether Malta was contravening European guidelines on State Aid, and whether the Maltese system was too aggressive.

The tonnage taxation system implemented by Malta is considered to be the main reason why the Maltese Maritime Register has become the biggest in the European Union, and the sixth biggest worldwide. It is not surprising therefore that the European Commission’s decision that the advantageous taxation system operated by Malta on tonnage and maritime services does not contravene European regulations is an important milestone in Malta’s flourishing shipping sector.

It is expected that certain laws will be amended and a number of shortcomings will be addressed in order to maximize on the decision by the European Commission.