
Article 1 
The aid granted under the tonnage tax scheme constitutes new aid within the meaning of the Accession Treaty since 1 May 2004.
Article 2 
The aid granted under the tonnage tax scheme is compatible with the internal market, subject to compliance with the commitments set out in the Annex.
Article 3 

1. The following elements of the tonnage tax scheme are incompatible with the internal market:
(a) The eligibility for tonnage taxation of income generated from the operation of non-propelled barges, oil rigs and fishing vessels;
(b) The eligibility for tonnage taxation of income generated from towage and dredging vessels and from bareboat chartering out without restriction;
(c) The eligibility for tonnage taxation of vessels under time/voyage chartering without restriction;
(d) The eligibility for tonnage taxation of revenues from ancillary activities without the restriction that the majority of the tonnage taxed revenues of the tax beneficiary stem from core shipping activities and the lack of mechanisms in place to ensure that land-based services are provided at arm's length;
(e) The eligibility for tonnage taxation for companies engaged in shipping without the requirement that tonnage taxed shipping organisations having also non-EEA-flagged vessels in their fleet increase or maintain the share of EEA-flagged tonnage of the fleet if this share is below 60 %;
(f) the eligibility for tonnage taxation of activities ‘as otherwise may be prescribed’;
(g) The exemption from taxation of capital gains from the sale or transfer of ships applied to Maltese residents.
2. The following measures are also incompatible with the internal market:
(a) The exemption from taxation of capital gains from the sale of shares in shipping companies applied to Maltese residents;
(b) The exemption from income tax on the interest income or other income of financial institutions in relation to the financing of shipping companies or tonnage tax ships;
(c) The exemption from the duty on documents and transfers for the transfer of shares in shipping organisations for Maltese residents;
(d) The exemption from payment of fees at ministerial discretion.Malta shall remove those tax exemptions from its legislation and adapt the scope of the tonnage tax scheme as specified in the commitments set out in the Annex.
Article 4 
Individual aid has not been granted in relation to the measure set out in Article 3, first paragraph, as well as in relation to the measures set out in Article 3, second paragraph, indents (b) and (d). No recovery is required in relation to these measures.
Article 5 
Individual aid granted under the measures referred to in Article 3, second paragraph, indents (a) and (c) is incompatible and must be recovered, save where it fulfils the conditions laid down by Article 3 of Regulation (EU) No 1407/2013 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid.
Article 6 

1. Malta shall recover incompatible aid granted under the measures referred to in Article 5 from any beneficiaries.
2. The sums to be recovered shall bear interest from the date on which they were put at the disposal of the beneficiaries until their actual recovery.
3. The interest shall be calculated on a compound basis in accordance with Chapter V of Commission Regulation (EC) No 794/2004 and to Commission Regulation (EC) No 271/2008 amending Regulation (EC) No 794/2004.
Article 7 

1. Recovery of any incompatible aid granted under the measures referred to in Article 5 shall be immediate and effective.
2. Malta shall ensure that this Decision is implemented within four months following the date of notification of this Decision.
Article 8 
Malta shall inform the Commission, within two months of the notification of this Decision, of the measures taken to comply with it and shall submit the following information:

((a)) the total amount of incompatible aid received by any beneficiaries identified;
((b)) the total amount (principal and recovery interests) to be recovered from each beneficiary;
((c)) a detailed description of the measures already taken and planned to comply with this Decision;
((d)) documents demonstrating any beneficiaries have been ordered to repay incompatible aid.
Article 9 
This Decision is addressed to the Republic of Malta.
Done at Brussels, 19 December 2017.
For the Commission
Margrethe VESTAGER
Member of the Commission
ANNEX
1. 

((a)) Fishing and fish factory ships;
((b)) Private yachts and ships used primarily for sport or recreation;
((c)) Fixed offshore installations and floating storage units;
((d)) Non-ocean-going tug boats and dredgers;
((e)) Ships whose main purpose is to provide goods or services normally provided on land;
((f)) Stationary ships employed for hotel and or catering operations (floating hotels or restaurants);
((g)) Ships employed mainly for gambling/as casinos (floating or cruising casinos).

2. 

((a)) Cable-laying vessels;
((b)) Pipe-laying vessels;
((c)) Crane vessels; and
((d)) Research vessels.

3. Malta commits to delete Point 3(2) of the Taxation Regulations and to remove the possibility of financial institutions benefitting from tonnage tax and to restrict the benefits of tonnage tax to organisations which have assumed risks and responsibilities for the operation of a tonnage tax ship (i.e. technical management and crewing) or the carrying out of shipping activities.

4. 

((a)) Only to deal with a situation of temporary excess capacity;
((b)) For a maximum period of up to three years;
((c)) Bareboat chartered out capacity will not exceed 50 % of the shipping companies' fleet, calculated on a group basis;
((d)) Excess capacity specifically acquired for chartering out cannot be eligible.

5. Malta commits that existing and new entrants to the tonnage tax scheme must have at least 25 % of their tonnage tax fleet EEA-flagged notwithstanding the requirement to maintain or increase the share as set out in 3.1 (paragraph 8) of the Maritime Guidelines.

6. Malta commits to explicitly limit eligibility to tonnage taxation for dredgers to those dredgers whose activity consists in ‘maritime transport’ — that is, the transport at deep sea of extracted materials — for more than 50 % of their annual operational time and only in respect of such transport activities. Eligible dredgers will be only those registered in a Member State or the EEA.

7. Malta commits to explicitly limit eligibility to tonnage taxation for towage to those vessels whose activity consists in maritime transport for more than 50 % of their annual operation. Waiting time may be proportionally assimilated to that part of total activity effectively carried out by a tug which constitutes maritime transport. Towage activities which are carried out inter alia in ports, or which consist in assisting a self-propelled vessel to reach port will not constitute maritime transport and only vessels registered in a Member State or the EEA will be eligible.

8. Malta commits to regulate the eligibility of revenues ancillary as set out at recitals 88 to 91 of the Commission's final Decision in the present case, by way of detailed regulation the draft of which has been shared with the Commission and that ship specific and non-ship-specific ancillary activities will not exceed 50 % of overall gross revenue (both ship-specific and other) of a beneficiary company. Malta also commits to exclude entirely from tonnage taxation revenues from the activities set out in recital 87 of the Commission's final Decision in the present case.

9. Malta commits to ensure that the capital gains exemption on the sale of ships covers only ships operated under the tonnage tax regime by companies engaged in genuine shipping activities and to introduce a requirement that only ships acquired and sold whilst under the tonnage tax regime may benefit from such an exemption.

10. 

((a)) have at least 60 % of the tonnage of their fleet under the flag of a Member State of the Union or of a State party to the EEA Agreement on entering the scheme; or
((b)) maintain or increase the share of tonnage of their fleet that they operated under the flag of a Member State of the Union or of a State party to the EEA Agreement at the moment that they entered the scheme.

In any event, by the third year of operation the organisation must have at least 60 % of the tonnage taxed fleet EEA-flagged.

However, in connection with the initial entry of a shipping organisation into the Maltese tonnage tax system, the said applicable threshold may be reduced to twenty-five percent (25 %). Malta will continue to check that the share of EEA-flagged fleet has not decreased on average over a period of three years (both for existing and new beneficiaries).

11. Malta commits that income from non-EEA-flagged vessels will only be eligible when the above criteria on flagging (see commitment 10) are met and shall apply only to fleets which are entirely managed from the EEA for commercial and strategic management. Ships which are not commercially and strategically managed from the EEA will be accepted under tonnage taxation only if flying an EEA flag (except for vessels bareboat chartered out under conditions respecting the limitations mentioned in commitment 4).

12. Malta commits to introducing a formal provision on control of the aid ceiling set in Section 11 of the Maritime Guidelines.

13. 

((a)) fees which are payable by vessels on registration and annual taxes on non-qualifying ships under the Maltese flag; and
((b)) tonnage tax, which is only payable in respect of qualifying ships.

14. 

((a)) shipbuilding;
((b)) sale on board of goods or services not customarily provided to passengers e.g. cars, domestic appliances or livestock; and
((c)) the operation of a port or harbour, ship-based holidays where the ship remains moored and there is no sea transportation element.

15. Malta commits to require beneficiaries of tonnage tax to submit mandatory annual compliance declarations for all controllable parameters such as type of vessel, activities performed with the vessel, net tonnage, days in use, flag, types of operation and compliance with the aid ceiling.

16. Malta commits to remove current sector-specific exemption from taxation of capital gains on shares in shipping companies for Maltese residents, as set out in Article 84Z(1)C of the Merchant Shipping Act.

17. Malta commits to remove the exemption in Article 5 of the Merchant Shipping Taxation Regulations from fees and charges payable under the Duty on Documents and Transfers Act.

18. Malta commits to amend the legislation to clarify that ships below 1 000 net tonnes may only be declared as eligible for tonnage tax where that ship is engaged in shipping activities and which but for its tonnage would be eligible for such treatment under Article 85(1) of the Merchant Shipping Act. and to exercise the power in such cases where the criteria are met by applicants. Malta will reformulate Article 85A(1) of the Merchant Shipping Act in the following way: ‘The Minister shall with the concurrence of the Minister responsible for finance and subject to such conditions deemed appropriate in line with these Regulations, declare to be a tonnage tax ship, a ship of any net tonnage, which is engaged in shipping activities)’.

19. Malta commits to issue guidance clarifying that the ministerial discretion contained in the First Schedule to the Merchant Shipping Act to exempt any ship or class of ships from the payment of fees shall be exercised only in the case of philanthropic and humanitarian operations which do not involve the offer of goods or services on a market.

20. Malta commits to separate accounting wherever a company is not solely engaged in shipping activities.

21. Malta commits to restricting the benefit of tonnage tax to organisations which have assumed risks and responsibilities related to the operation of a tonnage tax scheme or to the carrying out of shipping activities and will include a specific definition in legislation following that in the Maritime Guidelines.

22. Malta commits to delete from Article 85 of the Merchant Shipping Act the words ‘or as otherwise may be prescribed’.

23. Malta commits that the new rules that will render the measures of this Decision compatible with the internal market will come into force within three months of the date of this Decision.

24. Malta commits to continue to administer the tonnage tax scheme and the other measures forming the object of this Decision in a way that does not lead to payment of incompatible aid that would then need to be recovered from the beneficiaries.

25. Malta commits to re-notify the tonnage tax scheme within ten years of the date of the Commission's final Decision in the present case.
