In 2021, some of the most important incentives for the employment of highly qualified on-board staff and for continued competitiveness in Germany were at risk of expiring: at stake were both, the full withholding of wage tax under Section 41a IV of the German Income Tax Act (EStG), and the incentives to reduce non-wage labour costs (reimbursement of employers’ social security contributions). The same applied to the alignment of the Ship Manning Ordinance with the European standard. Against this backdrop, the Federal Ministry of Transport and the German Shipowners’ Association (VDR) each commissioned their own, independent studies to examine the extent to which these measures had an effect on the attractiveness of Germany as a shipping hub. Both studies came to the same conclusion: these incentives make sense and should be kept in place. So they were.
The package to promote employment of local maritime personnel is intended to enable German shipping companies to deploy highly qualified on-board staff and fly the German or another EU flag under conditions comparable to other major EU shipping centres. Both studies analysed in detail whether the incentives helped reduce the “competitive disadvantage of the German flag” (quote from the Federal Ministry of Transport) in terms of personnel costs compared to other European flags. It was also clarified whether those measures contributed to the employment of German and European seafarers while averting the impending loss of maritime expertise in Europe and Germany.
VDR had already commissioned the consulting firm PwC Germany to review the shipping subsidy package in 2019. The PwC evaluation was issued before the outbreak of the coronavirus pandemic on the basis of relevant figures and detailed interviews with numerous stakeholders from the maritime industry. In addition, 66 German shipping companies had completed a detailed questionnaire.
Key results:
- The number of ships in the German merchant fleet continued to fall significantly in the years leading up to 2019 as a result of the global economic crisis following the Lehman Brothers bankruptcy and the subsequent extended shipping crisis, particularly in container shipping. The number of ships sailing under the German flag likewise fell as a result. “However, the existing package of measures has succeeded in stabilising the proportion of tonnage under the German flag significantly,” the study states. The negative trend was clearly slowing, reaching a turning point recently: Compared to 2016, the proportion of German-flagged ships in German shipping registers rose by three percentage points by 2019.
- The number of domestic or locally based seafarers has remained more or less stable in recent years, while the number of training places filled per ship has even increased in some cases. This shows that the expertise required to operate ships has been maintained in Germany despite major challenges. This trend can be expected to continue, thanks to the incentives: 78 per cent of shipping companies surveyed for the study stated that they would not have trained without these measures.
The package of incentives to promote shipping at a glance:
Wage tax
– implementation of the current regulation dated June 2021 up until 31 May 2027
– Employers may withhold 100% of wage tax for shipboard personnel liable for tax in Germany
– Prerequisite: German or EU or EEA flag
Non-wage labour costs
– Reimbursement of employer contributions to statutory social insurance
– Shipboard personnel subject to social security contributions on ships flying the German flag or other EU flags in German shipping registers are eligible for funding under the incentive programme
– Initial implementation for the funding year 2017 (previously flat-rate grants to reduce non-wage labour costs for on-board personnel on ships flying the German flag)
– The current directive expires on 31 December 2027
Amendment of the Ship Manning Ordinance
– Change of nationality requirements: at least one EU captain and one EU officer for ships of 8,000 GT and above, and at least one EU captain for ships under 8,000 GT
– In force since July 2016; currently scheduled to expire on 30 June 2027
