Category: Ships

Our Malta office had the pleasure to interview Capt. Charles Pace, the Director of the Civil Aviation Directorate. Capt. Pace shared his views on the current status of the aviation sector in Malta, the competitive edge that Malta has compared to other jurisdictions, new market segments and his vision for the future.

Malta is now an aviation hub, with a Maintenance, Repair and Overhaul (MRO) sector, flight training and aviation software providers, as well as increased interest in Unmanned Aerial Vehicle Development. Malta is also part of important international agreements such as the Cape Town Convention. International players such as Lufthansa, Malta Air, Wizz Air, Lauda Air and more have chosen Malta as one of the bases for their operations. What are the main drivers that led these companies to take such decisions?

“The robust legal framework, the use of the English language, a favourable taxation and also the efficiency of the Civil Aviation Directorate are the main reasons mentioned by many companies. It is a fact that many companies move operations to Malta from other jurisdictions. They tell us how difficult it can be to do business in certain countries and that we give them a level of efficiency that is highly appreciated. The fact that our staff go the extra mile to process applications and to travel at short notice is extremely appreciated, as well as the availability, accessibility and willingness of our inspectors to assist during the application process. We also have an online system through which all applications are received. This cuts down on time and paperwork and is a transparent way of processing applications. The team at CAD has grown in size and, at the same time, is also much more proficient. Through a balanced pragmatic approach, we try to tick all the boxes.”

Malta is also an interesting jurisdiction for aircraft leasing structures, and there is a strong intention to further reinforce Malta’s offering in this space. How does this work? What are the current advantages for leasing structures in Malta and, in your opinion, what are the elements needed to further reinforce Malta’s offering in aircraft leasing?

“Leasing has been present in Malta for a while now. A few years ago, we carried out an analysis of our laws and made some tweaks to improve Malta’s position. Today, we have a very good product and companies have started to look at Malta as an alternative jurisdiction. In this period, we would need more exposure as well as buy in by the local banks. This being said, there are several companies that already operate through Malta. I would estimate around 400 aircraft are leased through Malta based companies, and this could easily double in the near future with other companies taking the plunge. We will have to prepare for an increase of the market size, for instance by creating university degrees that include modules related to leasing, and aviation accounting practices. We need more visibility both internationally and locally, to attract more business but also to create the talent that is needed to service a growing industry.”

In recent years, there is the tendency for airlines to lease their aircraft, rather than buying them. Many Malta AOCs owners offer this kind of services to commercial airlines – do you see space for further growth? Why is Malta better positioned, compared to other jurisdictions?

“Aircraft, crew, maintenance, and insurance (ACMI) has been very popular even pre COVID-19. Today, with the delays in production of new aircraft and also groundings due to engine problems, ACMI operators are very much in demand.  The Phenomena allows legacy carriers to increase capacity on demand and to replace grounded aircraft. I believe that this will remain a strong market for at least 3 more years due to lack of capacity. The problem is that many carriers are not letting go of aircraft as the new ones on order are delayed. With this scheme, we need to keep in mind however that the margins are tight, and many airlines will struggle despite the high demand. Cost is continuing to increase due to labour demands, fuel (even more with the introduction of SAF mandates kicking in next year) and overflying charges. This leaves airlines in precarious situations as we have seen with first quarter results of at least two major groups lately.”

Since you became Director of the Civil Aviation Directorate, in 2016, the industry grew and so did the Malta Aircraft Registry, which now counts over 880 aircraft and 52 Air Operator Certificate owners. Such growth needs to be constantly supported by the various administrative structures. What were the main challenges that the CAD had to face, to keep up with this growth? 

“Working within the public sector might present, at times, significant challenges because you often need a private sector mentality and the flexibility of a private enterprise to be able to give stakeholders what they need. For instance, some of the main issues were improving the remuneration for staff, getting enough headcount and have the agility to change things quickly.

The industry has gone through highs and lows both of which have brought challenges. High demand for flying means airlines recruit and offer better conditions. This makes it difficult to find people to take up regulatory posts and therefore retention becomes even more crucial. During the pandemic, the situation was the opposite, with many looking for a job but unfortunately for us, some of those who came to us for a job in those dark days left as soon as things improved in the industry. Loosing people at short notice after giving them training is a bitter pill to swallow but is something that happens in many economic sectors. 

A significant change that happened in recent years is that when I first joined, we did not accept helicopters or simulators. Today, on the contrary, we regulate the full range of activities. We have examination centres in other countries and have quite a few projects in the pipeline. Malta offers a low fixed rate of income tax to attract individuals to Malta and this has proven to be a very successful initiative that distinguishes Malta from other countries. In a way, we have been victim of our own success, and it is now difficult to match expectations of the industry while following the procedures of the public sector.”

Unmanned Aerial Vehicles are another sub sector in which Malta aims to become a main player at the international level. UAVs open the door to a multitude of services and operations. What are the main opportunities that you see, in this space?

“Since legislation was introduced by the EU, we have been monitoring the developments. We have a dedicated portal for UAVs and are actively seeking to bring to the island a testing facility that will allow research or testing of larger drones. I am very much interested in using new technology to improve urban mobility: I believe that this will be the future and we need to embrace it. The size of Malta makes it even easier as trips are short favouring electric aircraft which might not be that yet suitable for longer flights. One of the main challenges with new technology is the rather lengthy process of certification by EASA. Although millions are poured into Research and Development, the process to obtain certification and start commercial operations is taking longer than expected.”

You have recently returned from Geneva, where the CAD participated at the European Business Aviation Convention & Exhibition (EBACE) 2024. Was the event successful and do we expect further growth?

“Once again, the CAD participated with a stand at EBACE, in conjunction with the Malta Business Aviation Association. It was yet another opportunity to network, promote Malta and I must say that even this year CAD was very much busy meeting prospective clients and discussing future investments in Malta. The response was very strong, even more than expected, which indicates that we might be in for a productive period in the coming months.”

A look at the future: what do you think Aviation in Malta will look like, in 2035?

“I honestly think that the demand will peak in the next 5 years. I think there will be less airlines around and larger airlines will control the market.  I hope that, by then, we would deploy more aerial vehicles which would replace cars and even certain ferry boats between the islands.”

Dixcart Air Marine

Through our team of experienced professionals, Dixcart Management Malta Limited will assist you in all aspects of registering your aircraft in Malta. Services range from incorporation of the entity owning the aircraft in Malta and full corporate and tax compliance, to the registration of the aircraft under the Maltese Registry, whilst ensuring full compliance with Maltese Aviation legislation.

Additional Information

If you would like further information regarding Aircraft Registration in Malta, please speak to Jonathan Vassallo: advice.malta@dixcart.com, at the Dixcart office in Malta or to your usual Dixcart contact.

The Malta’s Small Commercial Yacht Code is the latest addition to the Maltese yacht legislation. Malta offers deep natural harbours, a strategic position in the middle of the Mediterranean, a climate with 300 days on sunshine per year, widespread use of English and an attractive lifestyle. Add these elements to a robust regulatory framework, state of the art marinas, refit and repair facilities, highly professional international operators and service providers and you will obtain a fully-fledged, international maritime hub. Malta has lined up, over the years, all requirements to be attractive in the yacht and superyacht industry.

The advantages of the Malta Flag

Malta has a long maritime tradition, with a very deep understanding of the industry and a reputable and an internationally recognised register, all supported by a clear, business-oriented vision. Having a yacht flying the Malta flag has numerous advantages, and we invite all those interested to read our article on why considering to register a vessel under the Malta flag.

A forward-looking authority that listens to the operators

The Merchant Shipping Directorate introduced Malta’s Small Commercial Yacht Code (sCYC), effective from the 1^st of April 2024, following an extensive consultation process that involved all relevant industry stakeholders. The small commercial yacht segment has been in constant increase in recent years, and the introduction of the sCYC aims to meet the needs, demands and technological advancements of the yachting industry while, at the same time, ensuring compliance with international safety standards.

Applicability and exclusions

The Code is applicable to yachts under commercial use that:

1. Are at least 12 metres in hull length;
2. Are less than 24 metres in length;
3. Are engaged in commercial operations;
4. Carry no more than 12 passengers.

The code does not apply to Category D vessels, Rigid Inflatable Boats (RIBs), military vessels and any other vessel that is operated for non-commercial use.

The code also states that yachts may be exempted, on a case-by-case basis, and at the sole discretion of the Administration, from any of the Code’s requirements which are proven to be disproportionately onerous and technically impracticable for the yacht.

What changes for the small commercial yachts

One of the most relevant changes is that, under the sCYC, yachts from 12 metres, which previously fell outside the scope of the Commercial Yacht Code (CYC), may also be registered commercially under the Malta flag.

The sCYC updates and replaces the requirements included in the CYC, and all CYC certified yachts are deemed, automatically, to be compliant with the sCYC. However, the sCYC states that any small commercial yacht must be compliant with the new requirements at the time of the vessel’s first renewal survey conducted after 1^st June 2024. In addition, sCYC Certified Yachts operating in the territorial waters of other countries must also adhere to any additional requirements stipulated by those specific countries.

The Small Commercial Yacht Code identifies the requirements in terms of safety, crew welfare and pollution prevention that are appropriate to vessels sized between 12 and 24 metres. The regulator addresses the needs of the operators while maintaining these requirements in line with those set out in international conventions and EU Regulations and Directives. This approach of using the EU Recreational Craft Directive (2013/53/EU, as amended) as the basis for the Code is clearly visible with regards to yacht’s design, stability and structure.

Conclusion

The new Small Commercial Yacht Code caters for the specific needs of this niche market. The code encourages more yacht owners to adopt the Malta flag and join the charter market by operating commercially in the Mediterranean and beyond. With this Code, the regulator addresses and accommodates the unique features of this niche market that has been gaining relevance in recent years.

Dixcart in Malta

At Dixcart Malta we have a dedicated team of professionals dealing with yachting matters including, but not limited to, yacht importation, flag registration, resident agent services, crew payroll. We are also able to assist with your Yachting related needs.

Additional Information

For further information about Malta Maritime services, please contact Jonathan Vassallo, at the Dixcart office in Malta: advice.malta@dixcart.com. Alternatively, please speak to your usual Dixcart contact.

VAT Treatment for Private and Commercial use of Yachts in Malta

Background

Malta has gained a high reputation in the shipping and yachting world, not only because of its geographical location but also because it offers attractive and competitive incentives, thereby making Malta one of the top flags in the world. Malta’s solid roots as a maritime location continue to enhance and expand the island’s footing in the maritime industry.

As well as creating a complete service offering for yachts; from shipyards to berthing facilities, to chandlers to maritime professionals, Malta offers ship and yacht owners several attractive solutions, including attractive VAT incentives for yacht and superyacht owners.

Reduced VAT Rate as from the Start of 2024

As from 1^st January 2024, short term charters commencing in, Malta have benefited from a reduced 12% VAT rate, subject to the fulfilment of certain criteria.

The Tax & Customs Administration’s has released new Guidelines, specifically tailored for the application of the 12% Value Added Tax (VAT) rate pertaining to the rental of pleasure yachts.

The Guidelines can be accessed by clicking this link.

VAT Treatment of Yachts Intended for Private Use

In March 2020, Malta published its guidelines establishing the means by which leased pleasure yachts are to be treated for VAT purposes, with a particular focus on the use and enjoyment provisions on yacht leasing supplies. The Guidelines issued on the subject matter reflect EU developments and practices.

With respect to operating leases, it is possible for a lessor/owner of a yacht to lease out their yacht to a lessee for a consideration, for a specified period of time. Through such a structure, VAT would be payable by the lessee on the monthly lease instalments, depending on the actual use and enjoyment.

In order to benefit from the said VAT treatment, the following conditions must be  satisfied:

• The lessor must be a Maltese entity, to be eligible for the Yacht leasing Scheme;
• There must be a yacht leasing agreement in place between the lessor and lessee setting out the conditions of the lease;
• The lessee must be a non-taxable person i.e., not using the yacht for commercial business purposes;
• The yacht must be placed at the disposal of the lessee in Malta;
• The lessor must maintain documentary and/or technological data to determine the actual use and enjoyment of the pleasure boat within and outside EU territorial waters;

This VAT treatment works depending on the ratio of use and enjoyment of the yacht in or outside EU territorial waters.

As a rule, full VAT payment at the rate of 18% is payable when the place of supply of the service is in Malta; however, in cases where the actual effective use and enjoyment of the pleasure yacht would be outside EU waters, there is an adjustment method that would apply.

The result will be that VAT would only be charged on the actual use and enjoyment of the yacht by the lessee in EU territorial waters. To this end, no VAT shall be due on the portion of the lease where the yacht is effectively used and enjoyed outside EU territorial waters.

Therefore, Malta VAT will be applicable solely on the use of the yacht within EU territorial waters; depending on the effective use and enjoyment of the yacht, possibly making it amongst the lowest VAT rates within the EU Member States.

Importantly, the VAT treatment options also provides an element of flexibility when it comes to exiting or terminating the lease. In the eventuality that at the end of the lease the lessor decides to contract the sale of the yacht in Malta, then VAT, at the prevailing standard rate, is charged on the value of the yacht upon subsequent sale.

In such a case should the Maltese VAT Department be satisfied that the necessary rules and regulations have been duly observed, a VAT Paid Certificate would be issued at their sole discretion.

VAT Treatment of Yachts intended for Commercial Use

Yachts intended for commercial use may opt for VAT deferment on the importation as follows:

• Obtaining a VAT deferment on the importation of the commercial yacht by a Maltese owning entity having a Maltese VAT registration; without needing to set up a bank guarantee (as historically required); or
• Obtaining a VAT deferment on the importation of the commercial yacht by an EU owning entity having a Maltese VAT registration, provided that the company duly appoints a VAT representative in Malta, without needing to set up a bank guarantee (as previously required); or
• Obtaining a VAT deferment on the importation of the commercial yacht by a non-EU owning entity, on provision by the importing entity, of a bank guarantee amounting to the VAT payable on 0.75% of the value of the yacht, capped at one million euros.

To opt for the first proposed VAT deferment structure, one would need to incorporate a company in Malta, and this company would need to obtain a valid Malta VAT identification number. In each instance, the importation of the commercial yacht will require the yacht to physically sail to Malta to undergo VAT and Customs procedures.

Following which, the yacht would be imported into the European Union, with the VAT payment deferred accordingly, rather than paid upon importation. In such a case, the yacht would be able to sail freely and circulate within EU waters.

Services Available from Dixcart Malta

At Dixcart Malta we have a dedicated team of professionals dealing with yachting matters including, but not limited to; yacht importation, flag registration, resident agent services, crew payroll. We are also able to assist with a number of your Yachting related needs.

Additional Information

For further information about Malta Maritime services please contact Jonathan Vassallo, at the Dixcart office in Malta: advice.malta@dixcart.com.

Background

Crime-linked vessels are an unfortunate reality worldwide.

The lack of information about vessels can result in countries flagging or re-flagging ships involved in criminal activities, or letting such vessels sail out of their ports unimpeded.

Main Concerns for Malta

Malta has had long-term concerns regarding contraband  linked to Italian organised crime as well as to Libyan militia groups.

The head of Malta’s sanction board Neville Aquilina, detailed in an International Maritime Organisation (IMO) Assembly “mechanisms for the full implementation of UN sanctions requirements are either too weak or inexistent”.

In addition, vessels which have been sanctioned in one country are able to sail to another jurisdiction, to obtain their license. This is possible because countries which de-flag vessels do not have the obligation of informing other countries about this and/or other actions taken.

International Database Proposal

In March 2020, in a meeting arranged by the IMO and the International Maritime Law Institute (IMLI), Malta proposed an idea to the EU to deal with this issue:

• Malta suggested the idea of building a global database of vessels or companies, connected to illicit activities or subject to international sanctions, and for this database to be shared between countries, to help them make informed decisions.

The goal is to strengthen international maritime law, specifically, making it more difficult for criminals to obtain vessel licenses when they sail from one country to another, after their ship has been de-flagged for sanction violations in a previous country.

International Database Creation

In addition, this new information about vessels worldwide will make it easier to carry out investigations. Currently these can take years to complete because of the lack of information available.

Malta raised this idea again in 2021, during a follow-up event. In April 2021 the European Commission agreed to start working on a database across the EU, and to introduce it as soon as possible, in the forthcoming months.

Malta’s Standing

Located centrally in the middle of Europe and to the north of Africa, Malta is ranked  sixth in terms of world ship registration and regards this new initiative as being extremely important.

Implementation Intentions

Even though the objective for the database is to be used by all of the IMO state members, the IMO has not, as yet, committed to a date to implement the database.

Dixcart will keep you updated.

Additional Information

For further information about the Malta flag please contact Jonathan Vassallo, at the Dixcart office in Malta: advice.malta@dixcart.com. Alternatively, please speak to your usual Dixcart contact.