Category: Ships

Navigating Malta’s Beneficial VAT Treatment: A Comprehensive Guide for Yacht Owners – Private and Commercial Use Explained

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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 1st 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 thislink.

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.

Isle of Man Shipping Registry

Malta Initiative Moves Forward – A Shared Database of Ships Linked to Criminal Activity

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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.

Shipping Advantages

Maltese Shipping – The Tonnage Tax System and Advantages for Shipping Companies

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Mediterranean centre of maritime excellence. Currently Malta has the largest shipping register in Europe and the sixth largest in the world. In addition, Malta has become a world leader in terms of commercial yacht registration.

In order to avoid the risk of shipping companies relocating or flagging to low-tax countries outside the EU, the European Commission’s 2004 Guidelines on State Aid to Maritime Transport (commercial shipping activities) was introduced to allow Member States to implement financial benefits for shipping companies. One of the most important benefits was to replace traditional methods of taxation with a tonnage tax.

In December 2017, the European Commission approved the Maltese tonnage tax regime for a period of 10 years, following a review of its compatibility with EU State Aid Rules.

The Maltese Shipping Tonnage Tax System

Under the Malta Tonnage Tax System, tax is dependent on the tonnage of the vessel or fleet belonging to a particular ship-owner or ship-manager. Only companies that are active in maritime transport are eligible under the Maritime Guidelines.

Standard corporate tax rules do not apply to shipping activities in Malta. Instead shipping operations are subject to an annual tax consisting of a registration fee and annual tonnage tax. The rate of tonnage tax reduces according to the age of the vessel.

  • As an example, a trading ship measuring 80 metres, with 10,000 gross tonnage, built in the year 2000, will pay a fee of €6,524 on registration and €5,514 annual tax thereafter.

The smallest category of ship is up to a net tonnage of 2,500 and the largest, and most expensive, are ships over 50,000 net tonnage. Charges are reduced for ships in the 0-5 and 5-10 year old age categories respectively and are greatest for those 25-30 years old.

Taxation of Shipping Activities in Malta

As detailed above:

  • Income derived from shipping activities by a licensed shipping organisation is exempt from income tax.
  • Income derived from ship management activities by a ship manager is exempt from income tax.

In all other circumstances:

  • Shipping companies incorporated in Malta are taxed on their worldwide income and capital gains.
  • Shipping companies not incorporated in Malta, but where control and management are exercised in Malta, are taxed on local income and capital gains and on foreign source income remitted to Malta.
  • Shipping companies not incorporated in Malta and where management and control are not exercised in Malta, are taxed on income and capital gains arising in Malta.

Ship Management Activities

Following a European Commission ruling, Malta has amended its tonnage tax law.

Ship management activities are now included in the tonnage tax system. This means that ship managers are allowed to pay a tonnage tax which is equivalent to a percentage of the tonnage tax paid by the owners and/or charterers of the ships managed. Any income derived by a ship manager from ship management activities is deemed to be income derived from shipping activities and is therefore exempt from income tax.

Ship management organisations can benefit from the tonnage tax measures, provided that the following conditions are met:

  • must be a ship management organisation established in the European Union (EU) or the European Economic Area (EEA);
  • have assumed responsibility for either technical and/or crew management of a ship;
  • must comply with the international standards and requirements of the EU;
  • must specifically include shipping activities in their objects and must register with the Registrar General accordingly;
  • maintain separate accounts, clearly distinguishing the payments by and receipts of the ship manager with respect to ship management activities from those not connected to such activity;
  • the ship manager opts to pay an annual tonnage tax on all ships;
  • At least two-thirds of the tonnage of the ships that the ship manager is providing ship management activities for must be managed in the EU and EEA;
  • the tonnage that the ship manager provides ship management activities for must satisfy the flag-link requirement.

Maltese Tonnage Tax Eligibility

Tonnage tax is applied to the activities of a shipping company as follows:

  • core revenues from shipping activities;
  • certain ancillary revenues that are closely connected to shipping activities (capped at a maximum 50% of a ship’s operating revenue); and
  • revenues from towage and dredging (subject to certain conditions).

Maltese shipping organisations must register with the Finance Minister by submitting the name of the organisation, the registered office address and the name and tonnage of the ship it wishes to own or operate. The vessel must be declared a ‘Tonnage Tax Ship’ or a ‘Community Ship’, with a minimum net tonnage of 1,000 and be entirely owned, chartered, managed, administered or operated by a shipping organisation.

A shipping company can only benefit from the Maltese Tonnage Tax scheme if it has a significant part of its fleet flying the flag of a European Economic Area (EEA) Member State.

Additional Reasons to Consider Ship Registration in Malta

There are a number of additional reasons to consider ship registration in Malta:

  • The Malta registry is on the Paris MOU and Tokyo MOU white lists.
  • Vessels registered under the Malta Flag have no trading restrictions and are given preferential treatment in many ports.
  • Registration of vessels under the Maltese flag takes place in two stages. A vessel is provisionally registered for a six-month period. This is an easy and fast process. During this provisional registration period the owner is required to submit additional documentation and then the vessel is permanently registered under the Maltese flag.
  • There is an exemption from stamp duty in Malta on the registration and/or sale of a ship, shares relating to a licensed shipping organisation and the registration of a mortgage relating to a ship.

Additional Information

If you would like further information regarding the Malta Tonnage Tax System or the registration of a ship and/or yacht in Malta, please contact Jonathan Vassallo at the Dixcart office in Malta: advice.malta@dixcart.com or your usual Dixcart contact.

Madeira International Shipping Register

The Advantages of Registering a Vessel with the Madeira International Shipping Register (MAR)

Posted on | by Karolis Surkus | Leave a Comment on The Advantages of Registering a Vessel with the Madeira International Shipping Register (MAR)

Background

The objective of the Madeira International Shipping Register (MAR) is to offer a credible alternative to other international registers. The high quality and safety standards of a conventional register have been maintained within an attractive tax environment designed to encourage inward investment to the island of Madeira. Vessels registered with MAR carry the Portuguese flag and are subject to the International Treaties and Conventions entered into by Portugal.

Over half a million vessels are now registered with MAR and it is ranked the fourth international shipping register in the EU. Four of the largest ship-owners in the world, APM-Maersk, the Mediterranean Shipping Company (MSC), CMA CGM Group and Cosco Shipping, have ships registered with MAR, as recorded by the international analyst firm, Alphaliner.

Key Developments in 2017

In 2017 a number of significant developments took place, increasing the attractiveness of registering a vessel in MAR:

  • The Madeira Shipping Register was “White Listed” on both the Paris MOU and the Tokyo MOU.*
  • Vessels under the Portuguese flag are included in the Qualship 21 Index of the United States of America. This certificate recognises the exceptional standards of the Register.
  • The Korean Register (KR), a member of the International Association of Classification Societies (IACS), was granted authorisation by the Portugal Maritime Authority (DGRM) to deliver statutory services on behalf of the Portuguese flag. This authorisation enables the Korean Register to act as a Recognised Organisation (RO), conducting surveys and audits, and issuing certificates to Portuguese flagged ships, including those in Madeira, to ensure full compliance with SOLAS, MARPOL, ITC, ILL and MLC regulations.

*MOU: Paris Memorandum of Understanding on Port State Control (MoU) and Tokyo (MoU).

Advantages of Registering a Vessel with MAR

The key advantages of ship registration in MAR are detailed below:

  • Shipping companies licenced to operate within MAR benefit from a corporate income tax rate of 5% until 2027. They also enjoy automatic VAT registration and have access to the Portuguese double taxation treaty network.        
  • The Register is of a high standard, has EU credibility and full access to EU cabotage.
  • It is not regarded by the International Transport Workers’ Federation as a flag of convenience.
  • There are no nationality requirements for ship owners of vessels registered in MAR and they are not required to have their head office in Madeira; it is sufficient to have local legal representation with adequate powers. Dixcart in Madeira can provide this service.
  • The existence of a flexible mortgage system allows the mortgagor and the mortgagee, by written agreement, to choose the legal system of a particular country that will govern the terms of the mortgage.
  • Registration fees are competitive and there are no annual tonnage taxes.
  • Generally, the captain and 50% of the crew of the ship must be “European”. This includes nationalities such as Polish, Russian and Ukrainian, as well as citizens of Portuguese-speaking countries, which allows for flexible manning.
  • Crew wages are exempt from income tax and social security charges in Portugal.
  • Temporary registration is allowed by law (bareboat charter: “In” and “Out”).
  • Eight International Classification Societies are recognised in Portugal. MAR can delegate some of its functions to these societies. This can be simpler and more convenient for ship owners.

Additional Tax Advantages for Shipping Companies in Madeira

In addition, to the reduced corporate tax rates, Madeira shipping companies also enjoy exemption from withholding taxes on the distribution of dividends, exemption from withholding taxes on interest, royalties and service fees paid to non-residents, and exemption from capital duty, notary and registration fees. If certain requirements are met, shipping companies may also be exempt from capital gains tax when subsidiaries are sold.

Shipping companies can benefit from the Double Taxation Treaties with Portugal and Investment Protection Treaties signed by Portugal.

Summary

The approach adopted by MAR allows for flexibility. Depending on the circumstances, the ship can be registered on MAR with the shipping company licensed in another jurisdiction, OR the shipping company can be registered in Madeira with the vessel registered elsewhere, OR both the vessel and the shipping company can be licensed in Madeira. Each of these options offer various advantages.

How Can Dixcart Help?

Dixcart has extensive experience working with the owners and operators of commercial vessels as well as pleasure and commercial yachts. We can assist with the permanent and/or bareboat registration of vessels, re-flagging, mortgages, and the establishment of corporate owning or operational structures for the holding or management of vessels.

Additional Information

If you require additional information regarding the International Shipping Register of Madeira and the tax efficiencies available to ships owned by Portuguese companies registered in MAR, please contact Catarina Sardinha at the Dixcart office in Madeira: advice.portugal@dixcart.com  

The Benefits of Ship or Yacht Registration in Portugal, with the International Shipping Register of Madeira (MAR)

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Ship or Yacht Registration in Portugal

The International Shipping Register of Madeira (MAR) was established in 1989 as part of the Madeira International Business Centre (“MIBC”) “package” of taxation benefits. Portugal is an attractive jurisdiction for ship or yacht registration, with over half a million vessels are now registered with MAR. It is also ranked the fourth international shipping register in the EU. If you are in the process of deciding where to register your vessel, Portugal should be considered.

Vessels registered with MAR carry the Portuguese flag and are subject to the International Treaties and Conventions entered into by Portugal. The register is of a high standard, has EU credibility, is not regarded as a flag of convenience, and is whitelisted in both Paris MoU and Med MoU. Moreover, it has never been regarded by the ITF as a flag of convenience.

It is important to note that the Portuguese Government is determined to boost the maritime economy, taking concrete steps to put MAR among the leading European flags. In this context we must point out that MAR is one of the first flags to fully introduce an efficient digital system, allowing for the dematerialisation of all procedures and the issuing of electronic certificates following the IMO Guidelines for the use of electronic certificates.

In the words of MAR’s Technical Commission, “Portugal considers digitalization in the maritime transport as a very relevant development, namely in respect to expediting sharing of information, improving security and traceability of documentation and reducing administrative burdens.”

It is therefore clear that MAR is offering the best quality package to owners worldwide, as any individual or entity can register a vessel with MAR. There are no nationality requirements for ship-owners of vessels registered in MAR and they are not required to have their head office in Madeira. In addition, if the entity is registered with the International Business Centre of Madeira (MIBC), and undertakes maritime transportation, it can enjoy specific tax incentives provided by the MIBC.

Advantages of Ship or Yacht Registration in Portugal

Yacht Registration with MAR:
  • EU register – yacht registration in MAR provides unrestricted access to EU waters.
  • Yacht owners are not required to have their head office in Madeira (it is sufficient to have local legal representation with adequate powers).
  • Low levels of taxation.
  • The yacht does not have to sail or be moored in Madeira.
  • No citizenship requirements for the crew of commercial yachts and a flexible social security regime.
  • The existence of a flexible mortgage system which allows the mortgagor and the mortgagee, by written agreement, to choose the legal system of a particular country that will govern the terms of the mortgage.   
  • Reduced costs of registration.

Advantages of Ship Registration in MAR:

  • EU Flag – the register is of a high standard and has complete EU credibility, with access to continental and island cabotage.
  • The register is included in the Paris MoU Whitelist.
  • Competitive registration fees, there are no annual tonnage taxes.   
  • Only 30% of the safe manning must be “European”. This includes nationalities such as Polish, Russian, and Ukrainian, as well as citizens of Portuguese-speaking countries. This requirement may also be derogated if duly justified. This allows for flexible manning.
  • Crew wages are exempt from income tax and from social security charges in Portugal.
  • If an MIBC company is formed, with the object being maritime transportation, there is no share capital requirements.
  • Shipping companies licensed to operate within MAR benefit from a corporate income tax rate of 5% until 2027. They also enjoy:
    • automatic VAT registration,
    • access to the Portuguese double taxation treaty network,
    • exemption from withholding taxes on the distribution of dividends,
    • exemption from withholding taxes on interest, royalties and service fees paid to non-residents,
    • and exemption from capital duty, notary, and registration fees.
    • If certain requirements are met, shipping companies may also be exempt from capital gains tax when subsidiaries are sold.
  • The existence of a flexible mortgage system which allows the mortgagor and the mortgagee, by written agreement, to choose the legal system of a particular country that will govern the terms of the mortgage.   
  • Eight International Classification Societies are recognised in Portugal. MAR can delegate some of its functions to these societies. This can be simpler and more convenient for ship owners.          
  • Temporary registration is allowed by law (bareboat charter: “In” and “Out”).
  • Vessels under the Portuguese flag are included in the Qualship 21 Index of the United States of America. This certificate recognises the exceptional standards of the Register.

Summary

If you are interested in finding out more about Ship or Yacht Registration in Portugal and would like to take advantages of the benefits listed within this article, please contact: advice.portugal@dixcart.com, or your usual Dixcart contact. 

Dixcart Air Marine – Team Introduction

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The Team and Activity

Dixcart Air Marine assists clients with the registration of yachts, ships, and aircraft in a number of different jurisdictions.

Our team of experienced professionals across the various Dixcart offices, provide a complete service for clients. Professionalism, coupled with practical experience, help guarantee a smooth process for our clients and enables them to access a range of attractive measures that are available in the different jurisdictions.

Dixcart Air Marine can coordinate the entire yacht, ship, or aircraft purchase and/or ownership. To maximise the benefits, one of our professionals should ideally be involved as early as possible – as soon as the thought of owning the asset has occurred to the client. To see the full range of services available, please click here.

Introduction to Jonathan Vassallo and Paul Harvey

Jonathan Vassallo from the Malta office and Paul Harvey from the Isle of Man office are two key members of the Dixcart Air Marine team that we are introducing you to today.

Jonathan joined Dixcart in September 2009. He is a member of the Association of Chartered Certified Accountants, the Malta Institute of Taxation, the Malta Institute of Accountants, and the Malta Institute of Management. Jonathan is also a member of the Yachting Business Section of the Malta Chamber of Commerce, Enterprise and Industry. He is the Managing Director of the Dixcart office in Malta.

Paul Harvey, an accomplished figure in offshore financial services, brings over two decades of expertise to his role at Dixcart Management (IOM) Limited. With expertise regarding superyacht holding structures, Paul collaborates closely with a network of tax advisers, lawyers, and industry experts to ensure the efficient establishment, management, and administration of these prestigious assets. His expertise extends to both private and commercial vessels.

Jonathan Vassallo – jonathan.vassallo@dixcart.com

Jonathan Vassallo

Jonathan was appointed Director of Dixcart Management Malta Limited at the start of 2013 and Managing Director during 2018. His role is to develop and implement strategy for the Malta office ensuring that the Group’s high standards of compliance and operational control are maintained. He manages a number of relationships with international clients and particularly specialises in the areas of yachting, residence, and VAT. He has extensive experience with the registration of yachts and superyachts, the formation and administration of the relevant holding structures, and the ongoing management of yachting structures.

Before joining Dixcart, Jonathan Vassallo was involved in the manufacturing industry in Malta for thirteen years. During this term, he served as an Accountant and Financial Controller for two major furniture firms in Malta.

Paul Harvey– paul.harvey@dixcart.com

Paul is a member of the Society of Trust & Estate Practitioners (STEP) and is skilled in handling complex tax and legal matters related to superyachts. He regularly attends events such as the Monaco Yacht Show.

Paul became a member of the Society of Trust & Estate Practitioners (STEP) and joined the Dixcart office in the Isle of Man in 2009, later becoming a director of Dixcart Management (IOM) Limited in June 2017. He maintains daily engagement with clients, advisers, and yacht professionals, leveraging over 20 years of offshore financial services experience to navigate the tax and legal complexities of superyacht holding structures effectively.

Portuguese Tonnage Tax

The Portuguese Tonnage Tax and All The Benefits it Offers

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The Portuguese tonnage tax and seafarer scheme was approved by the European Commission on 6 April 2018. This was in line with EU State aid rules, in particular the Guidelines on State aid to maritime transport. The Portuguese measures will enhance the competitiveness of the Portuguese shipping sector. Simultaneously, they will protect know-how and jobs in the EU maritime transport sector.

The law proposal had been presented by the Portuguese Government to Parliament before this date, and enactment is anticipated in the near future.

Portuguese Tonnage Tax System: Eligibility

The tonnage tax is not a tax but rather a means to determine relevant taxable income.

Entities liable to corporate income tax, carrying out eligible shipping activities, with a registered head office or place of effective management in Portugal, may opt to be taxed under this new tonnage scheme.

Application to the tonnage scheme will be subject to certain legal requirements as follows:

  • at least 60% of the respective net tonnage must fly a flag of a European Member State (EU) or an Economic European Area State (EEA) and be managed from an EU or EEA State;
  • in terms of chartering, the net tonnage of the ships under a charter cannot exceed 75% of the total fleet of the charterer and must comply with the flag and management requirements detailed above;
  • at least 50% of the crew of the relevant ships must be nationals from EU, EEA or Portuguese-speaking countries, except for very limited exceptional cases.

Tax Details: Portuguese Tonnage Tax Regime

Taxable income is calculated as a lump sum, depending on the size (net tonnage) of the ships, independent of the actual earnings (profit or loss), as per the schedule below:

Net TonnageDaily taxable income for each 100 net tonnes
Up to 1,000 net tonnes€ 0.75
1,001 – 10,000 net tonnes€ 0.60
10,001 – 25,000 net tonnes€ 0.40
Over 25,001 net tonnes€ 0.20

The tonnage tax can be applied to a shipping company’s:

  • core revenue from maritime transport activities, such as cargo and passenger transport;
  • certain ancillary revenue closely connected to shipping activities (which is capped at a maximum 50% of a ship’s operating revenue); and
  • revenue from towage and dredging, subject to certain conditions.

For more environmentally-friendly ships, companies can achieve an additional reduction of 10% to 20% of tax under the tonnage tax scheme.

Taxable profit assessed, as per the above schedule, is then subject to the standard rate of 21% corporate income tax (municipal surtax and state surtax also apply). No deductions can be offset against the taxable profit assessed under this scheme.

The proposed tonnage tax regime will be optional. However, participation in the scheme must be for a minimum 3 years, if commenced within the first 3 fiscal years of the introduction of the tonnage regime. After this initial period, subsequent participation must be for a minimum 5 years.

Scheme to Support Crew

The scheme exempts crew members employed on vessels eligible under the tonnage tax regime from paying personal income tax (IRS). A minimum of 90 days on board the vessel is required in each tax year, as well as meeting a number of other conditions.

The new scheme also allows the crew to pay reduced social security contributions; total rate of 6%, 4.1% paid by the employer and 1.9% by the member of the crew.

MAR – Madeira International Shipping Register

MAR is the fourth largest EU international shipping register. Ships registered with MAR qualify for the tonnage scheme. Madeira is an integral part of Portugal. In other words, Companies registered there enjoy a number of tax benefits which are guaranteed until at least the end of 2027.

MAR also permits bareboat charter registration. Therefore, MAR is very likely to be the preferred option for ship owners wishing to reflag their fleet in order to benefit from this new tonnage system.

In addition, the Madeira International Business Centre, of which MAR is a part, also offers several tax advantages to shipping companies, which can be combined with the benefits of this new scheme.

Additional Information

If you require additional information on this topic, please speak to your usual Dixcart contact, or to Catarina Sardinha at the Dixcart office in Madeira: advice.portugal@dixcart.com

redomicile a ship

Time to Redomicile a Ship? Why Malta Could be the Answer

Posted on | by Karolis Surkus | Leave a Comment on Time to Redomicile a Ship? Why Malta Could be the Answer

Redomiciliation of a Shipping Company to Malta

Malta has established itself as a robust and safe maritime jurisdiction and has the largest European maritime flag registry.

It is possible to redomicile a shipping company from another jurisdiction to Malta, without liquidating the company in the country that it is being redomiciled from (Legal Notice 31, 2020).

A Summary of the Attractive Tax Regime Available to Ships Registered in Malta

In December 2017, the European Commission approved the Maltese tonnage tax regime for a period of 10 years, following a review of its compatibility with EU State Aid Rules.

The Maltese Shipping Tonnage Tax System

Under the Malta Tonnage Tax System, tax is dependent on the tonnage of the vessel or fleet belonging to a particular ship-owner or ship-manager. Only companies that are active in maritime transport are eligible under the Maritime Guidelines.

Standard corporate tax rules do not apply to shipping activities in Malta. Instead shipping operations are subject to an annual tax consisting of a registration fee and annual tonnage tax. The rate of tonnage tax reduces according to the age of the vessel.

  • As an example, a trading ship measuring 80 metres, with 10,000 gross tonnage, built in the year 2000, will pay a fee of €6,524 on registration and €5,514 annual tax thereafter.

The smallest category of ship is up to a net tonnage of 2,500 and the largest, and most expensive, are ships over 50,000 net tonnage. Charges are reduced for ships in the 0-5 and 5-10 year age categories respectively and are greatest for those 25-30 years old.

Please see IN546 – Maltese Shipping – The Tonnage Tax System and Advantages for Shipping Companies, for further information regarding this regime and additional advantages regarding the registration of a ship in Malta.

Conditions to Redomicile a Shipping Company to Malta

The following conditions need to be met:

  • the company is established under the law of an approved country or jurisdiction where those laws are similar in nature to company law in Malta;
  • the ‘objects’ of the company must be such that the company qualifies as a shipping organisation;
  • provisions in the law of overseas country enabling such countries to redomicile
  • redomiciliation is permitted by the company’s charter, statutes or memorandum, and articles or other instruments that constitute or define the company;
  • a request is submitted to the Malta Registrar for the company to register to be continued in Malta.

A request by a foreign company for registration to be continued in Malta, must be  accompanied by:

  • the resolution authorising it to be registered as being continued in Malta;
  • a copy of the revised constitutional documents;
  • a certificate of good standing or equivalent documentation relating to the foreign company;
  • a declaration by the foreign company to be registered as continued in Malta;
  • a list of directors and company secretary;
  • confirmation that such a request is permitted by the laws of the country or jurisdiction in which the foreign company has been formed and incorporated or registered.

The Registrar will then issue a Provisional Certificate of Continuation.  Within six months of this certificate being issued, the company must submit documentation  to  the  Registrar  that  it  has ceased to be a company registered in the country or jurisdiction where it had been previously established. The Registrar will then issue a Certificate of Continuation.

Additional Information

If you would like further information regarding the Malta Tonnage Tax System or the registration of a ship and/or yacht in Malta, please contact Jonathan Vassallo at the Dixcart office in Malta: advice.malta@dixcart.com or your usual Dixcart contact.

Shipping Advantages

Shipping Advantages in Cyprus, Madeira (Portugal) and Malta

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Dixcart can provide clients with a number of alternative ship registration solutions. This note provides a brief overview of the regimes in Cyprus, the Isle of Man, Madeira (Portugal) and Malta and the shipping advantages they offer. More detailed information is available on request regarding shipping in each of the jurisdictions considered in this Information Note.

Shipping Advantages by Jurisdiction:

Cyprus

Cyprus is a major ship management centre attracting foreign ship owners through the highly favourable tax provisions available for shipping companies on the island. It is recognised as one of the most accessible registries in the EU.

The Cyprus shipping registry has not only grown in size in the last two decades but has also made a considerable effort to increase the quality of its fleet and related services. As a result the Cyprus flag is now classified on the white list of the Paris and Tokyo MOUs*.

Key shipping advantages relating to the shipping sector in Cyprus include:

  • A competitive tax regime for shipping companies, with an EU approved Tonnage Tax System (TTS) that is based on the net tonnage of the vessel rather than the corporation tax on the actual profit. This allows for mixed activities within a group, shipping activities are subject to TT and other activities are subject to 12.5% corporation tax.
  • Competitive operating costs, ship registration costs and fees.
  • The income of officers and crew on Cypriot registered vessels is not subject to income tax.
  • There are no nationality restrictions for officers or crew.
  • Cyprus also offers a series of tax advantages which are applicable to ship and ship management companies: exemption from tax of dividend income (subject to limited conditions), exemption from tax on profits from foreign permanent establishments, and exemption from withholding tax on the repatriation of income (dividends, interest and nearly all royalties).
  • More than 60 Double Tax Treaties.
  • No estate duty on the inheritance of shares in a Cyprus shipping company and no stamp duty is payable on ship mortgage deeds.

Madeira (Portugal) Shipping Advantages

The International Shipping Register of Madeira (MAR) was established in 1989 as part of the Madeira International Business Centre (“MIBC”) “package” of taxation benefits. Vessels registered with MAR carry the Portuguese flag and are subject to the International Treaties and Conventions entered into by Portugal.

The key shipping advantages of ship registration in MAR are detailed below:

  • The register is of a high standard, has EU credibility, is not regarded as a flag of convenience and is included in the Paris MOU white list.          
  • There are no nationality requirements for ship-owners of vessels registered in MAR. They are not required to have their head office in Madeira. It is sufficient to have local legal representation with adequate powers.      
  • Only 30% of the safe manning must be “European”. This includes nationalities such as Polish, Russian and Ukrainian, as well as citizens of Portuguese-speaking countries. This requirement may also be derogated if duly justified. This allows for flexible manning.
  • Crew wages are exempt from income tax and from social security charges in Portugal.        
  • The existence of a flexible mortgage system allows the mortgagor and the mortgagee, by written agreement, to choose the legal system of a particular country that will govern the terms of the mortgage.   
  • Competitive registration fees, there are no annual tonnage taxes.   
  • Eight International Classification Societies are recognised in Portugal. MAR can delegate some of its functions to these societies. This can be simpler and more convenient for ship owners.          
  • Temporary registration is allowed by law (bareboat charter: “In” and “Out”).        
  • Shipping companies licensed to operate within MAR benefit from a corporate income tax rate of 5% until 2027. They also enjoy automatic VAT registration and have access to the Portuguese double taxation treaty network.

Malta Shipping Advantages

Malta provides a reputable flag and ensures compliance with international and European standards. Registration of vessels under the Maltese flag take place in two stages. A vessel is provisionally registered for a six month period. During this provisional registration period, the owner is required to submit additional documentation and the vessel is then permanently registered under the Maltese flag.

There are a number of attractive tax reasons and shipping advantages to consider ship registration in Malta:

•       The standard corporate tax rules do not apply to shipping activities in Malta, due to a specific exemption. No tax on profits from shipping activities is therefore due. Following recent amendments this exemption has also been extended to ship management companies.          

•       Shipping operations are subject to an annual tax comprising an annual registration fee and a tonnage tax based on the net tonnage of the vessel. The rates of tonnage tax are reduced according to the age of the vessel.

•       There is an exemption from stamp duty in Malta on the registration or sale of a ship, shares relating to a licensed shipping organisation and the registration of a mortgage relating to a ship.

•       Individuals not resident in Malta who are officers or employees of a licensed shipping organisation, and the organisation that they work for, are exempt from social security contributions.     

Dixcart Shipping Services and Additional Information

Dixcart can assist in all aspects of registering a ship in Cyprus, the Isle of Man, Madeira and Malta.  

Services include the incorporation of the owner entity, coordinating the appropriate corporate and tax compliance, and registration of the vessel.

If you would like additional information on this topic, please speak to your usual Dixcart contact or to:

*White List Paris and Tokyo MOUs: Flags securing the highest rating in relation to the Memorandum of Understandings on Port State Control.

Dixcart Management (IOM) Limited is licensed by the Isle of Man Financial Services Authority

Portugal Armed Guards

Portugal Armed Guards Allowed Onboard Portuguese Flagged Vessels, Where Piracy is Prevalent

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New Law

On 10 January 2019, the Portuguese Council of Ministers approved a law to allow armed guards to sail on Portuguese flagged vessels.

This measure is long-awaited by the International Shipping Registry of Madeira (MAR) and by ship owners registered within it. The increase in financial loss due to hijackings and ransom demands, and the risk to human lives, as a result of hostage taking has led shipowners to demand such a of measure. Ship owners prefer to pay for additional protection rather than being potential victims of piracy.

Measures to Address the Increasingly Frequent Problem of Piracy

Unfortunately, piracy now constitutes a major threat to the shipping industry and it is recognised that the use of armed guards on board vessels is crucial to the decrease the number of piracy incidents.

The regime to be established by this law enables shipowners of Portuguese flagged vessels to hire private security companies, employing armed personnel to be on board ships, in order to protect these vessels when operating in areas of high piracy risk. The law also provides for the option to hire security contractors headquartered within the EU or EEA to protect Portuguese vessels.

Portugal will be joining the increasing number of ‘Flag States’ that allow the use of armed guards on board. This step is therefore logical and consistent with the actions being taken by a number of other countries.

Portugal and Shipping

As recently as November 2018 the Portuguese tonnage tax and seafarer scheme was enacted. The objective is to encourage new shipping companies by offering tax advantages, not only to shipowners, but also to seafarers. For more information regarding the advantages of the new Portuguese tonnage tax, please refer to the Dixcart Article: IN538 The Portuguese Tonnage Tax Scheme For Ships – What Benefits Will It Offer?.

The Madeira Shipping Registry (MAR): Other Advantages

This new law is designed to enhance Portugal’s shipping registry and Portugal’s second shipping register, the Madeira Registry (MAR). It is part of a comprehensive plan to develop the country’s entire maritime industry. This includes companies and individuals owning ships, shipping related infrastructure, maritime suppliers and those working in the maritime industry.

The Madeira Registry is already the fourth largest international shipping register within the EU. Its registered gross tonnage is over 15.5 million and its fleet comprises vessels from the largest shipowners such as APM-Maersk, MSC  (Mediterranean Shipping Company), CMA, CGM Group and Cosco Shipping. Please see: IN518 Why the International Shipping Register of Madeira (MAR) is so Attractive.

How Can Dixcart Help?

Dixcart has extensive experience working with the owners and operators of commercial vessels as well as pleasure and commercial yachts, registered with the Portuguese Registry and/or MAR. We can assist with the permanent and/or bareboat registration of vessels, re-flagging, mortgages and the establishment of corporate owning and/or operational structures for the holding or management of vessels.

Additional Information

If you require additional information on this topic, please speak to your usual Dixcart contact, or to Catarina Sardinha at the Dixcart office in Madeira:

advice.portugal@dixcart.com.