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

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.

Flagging or Reflagging

Why Consider Registering a Vessel Under the Malta Flag?

Resident Agency Services for Yachts

Malta has now been established as a reputable maritime jurisdiction for many years. A number of factors have contributed to making Malta a leading maritime hub: a strategic location in the centre of the Mediterranean, natural harbours, and an extensive range of maritime services, including; shipbuilding and repair works, a freeport, bunkering, ship supplies and towage services.

The island’s geographic location has given it significant importance and Malta is now recognised as being a port of entry into the EU.

Malta offers attractive and competitive incentives, making Malta one of the top flags in the world.

Who Can Register a Yacht/Vessel under the Malta Flag?

Under Maltese law, yachts may be owned and registered by; any Maltese, EU/EEA or Swiss national or company, or any third country national who enjoys legal personality that meets the criteria specified by the Registrar of Shipping. Maltese companies are considered to beacceptable ownership vehicles for yachts.

Maltese companies may be established by any person, for the purpose of yacht ownership. The owner, through the company, must be clearly identifiable, and non-Maltese owners must appoint a Maltese resident agent to liaise with the authorities.

Once a yacht is registered in the Maltese registry there are no restrictions on the nationalities of the individuals manning the yacht, and where the yacht may sail to.

What are the Advantages of Registering a Commercial Yacht under the Malta Flag?

  1. No trading restrictions imposed on Maltese registered commercial yachts.
  2. Fast crew-acknowledgement certification process with STCW endorsements processed within a maximum period of three months from acknowledgement.
  3. A VAT deferment can be obtained, when a yacht to be used for a commercial operation, is imported into Malta. This means that no VAT outlay will occur which provides the owner with a significant cashflow benefit. The yacht owner will also be able to recover VAT incurred on goods and services used, during the chartering operations.
  4. When a shipping organisation licensed in Malta sells a yacht, no Malta tax is liable.
  5. On the sale of shares in a yacht owning company by a non-Maltese resident owner, no capital gains tax will arise as this is exempt under Malta Tax Law.

Requirement for a Malta Registered Agent

When an owner is a non-Maltese entity, a Malta resident agent needs to be appointed. Dixcart Malta offers this service and is very experienced in representing international owners in Malta.

A resident agent, such as Dixcart Malta will provide the following services:

  1. The channel of communication between the international owner and the Maltese Government departments and authorities.
  2. The signing and filing, of all declarations and forms required by Maltese law, with Maltese Government departments and authorities, on behalf of the international owner.
  3. Acting as the judicial representative of the international owner for judicial proceedings in Malta.

At Dixcart Malta we have a department consisting of qualified accountants and lawyers dedicated to Resident Agent Services and are able to assist with your Maltese 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.

The Key Principles and What you Need to Know Today About Marine Insurance 

Malta and the Marine Sector Plus a Definition of Insurance

Malta has a long, rich maritime history and has the largest shipping register in Europe. Insurance is a topic that requires a detailed understanding of the options available, by the companies operating in this sector and professional advisors such as Dixcart Malta.

The contract of insurance is a contract under which one person (the insurer) is legally bound to pay a sum of money or its equivalent to another person (the insured), upon the happening of a specified event involving some element of uncertainty as to time or likelihood of occurrence, which affects the insured’s interest in the subject-matter of the insurance.
The objective is to indemnify the insured against losses attributed to marine adventure. The three main principles of marine insurance are: indemnity, insurable interest and utmost good faith.

The First Principle of Indemnity

The principle of indemnity, in the context of insurance, essentially has two elements:

  1. To ensure that the amount compensated or reimbursed shall not increase the assets of the insured in any way. An insurance policy can never be a source of benefit or profit for the insured;
  2. The amount of compensation or reimbursement should never exceed the value of the policy taken. The amount which has been agreed upon by the insured and the insurer, if any, is the upper limit of the compensation to be paid.

The Second Principle of Insurable Interest

This second principle is made up of the following:

  1. financial loss;
  2. the loss was caused by the peril insured against;
  3. the subject matter was covered by the policy;
  4. insurable interest.

An insurer normally requires:

  • The assured may benefit by the safety or due arrival of insurable property or be prejudiced by its loss, damage, or detention in respect of which he/she may incur liability;
  • The assured stands in a legal or equitable relationship to the adventure or to any insurable property at risk in such adventure; and

The benefit, prejudice or incurring of liability referred to in the first bullet point above, must arise in consequence of the legal or equitable relationship referred to in the second bullet point.

The Third Principal of Utmost Good Faith

The third and final principal of utmost good faith is embodied in The Marine Insurance Act.

A contract of marine insurance is a contract based upon the utmost good faith, and, if the utmost good faith is not observed by either party, the contract may be voided by the other party. The duty of utmost good faith requires both parties to ensure proper disclosure of all material circumstances and to avoid making misrepresentations about material facts, circumstances or beliefs.

If utmost good faith is shown not to have been observed by either party, the statutory duty enables the aggrieved party to rescind the contract ab initio, thereby restoring the parties to the position they were in, as if they had not entered into the contract.

The Courts have consistently ruled against allowing the insured’s duty of good faith, to be used by the insurer as an instrument to enable the insurer him/herself to act in bad faith. For the insurers to succeed in avoiding the contract, due to non-disclosure during the performance of the contract, the insurers would have to show that the claim was made fraudulently.

Types of Marine Insurance

The four main types of Marine Insurance are:

1.            Hull insurance: insurance of the vessel with its gear.

2.            Cargo insurance: insurance of goods carried by sea.

3.            Insurance against the liability of the carrier; protection and indemnity (P&I Clubs); 

              compulsory or mandatory insurance, voluntary insurance (e.g. liability for cargo).

4.            Other types of marine insurance; freight, salvage expenses and general  average

               contributions, insurance of containers, shipyards, oil rigs (“energy”), etc.

The Marine Insurance Policy

The contract must be in a policy that specifies: the name of the insured, the subject-matter, the risks, the voyage or period of time covered by the insurance, the sum insured, and the name of the insurer. It must also bear the signature of the insurer or his/her representative.

A policy is voided when there is:

  • Any implied condition as to the commencement of risk: the adventure shall be commenced within a reasonable time, otherwise the insurer may avoid the contract.
  • Alteration of port of departure: the risk does not attach and the insurer may avoid the contract.
  • Sailing to different destinations: the risk does not attach.
  • Change of voyage: the insurer is discharged from liability as from the time of the change. Manifest intention to change the voyage is sufficient. This must be a voluntary change of destination.
  • Deviation: the insurer is discharged from liability as from the time of deviation. Where there are several ports of discharge, these must proceed in the order designated by the policy. If not then there is a deviation.
  • Delay: the adventure must be commenced within a reasonable time period.

There are various ‘excuses’ for deviation or delay, the main ones being: lack of authorisation (“held covered” provisions), the safety of the ship, saving human life, and events beyond the master’s control.

Additional Information

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

Alternatively, please speak to your usual Dixcart contact.

Malta Aircraft Registration Cleared for Take-off

Background

Malta’s strategic geographical position has assisted its aviation industry to present numerous economic opportunities, for many years. The importance of the Malta aviation sector has led the Maltese Authorities to strengthen its aviation framework to further enhance aircraft registration and aircraft operator licensing.

Malta and the Aircraft Registration Act

Malta has aimed to position itself as one of the primary aviation hubs in the EU by continually reviewing and bolstering its aviation registry. The available aviation legislation provides the aviation industry with a solid foundation. This is further complemented by; competitive aviation registration costs, the authority’s practical understanding of the aviation sector, and favourable corporate structures. As a result, the aviation framework provides several benefits to individuals seeking to register an aircraft on the island.

The importance of Malta’s flag has already been proved within the aviation industry and the inception of the Malta Aircraft Registration Act in 2010, positioned Malta as having one of the most reputable aircraft registers, within the aviation sector.

The Aircraft Registration Act has helped to enhance the aviation framework on the island. Malta has also implemented the ‘Cape Town Convention in Interests in Mobile Equipment’ and its ‘Aircraft Protocol’. Malta took additional measures to boost the aviation industry in 2012, by establishing the Safi Aviation Park, providing a number of aviation services, including training and repairs.

Benefits of Aircraft Registration in Malta

There are many benefits and innovative concepts relating to aircraft registration in Malta.

Amongst these, as mentioned above, was the enactment of the Aircraft Registration Act (Chapter 503, Laws of Malta), which came into force on 1st October 2010. This new regime was implemented to regulate the registration of aircraft, mortgages, and other securities relating to aircraft.

  • In terms of Maltese legislation, an aircraft may be registered by; an owner who operates an aircraft, or an owner of an aircraft under construction (or an aircraft temporarily not being used or managed), or an operator of an aircraft under  temporary title (subject to certain conditions), or a buyer of an aircraft under a condition of sale or title reservation agreement.

Additional benefits include:

A. More visibility of rights and interests in relation to aircraft, through the updating of the National Register;

B. Incentives to encourage the development of finance and operating leases relating to aircraft. Legislation provides clear rules on the tax treatment of the finance charge, available tax deductions to finance lessors, and capital allowances for lessees;

C. Broader registration options, extending to aircraft under construction or temporarily not in service and aircraft under a temporary title;

D. Recognition of fractional ownership of aircraft;

E. No withholding tax on lease payments where the lessor is not a tax resident of Malta;

F. Competitive minimum depreciation periods for aircraft;

G. The private use of an aircraft by an individual who is not resident in Malta and is an employee/officer of an employer/company/partnership, whose business activities include the ownership/leasing/operation of aircraft used for international transport, does not constitute a taxable fringe benefit.

H. Legislation implementation including the provision of the Cape Town Convention on ‘International Interests in Mobile Equipment’ and its ‘Aircraft Protocol’, thereby granting secured lenders more protection and more effective remedies whilst also enabling lower borrowing costs.

Tax, Standards and Flexibility Advantages of Private and Commercial Aircraft Registration in Malta 

Tax

Since 2007, Malta has offered an attractive corporate tax system whereby non-residents can claim tax refunds. In practical terms, the standard 35% corporate tax rate is often effectively reduced to between 0% and 5%.

If you are considering aircraft registration in Malta, another tax benefit is that income, from the international transport of goods and passengers outside the country, is exempt from Maltese tax.

As an EU member state since 2004, the Maltese aircraft register permits free circulation of aircraft in the eurozone, which allows tax-free commercial operation.

VAT Treatment

The VAT treatment for aircraft leasing makes Malta an attractive jurisdiction for private and commercial aircraft registration, whilst ensuring full adherence to EU laws and regulations. The rules take into account the amount of time spent by an aircraft within EU airspace.

The imposition of VAT in Malta varies according to how an aircraft is used. The key differentiation is between, an aircraft being used by an airline operator mainly for ‘reward’ in relation to the international transport of goods or passengers, or an aircraft that is being used purely for private use.

VAT implications, such as those applicable in other EU member states, are also relevant in relation to; importations, intra-community acquisitions, and/or supply of aircraft. The intra-community purchase, importation or supply of aircraft destined for use by an airline operator chiefly for international transport of passengers or goods is classified as an exempt credit supply.

The following are additional exempt credit supplies:

(a) Supplies of equipment to constructors, owners, or operators of an aircraft;

(b) Supplies of services consisting of the modification, maintenance, chartering and hiring of an aircraft.

The VAT treatment applies to all aircraft, other than those used by airline operators for international traffic, as a VAT exemption applies in this latter case.

According to Malta’s VAT legislation, the lease of an aircraft, which airline operators do not use for international traffic, is the supply of a service subject to VAT, with the right of deduction of input VAT by the lessor.

In terms of the VAT simplification procedure, the portion of the lease that will be subject to VAT, depends on the amount of time that the aircraft is used in EU airspace. As it is difficult to identify the movement of a plane in advance and the period in which the aircraft will be operated in EU airspace, Malta applies an ‘expert technical test,’ to estimate the portion of the lease that will be subject to VAT. The standard Malta VAT rate of 18% is applicable on the established percentage of the lease that is deemed to be related to the use of the aircraft in EU airspace.

In addition, Malta offers a very solid legislative environment, with an extensive double-tax treaty network and transparency of rights and interests.

Standards

Falling under the jurisdiction of the European Union Aviation Safety Agency (EASA),  the Maltese aircraft register implements some of the highest levels of regulation in the world. Aircraft registration in Malta offers business jet owners peace of mind, with its International Civil Aviation Organisation (ICAO) rating, testament to stringent safety and security standards.

In addition, Malta adheres to the Cape Town Convention on ‘International Interests in Mobile Equipment’, which specifies international standards for leases, security interests and the registration of contracts.

Flexibility

Aircraft registration in Malta offers unparalleled flexibility for international operators. Aircraft on the Maltese aircraft register can be based and freely operated from anywhere globally.

It is also possible to add an aircraft that is currently under construction or ‘out of action’ to the Malta aircraft register.

Aircraft registration in Malta allows operators to take advantage of fractional ownership of a single aircraft. The potential benefits are enormous, with several co-owners being able to detail a percentage stake, each financed by a separate creditor.

How Can Dixcart Help?

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.

Listed Company Services

Malta Implements a New Passenger Yacht Code: More Than Twelve Passengers

Background

Malta is a well-known and popular jurisdiction within the yachting sector. It has the largest shipping register of vessels in the EU and the 6th largest in the world. It is also a jurisdiction that is ‘leading the way’, with a number of initiatives in this sector.

Current Obligations

Yachts need to meet obligations for ‘commercial passenger ships’ and it is widely recognised when considering the operational pattern and risk profile of yachts, that these requirements, are in some instances disproportionately onerous and impractical in terms of design and implementation.

As the trend for larger commercial yachts increases, the 12 passenger limitation rule has become more problematic and has resulted in an increase in administration for a number of organisations, including the Malta Merchant Shipping Directorate. This, combined with encouragement from the yachting industry, has provided impetus for Malta to develop the ‘Passenger Yacht Code’, to meet industry demands.

The Malta Passenger Yacht Code

The Malta Passenger Yacht Code is applicable to passenger yachts, which carry between 12 and 36 passengers, do not carry cargo, and which sail internationally. The Code is intended to cater exclusively to the yachting sector of the market, it is not intended to apply to the excursion and/or ferry passenger sectors of the industry.

The new yacht code has been drafted by the Authority for Transport in Malta, in consultation with various industry stakeholders including; yacht designers, yacht builders, repair yards, specialised service providers and manufacturers, appointed surveyors and recognised organisations. This has been to ensure a wide representation of the industry.

Details of the Malta Passenger Yacht Code

A passenger yacht must be; surveyed, certified, audited and issued with Class and Statutory Certificates, applicable to passenger vessels, by a recognised organisation. Class Rules relating to passenger vessels will apply. Approval staff, auditors and surveyors must be experienced and qualified in passenger ship planning, audits, and surveys.

The Malta Passenger Yacht Code provides addition regulation, in particular in relation to safety, for example; life- saving appliances and arrangements, life at sea safety, navigation safety, and protection of personnel.

Passenger Yachts Chartered on a Static Basis

Where a passenger yacht remains static; berthed or anchored at sea, the yacht may be allowed to carry more than 36 passengers, as provided for in The Malta Passenger Yacht Code. For a passenger yacht to be able to be chartered on a static basis, the yacht would need to be issued with a statement by the Flag Authority, permitting static charters.

The Certification Process

Once owners submit the necessary documentation and complete the designated survey and inspections, the Maltese Flag Authorities will issue the vessel with a Statutory Certificate.

All passenger yachts must, in addition, be classified by a Recognised Organisation (RO), and must maintain a valid classification throughout the validity period of the yacht’s statutory certificate. The applicable RO Rules for classification purposes are those used for the classification of passenger ships. Upon satisfactory completion of  the required surveys or audits, the yacht’s RO needs to issue a certificate, confirming compliance with the Malta Code.

Passenger yachts certified under the remit of the Code may carry out International (Unrestricted) Voyages or Short International Voyages, as defined by The International Convention for the Safety of Life at Sea (SOLAS).

Advantages of the Malta Passenger Yacht Code

The introduction of the Malta Passenger Yacht Code is a welcome development for those who plan to register larger commercial yachts under the Malta flag. It enables larger yachts to carry between 12 and 36 passengers.

It offers a solution to the many technical issues and concerns which were previously faced by prospective registrants.

Additional Information

If you would like further information regarding the registration of a yacht and opportunities available through Malta, please speak to Jonathan Vassalloadvice.malta@dixcart.com, at the Dixcart office in Malta or your usual Dixcart contact.

Isle of Man Shipping Registry

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

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.

Pleasure Boats in Malta

Dixcart Malta Managing Director – Co-opted to Malta Chamber’s Yachting Services Executive Committee

Jonathan Vassallo has been co-opted to join the Yachting Services Executive Committee of the Yachting Services Business Section, within the Malta Chamber.

Jonathan Vassallo

This section represents one of the biggest categories within the Chamber in terms of members.

During the past couple of years the Chamber has been dealing with the challenges faced by the industry. It has continued to work closely with the authorities to propose new, and re-visit existing practical applications and procedures, designed to have a positive impact on the yachting industry in Malta.

This is an ongoing exercise to ensure that this yachting sector remains dynamic and at the forefront of the industry internationally. A number of procedures and guidelines have been adopted and fine-tuned, and this has helped to ensure that Malta remains an attractive jurisdiction for yacht owners and operators.

Jonathan is keen to be part of this team and use his experience to contribute to the Yachting Services Executive Committee for the benefit of this sector within the Malta economy.

For the next two years, the key objective of the Committee is to continue to offer a robust platform for the yachting industry and to collaborate with the authorities and stakeholders to improve Malta’s already strong position within the yachting world.

You can contact Jonathan, in the Dixcart Malta office at: advice.malta@dixcart.com

The Malta Aircraft Registration Regime – A Favourable Aviation Base in the EU

Background – Malta Aircraft Registration

Malta has implemented an aircraft registration regime, structured in a manner to accommodate efficient registration of smaller aircrafts, in particular business jets.  The regime is governed by The Aircraft Registration Act Chapter 503 of the Laws of Malta which will serve as the framework for registration of aircrafts in Malta.

In recent years Malta has actively positioned itself as a favourable aviation base in the EU.  It has attracted several international carriers to operate from Malta and more importantly, the successful establishment of aircraft maintenance facilities such as those of SR Technics and Lufthansa Technik.

The Aircraft Registration Act addresses several important issues such as different types of registrants, the concept of fractional ownership and the protection of creditors and special privileges which may exist on the aircraft.  Aircraft registration is administered by the Authority for Transport in Malta.

Malta Aircraft Registration Process – Key Information

An aircraft may be registered by the owner, operator, or its buyer, under a conditional sale. Only qualified persons and entities are entitled to register an aircraft in Malta.

Qualified persons are citizens of the European Union, EEA or Switzerland and qualified entities are entities that should be beneficially owned at least to the extent of 50% by individuals who are citizens of the European Union, EEA, or Switzerland. Qualification for registration is more flexible when it comes to the registration of private jets. 

An aircraft which is not used for ‘air services’ may be registered by any undertaking established in an OECD Member State. Registration caters for issues of confidentiality in the sense that it is possible for the aircraft to be registered by a trustee. Foreign undertakings registering an aircraft in Malta are obliged to appoint a Maltese resident agent.

Malta Aircraft registration allows the possibility for separate registration of the aircraft and its engines. An aircraft which is still under construction may also be registered in Malta. The notion of fractional ownership is fully recognised by Maltese law allowing the ownership of an aircraft to be split into one or more shares. Details recorded on the public register include the physical details of the aircraft, physical details of its engines, name and address of the registrant(s), details of any registered mortgage(s) and details on any irrevocable de-registration and export request authorisation.

Registering a Mortgage on an Aircraft

Maltese law allows the aircraft to act as a security for a debt or other obligation.

A mortgage on an aircraft may be registered and as such all registered mortgages including any special privileges are not affected by the bankruptcy or insolvency of its owner.  Furthermore, the law protects the judicial sale of the aircraft (instituted by the registered mortgage) from being interrupted by the administrator overseeing the bankruptcy proceedings of the owner. A mortgage may be transferred or amended according to the relevant preferences and circumstances of the creditor. Special privileges are granted in respect of certain judicial costs, fees owed to the Malta Transport Authority, wages payable to the aircraft’s crew, debts owed in relation to the repair and preservation of the aircraft and, if applicable, to wages and expenses in relation to salvage. Interpretation of the provision of the governing legislation has been consolidated and facilitated by Malta’s ratification of the Cape Town Convention.

Taxation of Aviation Activities in Malta

The regime is supported by attractive fiscal incentives:

  • Income derived by a person from ownership, operation of leasing of aircraft is not taxable in Malta unless this is remitted to Malta.
  • 0% withholding tax on outbound lease and interest payments made to non-resident persons.
  • Beneficial depreciation period for wear and tear.
  • The Fringe Benefits (Amendment) Rules 2010 – in some cases, entities may be exempt from fringe benefit taxation (for example, the private use of an aircraft by an individual who is not resident in Malta and who is an employee of an entity whose business activities include ownership, leasing or operation of aircraft or aircraft engines, used for international transport of passengers/goods, shall not be considered as a fringe benefit, and is therefore, not taxable as a fringe benefit).

The Malta Highly Qualified Persons Programme and the Aviation Sector

The Highly Qualified Persons Programme is directed towards professional individuals earning over €86,938 per annum, employed in Malta on a contractual basis within the aviation sector.

This scheme is open to EU nationals for five years, and to non-EU nationals for four years.

Tax Advantages Available to Individuals – Highly Qualified Persons Programme

  • Income tax is set at a flat rate of 15% for qualifying individuals (instead of paying income tax on an ascending scale with a current maximum top rate of 35%).
  • No tax is payable on income earned over €5,000,000 relating to an employment contract for any one individual.

How can Dixcart help?

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 Malta Aircraft Registration, please speak to Jonathan Vassallo (advice.malta@dixcart.com) at the Dixcart office in Malta or your usual Dixcart contact.

Shipping Advantages

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

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.

Pleasure Boats in Malta

Additional Reasons to Consider Malta for Yachting Solutions

Malta: Recent History – the Marine Sector

Over the past decade, Malta has consolidated its status as an international 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 for commercial yacht registration.

As well as its strategic position, in the centre of the Mediterranean, one of the main contributors to Malta’s success is the business-friendly environment adopted by the Maltese authorities. The authorities are approachable and flexible in their practices, while at the same time meticulously follow a rigid framework of guidelines and regulations, and this has created a cutting edge for Malta within this sector.

Additional Benefits in Terms of VAT – Maltese Registered Yachts

The Malta Authorities recently announced further attractive measures, which have already been put in place, regarding the importation of yachts to Malta.

Yachts, intended for commercial use, can be imported into the EU via Malta, for  relevant VAT and customs procedures to be undertaken.  Subsequently, the yacht can then be chartered, and can sail freely within EU waters.

Apart from the already inherent attraction for yachts to be imported into Malta, due to the low VAT rate of 18%, yachts used for commercial chartering can benefit from VAT deferral. The deferral mechanism has now been made more attractive as follows:

  • Deferment of VAT on the importation of commercial yachts, by Maltese owning entities having a Maltese VAT registration, without the requirement for the importing entity to set up a bank guarantee;
  • Deferment of VAT on importation of commercial yachts, by EU owning entities having a Maltese VAT registration, provided that the company appoints a VAT agent in Malta, without the requirement for the importing entity to set up a bank guarantee;
  • Deferment of VAT on importation of commercial yachts by non–EU owning entities, as long as the importing entity sets up a bank guarantee for VAT, equivalent to 0.75% of the value of the yacht, capped at €1 million.

Dixcart: Yacht Registration Experience 

Our office in Malta has extensive experience and can assist clients with all of the commercial aspects in relation to yacht ownership:

  • Yacht ownership structures
  • Importation of yachts
  • Flag registrations
  • Deferment applications
  • Crew payrolls
  • Day-to-day administration
  • VAT registration in multiple jurisdictions
  • Resident agent services
  • Tax and VAT advice
  • Accounting and secretarial services

Assistance 

The Dixcart office in Malta has professionals who can assist your business with all aspects of yacht registration in  Malta and can help ensure that you take advantage of the specific VAT deferment, applicable to your circumstances. Please speak to your usual Dixcart contact, or alternatively, please email: advice.malta@dixcart.com.