Jurisdiction: Malta
Why Malta is a Great Location for Flagging or Reflagging a Vessel?
Background
A lot of uncertainty has been generated within Europe following on from the Brexit vote, and certain other countries who are beginning to reassess their position within the EU. This is having an impact on the marine industry, with a number of vessel owners seeking to reflag ships and yachts.
The choice of flag registration is an important decision and a jurisdiction must be selected that satisfies relevant criteria relating to how and where the vessel will be used.
The Jurisdiction of Malta and Ship and Yacht Registration
Malta, with its central and strategic position at the heart of the Mediterranean, offers a wide range of international maritime facilities and services. This jurisdiction offers an active International Ship Register, with an excellent reputation, and it currently ranks as the largest merchant shipping flag in Europe.
The Malta Flag is a European Flag, a flag of confidence and a flag of choice. Many leading ship owning and ship management companies register their vessels under the Malta Flag, and international banks and financiers often recommend the Maltese Register and Malta Ship Registration.
Benefits Offered to Ships and Yachts Registered in Malta: Fiscal, Corporate and Legal
A number of advantages are available to vessels registered under the Malta Flag, which include:
- Vessels registered under the Malta Flag have no trading restrictions and are given preferential treatment in many ports.
- The Malta Flag is on the white list of the Paris MoU, Tokyo MoU and on the Low Risk Ship List of the Paris MoU. In addition, Malta has adopted all International Maritime Conventions.
- All types of vessel, from pleasure yachts to oil rigs, may be registered in the name of legally constituted corporate bodies or entities (irrespective of nationality), or by European Union citizens.
- A Maltese vessel may also be bareboat charter registered under another flag.
- There are no trading restrictions for the vessels.
- Vessels less than 25 years old may be registered. Where relevant, the following criteria apply:
- Ships aged 15 years and over, but under 20 years, must pass an inspection by an authorised flag state inspector before or within a month of, provisional registration.
- Ships aged 20 years and over but under 25 years, must pass an inspection by an authorised flag state inspector prior to being provisionally registered.
Registration of a Vessel in Malta – the Procedure
The procedure for the registration of a vessel in Malta is relatively straightforward. Provisional registration, which in terms of the law has the same effect as permanent registration, can be effected very quickly.
Authority to provisionally register a ship will only be given once the Malta Maritime Administration is satisfied that the vessel conforms to all of the standards required by the relative international conventions.
Provisional registration is valid for six months, although this can be extended by a further six months; by this time all of the documentation must have been completed for the permanent registration. Specifically this must include evidence of ownership from a former registry, unless the vessel is new. Authority to operate remains dependent on meeting the relevant manning, safety and pollution prevention measures as detailed in international standards.
Bareboat Charter Registration
Maltese law provides for bareboat charter registration of foreign ships under the Malta flag and for the bareboat charter registration of Maltese ships under a foreign flag.
Vessels so registered enjoy the same rights and privileges and have the same obligations as a ship registered in Malta.
The main factor relating to bareboat charter registration is the compatibility of the two registries. Matters regarding title over the ship, mortgages and encumbrances are governed by the underlying registry, while the operation of the vessel falls under the jurisdiction of the bareboat registry.
A bareboat charter registration lasts for the duration of the bareboat charter or until the expiry date of the underlying registration, whichever is the shorter, but, in any event, for a period not exceeding two years. It is possible for the bareboat charter registration to be extended.
Yacht Registration Services Offered by Dixcart Malta
Dixcart Management Malta Limited has extensive experience in registering yachts under the Malta Register and providing the ancillary services needed to maintain such a registration.
Dixcart can establish the ownership structure for the vessel and provide advice on the most efficient structure, depending on the type of use of the vessel as well as the place of use.
For further information, please speak to your usual contact at Dixcart or email the Dixcart office in Malta: advice.malta@dixcart.com
Hiring of Pleasure Boats in Malta – The Guidelines
The Malta Commissioner for Revenue has just published the guidelines that are to be used to determine the place of supply for the hiring of pleasure boats. These will be applicable, retrospectively, for all leases commencing on or after 1 November 2018.
These new guidelines are based on the fundamental VAT principle of ‘use and enjoyment’ and provide the mechanism to determine the amount of VAT to be paid on the lease of a pleasure boat.
The lessor (the party leasing the asset) needs to obtain from the lessee (the party paying for use of the asset), reasonable documentation and/or technical data to determine the effective use and enjoyment of the pleasure vessel both within and outside EU territorial waters.
By using a ‘Preliminary Ratio’ and an ‘Actual Ratio’ the lessor will be able to apply VAT to the proportion of the lease relating to effective use and enjoyment, within EU territorial waters.
Additional Information
The Dixcart office in Malta has extensive experience in assisting with yacht ownership and registration in Malta. Please speak to Jonathan Vassallo: advice.malta@dixcart.com or to your usual Dixcart contact.
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.
Using a Maltese Cell Company for the Registration of a Yacht or Aircraft
Extension of the Ability to Use a Cell Company in Malta
Shipping and Aviation Cell Company Regulations were issued in Malta, earlier this year. The purpose of these regulations is to provide the opportunity to use a new cell structure for companies operating in the fields of shipping and aviation.
Cell companies, for use in the insurance and securitisation sectors, have already been successfully established in Malta, under the Companies Act for Cell Companies. It was felt beneficial to extend this type of corporate structure to the shipping and aviation industry.
Benefits Cell Companies Offer
The definition of a cell, within the relevant Malta Companies Act, summarises the benefits available; a cell company creates ‘within itself one or more cells for the purpose of segregating and protecting the cellular assets of the company in such a manner as may be prescribed’.
Each cell is treated as a separate legal entity which allows for the segregation of assets and liabilities relevant to the individual cell, from the assets and liabilities of the non-cellular element, and from the other cells.
A cell company may have more than one cell and each cell is treated independently from any other cell forming part of the same cell company. A cell company therefore provides protection for cells, from the other cells within the same company.
Obligations Cell Companies Must Meet
Cell Companies are distinguished from other companies by their name, which must include the words; ‘Mobile Assets Protected Cell Company’ or ‘MAPCC’.
Companies with such a structure may be formed or constituted as a cell company to conduct shipping or aviation business. Alternatively, a company conducting such business can be converted into a cell company, if permitted to do so by its memorandum and articles of association.
The assets of a cell company can be cellular or non-cellular assets. Such assets consist of the cell’s capital and reserves, as well as all other assets attributable to the different cells.
A cell company may, in respect of any of its cells, create and issue shares, these are known as ‘cell shares’. The proceeds of the issue of this ‘cell share capital,’ will form the assets of the cell.
Cell companies must inform all third parties that they are dealing with a cell company, and that there are two regulations which specifically deal with creditors and the recourse available for creditors in relation to cellular assets.
Examples – How Aviation and Shipping Companies Can Use a Cell Company
There are numerous examples of how a cell company can be effectively used to segregate assets in the fields of aviation, shipping and yachting:
- In relation to aviation, for example; one cell could own the plane, the second cell the engine, the third cell ‘aircraft management’ and a fourth cell might relate to the employees’ pension fund.
- A similar, relatively simple example in relation to yachting, might be where one cell owns yacht A, the second cell owns yacht B, the third cell owns yacht C, and cell D owns the business matters in relation to ‘yacht management’.
Additional Information
If you would like further information regarding Malta Cell Companies and the opportunities that they provide and/or the registration of a ship, yacht or aircraft in Malta, please contact Jonathan Vassallo at the Dixcart office in Malta at advice.malta@dixcart.com.
Shipping Advantages in Cyprus, Madeira (Portugal) and Malta
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:
- Charalambos Pittas in Cyprus: advice.cyprus@dixcart.com
- Catarina Sardinha in Madeira: advice.madeira@dixcart.com
- Jonathan Vassallo in Malta: advice.malta@dixcart.com
*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