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NEW TAX INCENTIVES IN MALTA – MERCHANT SHIPPING

RELEASE DATE: 02 JUNE 2010

Malta has, over the last decades, seized opportunities and developed its maritime flag for the benefit of ship-owners and the ship-operating sectors. In fact, Maltese law in the Merchant Shipping (Taxation and Other Matters relating to Shipping Organisations) Regu-lations1, offers a number of tax incentives to shipping organ-izations. These benefits have been availed of by both commercial vessels owning companies and spv’s acting as owner of commercial registered yachts in Malta 
 
By virtue of Legal Notice 83 of 2010 entitled ‘Merchant Shipping (Taxation and Other Matters relating to Shipping Organisations) (Amendment Regulations 2010’, (the ‘Amending Regulations’) published on the 16th of February 2010 certain new incentives have been introduced. These incentives are in line with the relevant European Community Guidelines for the State Aid to the Maritime Sector. 
 
The main principle of the tonnage tax model adopted in Malta is that the payable tax is based on the tonnage of the vessels instead of the actual accounting profits from the commercial operation of a commercial vessel or commercial yacht. Thus no income tax would be payable on the income which is derived from shipping activities of licensed shipping organizations. 
 
The Amending Regulations have extended these benefits which were already being enjoyed by shipping organizations owning and operating a tonnage tax ship to shipping organizations established in a Member State of the European Union (including Malta) or of the European Economic Area, carrying on ship management activities. As defined in the amending Regulations, such ship management activities would include all those activities carried out by a ship manager and consisting in, but not limited to, the entire crewing of a ship or the provision of technical management thereto. Therefore, subject to the fulfillment of certain conditions, any income derived by a ship manager from such ship management activities will be deemed to constitute income derived from shipping activities and will thus be exempt from tax under the Income Tax Act, provided that: 
  • Separate Accounts be kept clearly distinguishing the payment and receipts by the shipping organization concerned in respect of shipping activities, including ownership, operation, administration or management of a tonnagetax ship, and payments and receipts in respect of any other business.
  • The ship manager has paid the Registrar- General the respective annual tonnage tax;
  • At least two-thirds of the tonnage of the ships to which the ship manager provides ship management activities is managed from the territory of the Community; and
  • The tonnage of the ships in respect of which the ship manager provides ship management activities meets any of the following conditions:
 
Where the said tonnage does not fulfill these requirements the regulation shall still be deemed to be satisfied where the ship manager proves to the satisfaction of the Registrar- General that it is committed to increasing or at least maintaining under the flag of one of the Member States the share of tonnage in respect of which the ship manager was providing ship management activities under such flags. 
 
Another important feature of the Amending Regulations is an extension of the benefits which were already enjoyed by shipping organizations owning and operating a Maltese registered commercial vessels or commercial yachts to ships/commercial yachts registered under the laws of different jurisdictions provided that requirements akin to those required for shipping organizations involved in ship management activities are satisfied. 
 
Undoubtedly these amend-ments present new oppor-tunities especially in the ship management sector trading in the form of Maltese spv’s. 
 
SHIPPING NEWS 
 
The Shipping and Aviation Department at Mamo TCV is currently engaged in several projects which should be concluded throughout the course of 2010. These engagements including the following: 
  • Reflagging of Chemical tanker fleet from various jurisdictions to Malta;
  • Acting for a major European Banks with regard to the financing of acquisition of newly built chemical product tankers;
  • Registration of 35 mtrs catamaran and 37 mtrs custom built sailing yacht, both to be registered as Commercial Yachts in Malta;
  • VAT leasing transactions for yachts ranging from super yachts to privately owned vessels;
  • Acting for major European financing banks with regard to the finance and purchase of executive business jets to be registered in Malta;
  • Major litigation with regards to bird strike incident at Malta international Airport in 2004, Hull damage recovery procedures;
  • Court approved sale of vessels (survey ship).
 
AVIATON NEWS 
 
The Aircraft Registration Act 2010 has been presented before the House of Representatives in Malta as a Parliamentary Bill. Amongst the major proposals one can note the following: 
  • Integration of Aircraft Registry and the mortgage registry;
  • New provisions regulating mortgage registration and privileges over aircraft;
  • Implementation of the Cape Town Convention on International Interests in Mobile Equipment and Protocol in Matters Specific to Aircraft Equipment;
 
Once the act comes into force financiers can opt to either register their interest over an aircraft under the traditional mortgage system which once implemented will be akin to that which is currently in place or will otherwise be able to opt to register its interest in terms of the Cape Town Convention. 
 
For a full reading of our Shipping and Aviation Newsletter please click HERE (PDF Format 511KB). 
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