Waving the Flag for Malta

Recently published figures have shown that the Malta ship registry is growing from strength to strength. At the beginning of September 2015 the total number of mercantile vessels registered in Malta was 7,109, having a total gross tonnage of over 62 million.

A comparison of the figures year on year shows a total of 485 vessels have registered with the Malta ship register so far in 2015.

This ranks Malta’s ship registry as the 6th largest in the world, and number one within the European Union.

Malta’s position within shipping circles clearly speaks for itself. Malta continues to be an attractive operating base as costs are low, with highly favourable fiscal regimes and Malta’s excellent tax opportunities.

Registering in Malta

Being a very accessible jurisdiction, Malta, unlike other jurisdictions, does not impose restrictions on the type of vessels that can be registered under its flag thus giving yacht and ship owners the possibility of registering unconventional vessels under the Malta flag.

From an ownership and operational perspective, Malta also provides an array of tax efficient solutions.  A Malta shipping organisation may be set up, for example, with the main purpose of owing a superyacht and subsequently being registered as the owner.

Malta Tax treatment

So what are these excellent tax opportunities I hear you say? Well for ship and yacht owners, registered charterers and financiers of Maltese ships which are over 1,000 net tons, Malta offers a complete tax exemption.

This effectively means that a shipping organisation is exempt from paying any tax on income derived from shipping activities as well as any income or gains arising from the sale or transfer of a tonnage tax ship.

Likewise no tax is payable on any payments of interest or income in relation to the financing of the operations of a shipping organisation or the financing of a tonnage tax ship.

The tonnage tax regime applies only to income derived by a shipping company from “shipping activities”. Shipping activities are defined as “the international carriage of goods or passengers by sea or the provision of other services to or by a ship as may be ancillary thereto or associated therewith including the ownership, chartering or any other operation of a ship engaged in all or any of the above activities or as otherwise may be prescribed.”

Other benefits includes an exemption from tax on the distribution of profits derived from shipping activities to the shareholders and an exemption from the payment of stamp duty on the disposal of shares in a licensed shipping organisation that owns, charters, operates, administers or manages a tonnage tax ship.

Tonnage tax

To benefit from such favourable exemptions, an annual tonnage tax based on the gross tonnage of the vessel, and the annual registration fee need to be paid. The Malta Transport Authority sets these fees at a very reasonable rate with registration fees starting as low as €115 and tonnage tax starting at around €175 per annum.

Vessels not qualifying under tonnage tax

In the case where a particular vessel does not qualify to benefit from such income tax exemption, financiers and the like may still benefit from the low effective income tax rate of 5%. In addition, any foreign income tax incurred on a vessels commercial operations would be available as a credit against the Maltese income tax, to the effect that the effective Maltese tax may even in certain cases be reduced to 0%.

The Maltese Yachting Industry

The Yachting Industry in Malta has two key facets, namely pleasure yachts and commercial yachts, the latter used as part of a business activity and to which the fiscal advantages outlined above for Malta shipping organizations also apply.

In the case of pleasure yachts, in addition to the brisk registration process, Malta offers a favourable regime for VAT minimisation, with a potentially effective VAT rate as low as 5.4%, which can be obtained through a leasing structure arrangement.

Beyond the advantages that the registration process and the VAT yacht leasing presents, Malta offers yacht marinas that may be found all over the Maltese islands. These include facilities for super yachts. Most marinas cater for the requirements of yachtsmen, including fuel bunkering, technical services for repairs and services, luxury on-site facilities and immediate access to other off-site facilities.

Written by:

Samantha Snow
Client Services Manager, Abacus Corporate Services Limited