Aviation industry in Malta

Aviation industry in Malta

With the enactment of the Aircraft Registration Act, intended to firmly put Malta on the map of international aviation registers, Malta is well along the way of restructuring its aviation sector. The new Act implemented the Cape Town Convention on International Interests in Mobile Equipment and the Aircraft Protocol thereto (the “Convention”) which is recognized as facilitating asset-based financing by providing increased protection for secured creditors. Malta’s decision to accede to the Convention further enhances Malta’s reputation as a lender-friendly jurisdiction whilst at the same time facilitating the acquisition of aircraft and offering prospective investors of aircraft a reduction in cost on their borrowings.

The primary aim of the recent enactment is to make Malta an attractive jurisdiction to register both private and commercial aircrafts within Europe, while ensuring full adherence to the restrictions imposed by EU law on the registration and ownership of aircraft within the EU.

Newly introduced concepts

  • Recognition of fractional ownership of aircraft – ensuring partial owners are listed as such thereby protecting their rights
  • Registration of aircraft under construction as soon as it is uniquely identifiable
  • Broadening of registration possibilities for non air service aircraft
  • Possibility to register mortgages on Malta registered aircraft in the international register in terms of the Aircraft Protocol to the Cape Town Convention on International Interests in Mobile Equipment

Persons eligibility to register aircrafts

An aircraft may be registered in Malta by any of the following persons:

  • An owner of the aircraft who operates the said aircraft;
  • An owner of an aircraft under construction or temporarily not being operated or managed;
  • An operator of an aircraft under a temporary title; or
  • A buyer of an aircraft under a conditional sale or title reservation agreement or similar agreement, and who is thereby authorized to operate the aircraft.

The following persons are qualified to register aircraft as detailed below:

–       Aircraft used in Air Service

  • Government of Malta
  • Citizen of Malta or member state of EU, or Switzerland or EEA having a place of business or residence in one of these states
  • An undertaking formed and existing in accordance with the laws of Malta, member state of EU, EEA or Switzerland. The undertaking must have its registered office, central administration and principal place of business in one or more of said states and must have not less than 50% of its ownership owned (directly or indirectly) by the Government of Malta, EU member state or persons referred to in the last preceding point.

In order to operate an aircraft for public transportation of persons or goods, the operator would require an air operator’s certificate.

–       Private Aircraft (not used in Air Service)

A natural person who is a citizen of, or an undertaking established in a member country of OECD or any country approved by the Minister is qualified to register aircraft in construction or one not used in air services provided it:

  • Has legal capacity to own/operate said aircraft in terms of law
  • Appoints a local resident agent to represent the owner in Malta in matters concerning registration
  • Complies with applicable regulations/guidelines.

Persons so qualified under these provisions are referred to in the Act as International Registrants.

Fiscal advantages available to Aviation

Complimenting the aircraft registration regime, Malta has also introduced specific provisions with regard to the taxation of aviation income.

Import and stamp duty

No import duty is chargeable in terms of the Import Duties Act on the importation of civil aircraft into Malta. Aircrafts do not attract any stamp duty in terms of the Duty on Documents and Transfers Act.

Income tax

Income from the ownership, leasing or operation of an aircraft or aircraft engine used for or employed in the international transport of passengers or goods is deemed to arise outside of Malta. This could lead to nil tax leakage in Malta when applied to persons resident but not domiciled in Malta. Thus non-Maltese companies linked to Malta simply by registration of the aircraft in Malta or the fact that the aircraft calls at a Maltese airport are not taxable in Malta. This rule offers interesting tax structuring opportunities in respect of companies which are resident in Malta on the basis that they are effectively managed herein.

The specific provisions also provide for competitive accelerated depreciation – 6 years for aircraft airframe, engine and overhaul and 4 years for aircraft interiors and other parts together with an exemption from the application of fringe benefit rules on income.
Furthermore, leasing of aircraft (together with other aviation related activities) carried by Maltese companies would be entitled to benefit from the standard corporate tax rate and refund structure available in Malta together with an absence of withholding taxes on the distribution of dividends or payment of interests outside of Malta.


Benefits available to MALTESE LESSEES of aircraft where the Lessor is a Foreign Company and the lease payments are accruing to the foreign Lessor:

–       No withholding tax applies on lease payments made to lessors of aircraft used for the international transport of goods or passengers.

–       If the lease is an operating lease, lessees may generally claim full deduction for lease payments against their income.

–       Lessees may claim capital allowances if they suffer the burden of wear and tear.

–       If the lease is a finance lease, lessees are entitled to a deduction in respect of:

  • Interest element of the finance lease;
  • Repairs and maintenance;
  • Insurance;
  • Capital allowances at the applicable rates.

–       Profits accruing to lessees are taxed at the standard rate of 35%. However, upon a dividend distribution of such taxed profits, shareholders may be entitled to a refund of 6/7ths of the Malta tax paid.


Benefits available to MALTESE LESSORS of aircraft where the Lessor is a Malta Company and lease payments are accruing to a Maltese Lessor:

–       If the lease is an operating lease, then lessors are subject to tax on the full lease payment.

–       If the lessor suffers the burden of wear and tear, the lessor is entitled to claim capital allowances in respect of the aircraft.

–       If the lease is a finance lease, then lessors are only chargeable to tax on the interest element of the finance lease, without any deduction for capital allowances.

–       Lease income is taxed at the standard rate of 35%. However, upon a dividend distribution of such taxed profits, shareholders may be entitled to a refund of 6/7ths of the Malta tax paid.

 Investment tax credits

Any person that carries on a trade or business consisting of the repair, overhaul or maintenance of aircraft, engines or equipment incorporated or used in such aircraft, may benefit from investment tax credits against the tax due on its chargeable income in Malta.

 Fringe Benefits

The private use of an aircraft by a non-resident individual who is an employee or officer of a company whose business includes the ownership, leasing or operation of aircraft engaged in the international transport of goods or passengers is deemed NOT to constitute a taxable fringe benefit.


The VAT implications vary according to the manner in which the aircraft is used, that is, whether the aircraft is employed by an airline operator for reward chiefly for international transport of goods or passengers, or whether it is purely for private use.  VAT implications similar to those applicable in other EU Member States would be applicable in respect of importations, intra-community acquisitions, or supply of aircraft.



Overall benefits of aircraft registration in Malta

Pursuant to the above, the Maltese legal infrastructure and existing aircraft facilities are able to offer the following benefits:

  • Stable, E.U. jurisdiction with a well-established legal infrastructure that is sensitive to the rights of holders of security interests in aircraft, and having a mature law on trusts, as well as an efficient company registration and re-domiciliation system;
  • Enhanced visibility of rights in aircraft;
  • Access to intra-Community traffic rights. Operators licensed in Malta or in any other E.U. State are entitled to operate their aircraft commercially within the E.U. without any requirement or formality, subject to maintaining the applicable qualifying requirements for operators at all times. For private aircraft, any license issued by an ICAO state would be acceptable.
  • Attractive fiscal regime as explained above;
  • Availability of a wide range of airline services ranging from aircraft and engine maintenance, repair and overhaul to software development, aircraft management, aircraft maintenance training and ancillary support services;
  • Highest standards of safety and security;
  • A Cape Town Convention State, thereby enabling debtors situated in Malta to be entitled to a reduction on their borrowing costs (the “Cape Town discount”);
  • An efficient, skilled, cost-effective, multi-lingual workforce;
  • A clear strategic political vision and national policy supporting business, the aviation industry and its clusters.