Shipping and Yachting industries in Malta

Malta’s long maritime tradition and culture has led to the country becoming a well-established, reputable, open ship register. The Maltese International ship register has earned the plaudit ‘Flag of Confidence’ by means of dedicated legislation, which is all in line with EU Directives and IMO Conventions, and also through years of determined commitment to reaching and surpassing international standards. Now the island is reaping the benefits of these hard-won achievements. Long seen as a global leader in ship management services, Malta is today home to the largest merchant fleets in the world.

Malta’s ship register is attracting all sorts of vessels, from pleasure yachts to passenger cruise ships, tankers and oils rigs. In 2011, the country increased its tonnage by 16% over 2010, with 5,810 vessels registering on the Maltese Islands. Malta’s register has recently become the largest in Europe and seventh in the world, surpassing both Greece and Cyprus, which have led the maritime sector for many years.

Deemed as a very accessible jurisdiction, Malta does not impose restrictions on the type of vessels that can be registered under its flag, thus giving a number of ship owners the possibility of registering unconventional vessels. Shipping is directly correlated to the ups and downs of the global economy, and Malta is conscious that ship owners are increasingly forced to consider cost-related factors when choosing a flag. Registration costs and the fees of service providers in Malta have remained highly affordable, and thus savings can be substantial when using the Malta flag.

Apart from the affordable registration costs and fees of service providers, Malta also provides an array of tax efficient solutions. One of which is the advantageous tonnage tax system for income derived from shipping activities. Maltese legislation grants a number of fiscal benefits to ship owners or bareboat charterers operating qualifying ships (tonnage tax ships). Whilst being subject to an annual tonnage tax, any income derived from shipping activities is exempt from tax. Amendments to the country’s maritime legislation, introduced in 2010, have extended the scope of this legislation to ships flying the flag of another EU or EEA member state, as well as to ship management activities. Other benefits are the 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.

Malta is also considered to be an attractive base for the registration of commercial and pleasure yachts, as well as super yachts. The owners of almost 300 super yachts have already chosen Malta as a base for their yachts in order to take advantage of the locations of the country and the cost-effective services provided by marinas and ancillary companies, as well as the regime for boat ownership which offers two specific incentives to yacht owners.

Under the Commercial Yacht Code, yachts which do not carry cargo and do not carry more than 12 passengers, can be registered as commercial yachts. If such a Maltese registered vessel is owned, chartered or managed, no income tax is due in Malta on or in relation to the ownership, operation or management of the yacht. Instead, the owner, charterer or manager has to pay an annual tonnage tax which is calculated according to the size of the vessel.

As far as yachts which are not commercially registered are concerned, the Maltese VAT guidelines address scenarios where a Maltese company purchases a pleasure yacht and enters into a ‘lease-sale’ agreement with a third party. The main aim of such leasing structure is to minimise VAT potentially down to 5.4% of the yacht’s cost. The amount of VAT, that is payable in relation to this supply of service, is calculated on the percentage of the time that the vessel is deemed to sail in the EU waters (which will be based on the assumption that the larger the yacht, the less time it stays there). Such lease agreement will also enable owners to receive a VAT paid certificate at the end of the process, provided that all the conditions established by the VAT department have been satisfied.

The guidelines relative to yacht leasing allow the yacht to be bought by a Maltese VAT registered company, thus becoming the owner/lessor of the yacht. If such purchase is made from an EU VAT registered supplier, no VAT is paid on the purchase since such transaction would be considered to be an intra-community acquisition. The Maltese company is then free to lease the yacht to a Maltese or foreign person, i.e. the lessee, who pays for the lease in instalments, at the end of such agreement the lessee will have the option to buy the yacht at 1% of the declared value. At the end of the lease, a VAT paid certificate will be issued by the VAT department of Malta which is valid all across the EU.