Over the last decade, Malta has consolidated its status as an international, Mediterranean centre of maritime excellence. Currently Malta has the largest shipping register in Europe and the sixth largest in the world. In addition, Malta has become a world leader in terms of commercial yacht registration.
In order to avoid the risk of shipping companies relocating or flagging to low-tax countries outside the EU, the European Commission’s 2004 Guidelines on State Aid to Maritime Transport (commercial shipping activities) was introduced to allow Member States to implement financial benefits for shipping companies. One of the most important benefits was to discard the traditional methods of taxation and introduce tonnage tax.
In December 2017, the European Commission approved the Maltese tonnage tax 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. 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 an annual registration fee and tonnage tax. The rate of tonnage tax is reduced according to how new the vessel is.
Taxation of Shipping Activities
- Shipping companies incorporated in Malta are taxed on their worldwide income and capital gains.
- Shipping companies not incorporated in Malta, but where control and management are exercised in Malta, are taxed on local income and capital gains and on foreign source income remitted to Malta.
- Shipping companies not incorporated in Malta and where management and control are not exercised in Malta, are taxed on income and capital gains arising in Malta.
- Income derived from shipping activities by a licensed shipping organisation is exempt from income tax.
- Income derived from ship management activities by a ship manager is exempt from income tax.
Malta exempts tax on the actual income derived and, instead, charges an annual tonnage tax in the form of a lump sum. The sum is set at fixed rates according to different net tonnage brackets. The standard rates are then adjusted depending on the age of the ship. The standard rate remains the same for ships that are 10 to 15 years old; newer ships benefit from a reduction and older ships are subject to a surcharge.
Maltese Tonnage Tax Eligibility
Tonnage tax is applied to the activities of a shipping company, as follows:
- core revenues from shipping activities;
- certain ancillary revenues that are closely connected to shipping activities (capped at a maximum 50% of a ship’s operating revenue); and
- revenues from towage and dredging (subject to certain conditions).
Maltese shipping organisations must register with the Finance Minister by submitting the name of the organisation, the registered office address and the name and tonnage of the ship it wishes to own or operate. The vessel must be declared a ‘Tonnage Tax Ship’ or a ‘Community Ship’, with a minimum net tonnage of 1,000 and be entirely owned, chartered, managed, administered or operated by a shipping organisation.
A shipping company can only benefit from the Maltese Tonnage Tax scheme if it has a significant part of its fleet flying the flag of a European Economic Area (EEA) Member State.
Additional Reasons to Consider Ship Registration in Malta
There are a number of additional reasons to consider ship registration in Malta:
- The Malta registry is on the Paris MOU and Tokyo MOU white lists.
- Vessels registered under the Malta Flag have no trading restrictions and are given preferential treatment in many ports.
- Registration of vessels under the Maltese flag takes place in two stages. A vessel is provisionally registered for a six-month period which is an easy and fast process. During this provisional registration period the owner is required to submit additional documentation and then the vessel is permanently registered under the Maltese flag.
- There is an exemption from stamp duty in Malta on the registration and/or sale of a ship, shares relating to a licensed shipping organisation and the registration of a mortgage relating to a ship.
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: firstname.lastname@example.org or your usual Dixcart contact.