Ship Registration in Malta

Malta provides a reputable flag ensuring compliance with international and European standards accompanied with the right balance of maritime services knowhow and fiscal advantages. Malta’s Merchant Shipping Act, enacted in 1973, was originally based upon the UK Merchant Act however a series of amendments and supplementary legislation were subsequently introduced to cater for the specific needs of the shipping industry.

All types of vessels from pleasure yachts to oil rigs, including vessels under construction, may be registered under the Maltese flag provided they are wholly owned by citizens of the EU or by duly constituted corporate entities.

Malta does not impose trading restrictions or age restrictions for registration of vessels, however ships that are older than fifteen years will be subject to additional requirements and inspections. Furthermore, as a rule, trading ships of twenty-five years and over are not registered under the Maltese flag.

Registration of vessels under Malta’s flag is affected in two steps. The vessel would first be provisionally registered for a six month period – in which the owner would be required to submit certain documentation including a copy of the vessel’s international tonnage certificate, evidence of seaworthiness together with payment of the relevant fees and tonnage tax. During the provisional registration period, the owner is required to submit additional documentation regarding the vessel, cancellation of previous registration (if any) and evidence of ownership thereof. Once the necessary documentation is supplied the vessel will be permanently registered under the Maltese flag.

Bareboat Charter Registration

Maltese law provides for the registration of bareboat charters of foreign vessels in Malta and registration of bareboat charters of Malta vessels in foreign jurisdictions provided that the two jurisdictions regulate ownership registration, mortgages and encumbrances in a compatible manner. Ships under a bareboat registration in Malta are entitled to the same benefits and subject to the same obligations as vessels registered in Malta.

Yacht Registration

Maltese law provides for two regimes applicable to the registration of yachts under the Maltese flag. The first regime is applicable to pleasure yachts of between six and twenty-four metres in length while the second regime is intended for commercial yachts or pleasure yachts in excess of twenty-four metres. The type of regime that one may opt for will also influence the tax regime applicable to any income generated by such yacht.

Yacht Registration: registration of pleasure yachts is regulated by the Merchant Shipping Act. Maltese legislation provides for a simplified procedure of registration due to the personal nature of a pleasure yacht. Value Added Tax is due on pleasure yachts imported or in use within EU waters. The Maltese VAT Department has issued guidelines applicable to yachts reducing the applicable tax due depending on the size of the yacht and its propulsion system. The basis of this assumption is that the larger a yacht is, the less time it will likely spend within European waters and therefore less VAT would be due.

As it is administratively difficult to determine the time spent within European waters, the guidelines provide for the application of the standard rate of VAT on a reduced amount based on the assumed time spent outside of European waters, which can be summarized in the following table:

Yatch Type	% of Lease Subject to VAT	Effective VAT Due
Yachts over 24 metres	30%	5.4%
Sailing yacths from 20.01 - 24 metres	40%	7.2%
Motor yacht from 16.01 - 24 metres	40%	7.2%
Sailing yacths from 10.01 - 20 metres	50%	9%
Motor yacht from 12.01 - 16 metres	50%	9%
Sailing yacths up to 10 metres	60%	10.8%
Motor yacht from 7.5 - 12 metres	60%	10.8%

The reduction of VAT due is available through a finance leasing structure. In terms of the finance leasing guidelines the yacht would be acquired by a Maltese company, registered for VAT purposes in Malta that would then be leased to another individual or company. For VAT purposes the lease of the yacht is a supply of service and is subject to VAT and tax must be paid together with the lease payments.

The lease must be for a period not exceeding thirty-six months and the lessee would have the option to purchase the yacht after the termination of the lease period at a percentage of the original price. If the lessee takes up the option to acquire the yacht, the Department would issue a VAT paid certificate to the lessee. Any structure must seek prior approval of Malta’s VAT authorities before benefitting from the application of the yacht leasing guidelines.

The lessor will also have the option to take advantage of Malta’s full imputation system and applicable refunds. The Maltese income tax authorities have also issued special guidelines in relation to the tax treatment of the structure throughout the lease that include the following:

• The lessor is charged to tax only on the annual finance charge
• The lessee is allowed a deduction in respect of the finance charge, maintenance, repairs and insurance
• The lessee is allowed capital allowances

Should the lessee exercise the option to purchase the yacht at the end of the lease, the purchase price received by the lessor shall be considered to be of a capital nature and not subject to tax in the hands of the lessor.

Commercial Yacht Registration: registration of commercial yachts under the Maltese flag – which is open to yachts from 15 metres in length with a capacity of not more than 12 passengers – permits the owner to make use of their yacht as a commercial vessel. Being registered as a commercial yacht provides the owner with the advantage of applying the tonnage tax regime instead of being subject to tax on income derived from the operation of the yacht. Tonnage tax on commercial yachts less than twenty-four metres in length is applied at a standard rate of €175 together with a registration fee of €105 per annum. Furthermore, commercial yachts have to comply with the specific conditions applicable to their operation in terms of the Commercial Yacht Code.

Taxation of Shipping Activities

The standard income tax rules do not apply to shipping activities through a specific exemption – therefore no tax on profits from shipping activities is due. Furthermore, following recent amendments this exemption has also been extended to ship management companies.

In terms of Malta’s tonnage tax regime, shipping operations will be subject to an annual tax comprised of an annual registration fee together with a tonnage tax based on the net tonnage of the vessel. The rates of tonnage tax are further reduced according to the age of the vessel.

Our Shipping Services

Through our team of experienced professionals, RSM Malta will assist you in all aspects of registering your ship in Malta – ranging from the incorporation of owner entity in Malta, full corporate and tax compliance, to the registration of the vessel under the Maltese flag while ensuring full compliance with Maltese shipping legislation.

Furthermore our maritime division is able to advise on the best avenue available for the registration of your yacht in Malta and benefit from the yacht leasing regime that is available in terms of Maltese law at each step of the process.