ELIGIBILITY

Vessels

All types of vessels can be registered in Malta including oil rigs, platforms and barges. Hulls and vessels under construction can also be registered under the Malta flag.

Ownership

Under Maltese law, the following persons can register a yacht in Malta without further requirements:

• a Maltese person or entity;
• any other EU, EEA or Swiss citizen resident in Malta.

The following persons are also eligible to register a yacht in Malta subject to the appointment of a resident agent, that is, a person who is habitually resident in Malta or a Maltese entity that will act as a
representative of the owner:

• an EU, EEA or Swiss citizen not resident in Malta; and/or
•  a foreign company as approved by the registrar

YACHT & ASSET PROTECTION STRUCTURES

Maltese law provides for the possibility of constituting different vehicles for asset protection including trusts, foundations, limited liability companies or partnerships. Each of these has different characteristics and may provide scaling levels of protection of assets. Undoubtedly, the most commonly used vehicle for asset segregation and protection is the limited liability company, generally classified as a holding company in that the company is set up for the purposes of owning assets rather than undertaking a trade. Essentially, holding companies are onshore flexible and tax-efficient entities set up to ring-fence assets from other trading or commercial risk and to provide ownership participation and enhanced asset control.

MARITIME COMMERCIAL AND TRADING STRUCTURES

Again for the purposes of undertaking trading activities through the commercial operation of yachts or for the provision of ancillary services thereto, various types of entities may be utilized under Maltese
law. Here again, the most popular vehicles are companies set up for trading purposes.

Malta Trading Companies

Companies registered in Malta are deemed to be resident and domiciled in Malta and are therefore subject to tax on their worldwide income less permitted deductions at the corporate income tax rate which currently stands at 35%. Shareholders of a Malta company in receipt of a dividend may elect to claim a refund of all or part of the Malta tax paid at the level of the company on such income. The amount of refund which may be claimed depends on the type and source of income received by the company. In the context of maritime trading activities, when dividends are paid to the shareholders, these shareholders become entitled to claim a refund of 6/7ths of the Malta tax paid by the company. This results in an effective rate of Malta tax of 5% in the hands of the shareholders.

Shipping Organisations

An entity that undertakes shipping activities as stated in the Merchant Shipping Act is considered a shipping organisation. Shipping activities mainly refer to the international carriage of goods and passengers, in accordance with the EU Maritime State Aid Guidelines. Ancillary activities, which constitute less than half of the revenue generated from the main shipping activities also are considered as such. Once a company is recognised as a shipping organisation, it is exempt from tax based on fluctuating income subject to tonnage tax being paid based on the weight and age of vessels engaged in the shipping activity. The main fiscal advantages of the tonnage tax system for a shipping organisation covering shipping activities include:

• exemption from corporate tax under the Income Tax Act on shipping activities;
•  exemption from tax under the Income Tax Act on any income, profits or gains derived from the sale or other transfer of ship tonnage tax ship which had been acquired or sold whilst under the regime or from the disposal of any rights to acquire a ship which when delivered would qualify as a tonnage tax ship; and
•  exemption from tax on the distribution of profits derived from shipping activities to the shareholders.

REQUIREMENTS

In order for VAT on Malta leases to be levied on the basis of the actual yacht’s use and enjoyment within the EU territorial waters and to benefit from the guidelines, the following requirements have to be followed:

• the lessor must be a Maltese shipping organisation established in Malta for VAT purposes and holding a Malta VAT number;
• the lessee may be established outside Malta, be- ing a non-taxable person and therefore using the yacht for pleasure and not business purposes;
•  the lessor and the lessee must enter into a leasing arrangement and the lease must be for more than 90 days (long-term lease);
•  the leasing of the yacht must be undertaken through Malta and hence the yacht must be placed at the disposal of the lessee in Malta;
• the lessor must keep appropriate records in relation to the actual use by the lessee of the yacht in/ outside the EU; and
•  VAT returns must be properly submitted and an annual declaration filed with the Commissioner of Inland Revenue.