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Home arrow News arrow Last news arrow Using the Malta Flag – Benefits
Using the Malta Flag – Benefits
1. Tax Benefits: Ownership of Commercial Carriers According to the Merchant Shipping Act, no tax shall be charged or payable on the income of a company registered under the Act in respect of gains or profits derived from the ownership or operation of an exempted ship while she was so exempted. A ship is an exempted ship where it belongs to a Maltese Shipping Organisation registered in Malta as aforesaid and owning a ship or ships of not less than one thousand net tons engaged in the carriage of goods or passengers and is registered under the Act. Where the ship does not so qualify, an exemption can still be requested from the Minister concerned. No tax is likewise payable on any dividend paid to the shareholders of such Maltese Shipping Organisation. The shareholder of the Maltese Shipping Organisation/s can be a Holding Shipping Organisation. This organisation would act as shareholder of one or more Maltese Shipping Organisations. No tax is levied on the income of Holding Shipping Organisation, and neither on any dividend paid to the shareholder of such organisation to the extent that such dividend is paid out of gains or profits derived from its shareholding in the Maltese Shipping Organisation/s The exemption from tax is only applicable as long as separate accounts are kept by every organisation which clearly distinguish the payments and receipts by the company in respect of the ownership and operation of an exempted ship and payments and receipts in respect of any other business. Where the organisation’s sole purpose is that of owning or operating exempted ships, the organisation is entitled to the tax exemption if it merely files a declaration with the Commissioner of Inland Revenue (instead of an income tax return), wherein it is declared by the auditor of the company that the objects of the company are limited to owning and operating the said vessels. A separate company can also be set up specifically for the purposes of providing ship management services to the above-mentioned organisations. The activities and objects of such company must solely compromise the management of ships which are of not less than one thousand net tons and which are engaged in the carriage of goods or passengers. This Company is registered under Maltese Law as an International Trading Company. Its tax liability is considerably reduced by virtue of a system of refunds. The final tax liability of such company per year is that of 4.17%. The International Trading Company providing such ship management services as mentioned above, can manage the affairs of the Holding Shipping Organisation, the Maltese Shipping Organisations and the vessels owned by the latter. An organigram depicting some of the details of the tax benefits mentioned above is herewith attached. Furthermore, no stamp duty is payable by the Company under the Duty on Documents and Transfers Act of 1993 in respect of any instruments connected with or involving any of the following:- i. the registration of an exempted ship; ii. the allotment of any newly issued share or stock of the company or the purchase, transfer, assignment or negotiation of any share or stock of any such company; iii. the sale or other transfer of an exempted ship or share thereof. Certain exemptions are also granted under the Act in so far as concerns value of the shares in the company or the value of the ship following a transmission ‘causa mortis’. Members of our firm have assisted various clients in their pursuit to minimise their tax exposure in the ownership and management of such vessels. Our experience in this matter is vast and wide-ranging. We have in fact devised a ship owning structure involving locally incorporated ship owning companies and holding companies, whereby through a system of exemptions and refunds the tax liability of the beneficial owners of the vessels is reduced to a nominal amount. 2. Facilities at the Malta Merchant Shipping Registry Registration and subsequent management of vessels under the Malta Flag is a quick and efficient process. Several established shipping lines using the Malta Flag have always considered the Malta Registry to be one of the most efficient and cost effective registries. The officers at the Malta Registry understand the realities of the shipping and trading world and this is reflected in their handling of registration and management issues. This is another reason why owners and managers alike should choose the Malta Registry as their preferred flag. 3. Registration of ships A vessel can be registered whilst still under construction. A provisional non-operational certificate of registry is issued by the Malta Registry after the filing of an application for the registration of a vessel, the declaration of ownership of such vessel and the Certificate of class. This enables banks to register mortgages over a vessel whilst in turn enabling ship-owners to secure requisite financing at an earlier stage. A provisional certificate of registry for a vessel may be obtained after filing an application for the registration of a vessel, a declaration of ownership, the certificate of class and all safety certificates which are necessary for the particular class of vessel. A permanent certificate of registry is then obtained by filing the original bill of sale or original builder’s certificate, where necessary an original deletion certificate from a previous registry and a ships carving and marking note which is counter- signed by a surveyor who is recognised by the Malta Maritime Authority. 4. Crew Certification The Crew Certification process is extremely quick and cost effective. Upon presentation of an application to register a crew member together with relative medical certificates, the Malta Maritime Authority will issue an acknowledgement stating that a particular crew member is qualified under STCW to perform certain duties on Malta Flagged Ships. This acknowledgement will be then followed by a proper STCW Certificate of Endorsement in respect of such crew member. Social Security In terms of the Regulation (EEC) 1408/71 on the application of social security schemes to employed persons and their families moving within the Community and the Social Security Act Chapter 318 of the Laws of Malta, no social security contribution is due whether by a crew member or his employer, if a crew member employed on a Malta flagged ship is a national of a European Union member state (and is not resident in Malta) and the Company employing such person is an entity incorporated in the European Union (except Malta) or in any other jurisdiction outside the European Union. 5. Bareboat Charter Registration Bareboat-In Under the Merchant Shipping Act it is possible to register a vessel with the Malta registry whilst it is under bareboat charter. The income derived from the operation of such a vessel by the charterer is subject to the tax benefits listed and explained above. The registration of such a vessel under bareboat charter is subject to the same requirements for the registration of a vessel as specified above, however one must also file a copy of the bareboat charter agreement which was entered. Such bareboat charter agreement must be of a minimum duration of two years. Bareboat-Out Similarly the ownership of a vessel can be registered under the Malta Registry, whilst the bareboat charter of the same vessel can be registered in another compatible registry. The tax benefits listed and explained above would also apply to such bare owner registered in Malta. 6. Ship Finance Mamo TCV assists major international financial institutions and banks in various transactions where financing is provided to shipping organisations owning vessels registered under the Malta flag. The firm is involved in all the aspects of ship finance. The spectrum of work in which the firm has been involved ranges from the drafting of loan and various financing agreements, the review of such agreements on behalf of clients and the preparation of corporate authorities to the issuing of legal opinions and the preparation of mortgage recitals In this regard, the firm also assists banks in all the formalities relating to the registration of mortgages or in otherwise securing, realising or enforcing their interests over Maltese vessels. 7. Registration of Mortgages: Advantages for Banks Maltese ship mortgages provide excellent security by creating a privileged charge over a ship, which is not affected by the bankruptcy of the mortgagor (or shipowner) occurring after the date on which it was created. Mortgages enjoy a relatively high priority in an eventual ranking of claims against a Maltese ship. Amongst the advantages of registering a mortgage over a Maltese ship, one should note the following: - A mortgagee may (in the mortgage instrument) prohibit the creation of subsequent mortgages. - A Maltese ship may not be voluntarily transferred outside the registry and its registry may not be cancelled without the mortgagee's prior written consent. - A vessel may only be "struck off" the register if at least one month's notice thereof is given by the Registrar of Ships to the mortgagee. - The mortgagee may take over and complete any outstanding registration formalities. - Mortgages are executive titles and may be enforced immediately without the need for lengthy court proceedings. - The mortgagee may also take possession of the mortgaged ship and/or sell (even privately) the mortgaged ship. The process of ship repossession is relatively straight forward. Once an event of default under the Deed of Covenants and the terms of the registered Mortgage arises, the Master and/or agent in Malta of a ship is notified with a judicial letter informing him/them that an event of default has arisen in terms of the Deed of Covenants. - The mortgagee may also demand an order by a competent court prohibiting, for a specified time, any voluntary sale of, or voluntary creation of a registered encumbrance over, the mortgaged ship. The mortgage instrument may also expressly prohibit the voluntary transfer of the mortgaged ship in the absence of the mortgagee’s prior written consent. - The mortgage attaches to any insurance proceeds. - If a ship to which a mortgage attaches is sold pursuant to an order or with the approval of a competent court the mortgagee’s interest in the ship passes to the proceeds of the sale. - The mortgagee is entitled to benefit from fiscal benefits: no tax is payable on the interest or other income due to him by a Maltese ship owning or ship operating company in respect of a debt contracted or undertaken by the Maltese company with regard to a Maltese-registered ship. Should you require any further assistance in relation to the registration of ship owning companies in Malta, the registration vessels under the Malta Flag or any ship owning and management structure issue, do not hesitate to contact us.
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