Historically, Malta’s strategic location in the middle of the Mediterranean has been, and continues to be, an important factor in the development of its shipping industry. Malta is, today, the largest merchant shipping flag in the European Union and the 7th largest worldwide. In 2013, Malta once again registered a strong improvement in ship and yacht registration, with a growth of 13.6% that translates into over six (6) million gross tonnes and a growth of 18% in yacht registration relative to the 2012.
The Malta Flag is governed by the 1973 Merchant Shipping Act (Chapter 234 of the Laws of Malta). It offers an excellent balance between compliance with international standards, maritime services available and fiscal advantages. The main advantages of registering a ship in Malta are the following:
- an attractive fiscal regime;
- European flag;
- On the White List of the Paris MoU and Tokyo MoU and on the Low Risk Ship List of the Paris MoU;
- 24/7 administration;
- possibility to register all types of vessels under the Malta flag, including those that are not strictly classified as ships, such as oil rigs, floating docks, pontoons, barges, and including those that are still under construction;
- no trading restrictions and preferential treatment to Maltese ships in certain ports;
- Ships may be registered in the name of legally-constituted corporate bodies or entities irrespective of nationality, or by a European Union citizen;
- no restrictions on the nationality of the shareholders and directors of shipping companies in Malta ;
- no restrictions on the nationality of the master, officers and crew serving on vessels registered under the Maltese flag;
- a beneficial and well-organised maritime mortgage system;
- long tradition in Maritime affairs and experienced professionals in all relevant fields;
- a wide range of shipping services including shipbuilding and specialised ship repair in addition to natural harbours and excellent Malta Freeport facilities.
Special tax agreements exist for particular vessels, like for example vessels of over 1,000 net tons are not required to pay income tax and duty on transfers or assignment, donations and succession duty. In some cases vessels under 1,000 net tons may also qualify for the same exemptions, although in this case it is not automatic and exemptions need to be applied for according to applicable policy. This exemption, however, is not applicable to pleasure yachts.
Malta has adopted all the major international maritime conventions including: CLC 92, Tonnage 69, COLREG 72, Fund 92, INMARSAT, LLMC 1996 Protocol, Load Lines 66 (including 1988 Protocol), London Convention 72, MARPOL 73/78, SOLAS 74/78 (including 1988 Protocol), STCW 78 (including 95 amendments), Bunkers 01, AFS 01, SUA 88 (including SUA Protocol 1988), SAR 79, FAL 65, OPRC 90 and OPRC-HNS Protocol 00 and ILO Conventions Nos. 8, 16, 22, 53, 73, 74, 87, 98, 108, 138, 147 (including 1996 Protocol), 180 and MLC2006.Maritime MortgagesMalta employs a beneficial and well-organised mortgage system where a ship owner’s interest in the ship is used to provide security for a loan. Mortgages under Maltese law constitute an executive title and thus can be enforced, when necessary, without the need for a judgement in this respect. Furthermore, the following safeguards are offered with respect to a maritime mortgage registered over a vessel with Maltese flag:
- under Maltese law, the ship is considered as a separate, distinct asset when providing security for debts or other obligations, and mortgages in relation to a vessel rank before other debts, claims or interests of any creditor, curator, trustee or receiver in the event of bankruptcy of the ship owner;
- a registered mortgage attaches to the ship and thus is not extinguished by the death of the ship owner;
- a mortgagee has the option of prohibiting further mortgages and transfers of ownership in the vessel without his prior consent;
- registration, transfer, amendment and discharge of mortgages in Malta is a straightforward and efficient process.
Registering a vessel under Malta’s flag occurs in two phases. The first phase is a provisional registration where the owner is required to submit the initial documentation. In order to complete provisional registration, the owner must submit the following documentation:
- Application for registration by the owner or an authorised representative, including, if required, application for change of name of ship;
- Proof of qualification to own a Maltese ship; in the case of a body corporate, the document of incorporation;
- In the case of non-Maltese owners, appointment of a resident agent;
- Where applicable, copy of the current ship’s International Tonnage Certificate;
- Declaration of ownership made in front of the Registrar by the owner or an authorised representative;
- Evidence of seaworthiness; in the case of trading ships, confirmation of class with a recognised organisation, and information of the ship’s statutory certification including Company ISM compliance;
- Where applicable, request for the Administration to authorise the appropriate recognised classification society to issue the ship’s and the company’s statutory certificates;
- Where applicable, application for Minimum Safe Manning Certificate;
- Payment of initial registration fees and annual tonnage tax;
- Application for Ship Radio Station Licence.
Provisional registration lasts six (6) months (extendible to a maximum of an additional six  months) and during this period the owner is required to finalize additional documentation on the vessel. Additional documentation to be submitted during provision registration includes:
- A bill of sale or any other document by which the vessel was transferred to the applicant for registry or a builder’s certificate in the name of the applicant;
- Where applicable, cancellation of registry certificate issued by the Administration where the vessel was last documented;
- In the case of SOLAS ships, copy of the last updated Continuous Synopsis Record issued by the Administration where the ship was last documented;
- Certificate of Survey and a copy of the International Tonnage Certificate issued by an approved surveyor of ships;
- Evidence that the vessel has been marked in accordance with law;
- Where valid, appropriate convention certificates are not in place the ship will be issued with a non-operational certificate of registry.
The second phase – permanent registration – is completed once all the required documentation as listed above has been received and processed. Despite the misleading name, permanent registration must be renewed on a yearly basis through the payment of relative tonnage tax.
Bareboat registration is defined in the Malta Merchant Shipping Act as the “contract for the lease or sub-lease of a ship, hereinafter referred to as charter, for a stipulated period of time. By virtue of a charter, the charterer shall acquire full control and complete possession of the ship, including the right to appoint her master and crew for the duration of the charter but excluding the right to sell or mortgage the ship”.
Malta allows both bareboat registration of foreign ships under the Malta flag and also the registration of Malta flagged vessels under a foreign flag, provided that the registries are compatible. Additionally, the underlying registry remains the relevant jurisdiction for matters concerning the title, mortgages and encumbrances. The bareboat charter registry will gain jurisdiction only over operation of the vessel. In all other aspects, vessels that are subject to bareboat charter in Malta enjoy the same benefits and are subject to the same obligations as ships registered under the Maltese flag.
Bareboat charter registration lasts as long as the charter agreement or the expiry dates of the registration, whichever comes first. Bareboat registration has a maximum duration of two (2) years, with the possibility of extension.
Bareboat registration fees are the same as the regular registration fees, as is the registration process, however the following additional documents are required:
- Application for registration by the charterer or an authorised representative;
- Declaration of bareboat charter accompanied by the charter agreement;
- Transcript or an extract of the underlying registration;
- Copy of the Ship’s International Tonnage Certificate;
- Consent in writing of the underlying registry, owners and mortgagees.
Maltese law distinguishes between pleasure yachts and commercial yachts (or pleasure yachts above twenty-four metres) with different tax regimes applicable to each of these.
The procedure for yacht registration under the Maltese flag is also governed by the Merchant Shipping Act and is relatively simple, reflecting the personal nature thereof. Yachts imported or in use within EU waters are subject to Value Added Tax (“VAT”). VAT is calculated on the basis of the size of the yacht. As larger yachts are assumed to spend less time within EU waters, VAT is less for larger vessels.
Maltese legislation has a lease structure in place in order to optimize the tax position of yacht owners. In this situation, a Maltese company is set up to acquire and register the yacht for VAT purposes and then lease it to an individual or company. In this case, the standard rate of 18% VAT is applied on the established percentage of the lease, calculated on the basis of assumed used within EU territorial waters. The Malta VAT Department Yacht Leasing VAT Guidelines provide more information on how this is calculated.
The maximum duration of the lease agreement in this case is thirty-six (36) months. Each case must receive approval from the Commissioner of VAT and will be considered on its own merit. The Commissioner of VAT may request additional details regarding the use of the boat. At the end of the lease period, the lessee may exercise an option to purchase the boat (minimum 1% of original value) and, provided that all VAT has been paid as per leasing agreements, a VAT paid certificate will be issued to the lessee.
Yachts used commercially that carry no more than twelve (12) passengers and do not carry cargo are eligible to be registered as commercial yachts.Malta has a Code of Practice for commercial yachts that establishes the standards of safety and pollution prevention for commercial yachts. A Certificate of Compliance to Trade as a Commercial Yacht is issued once a ship has been evaluated and complies with the code, allowing operational registration. The evaluation may be conducted by the appointed ship surveyors or a recognised organisation (classification society). Effective from 1 January 2012 the list of these classification societies has been revised as follows:
- American Bureau of Shipping (ABS)
- Bureau Veritas (BV)
- China Classification Society (CCS)
- ClassNK (NK)
- Det Norske Veritas (DNV)
- Germanischer Lloyd (GL)
- Korean Register of Shipping (KR)
- Lloyd’s Register (LR)
- Polish Register of Shipping (PRS)
- Registro Italiano Navale (RINA)
- Russian Maritime Register of Shipping (RS)
After the initial evaluation, an annual survey must be conducted. On yachts under 24 metres in length, the Master/Engineer may conduct the evaluation. Otherwise, the evaluation procedure is the same as the initial evaluation (i.e. carried out by appointed ship surveyor or recognised organisation). Additionally, a renewal survey (similar to the initial survey) must be conducted every five (5) years (four (4) years for yachts of less than 24 metres in length).
Commercial yachts have the option to apply the tonnage tax regime instead of tax on income derived from operation of the yacht. The provision of goods and services to ocean-going ships are also exempt with credit from Maltese VAT.
The holistic team at Equinox can assist you in any of the following requirements:
- Assistance in all aspects of the ship registration process in Malta;
- Liaising with Transport Malta and other relevant regulators;
- Incorporation of owner entity;
- General assistance in relation to compliance issues;
- Marine litigation, arbitration, admiralty claims;
- Tax planning and compliance;
- Assistance in all aspects of ship and yacht finance;
- Drafting and review of relevant legal and loan agreements and legal opinions.