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Yacht Registration and Yacht Chartering in Malta

By William Spiteri Bailey of Spiteri Bailey & Co.

10 December 2014

Malta's flag is constantly being described as a Flag of Confidence.

Policy-driven initiatives and heavy investment placed Malta on the map as a premiere jurisdiction for yacht registration and high-standard yachting services. Malta, an island in the heart of the Mediterranean and a member of the European Union with a robust legal framework, pro-business environment and a strong maritime tradition provides an attractive platform to yacht owners, charters and financiers.

The framework regulating the Maltese yachting sector has been tailored to emulate the success and international repute of the Malta merchant ship register, which ranks first in Europe and seventh globally in terms of registered tonnage. The success of the Malta flag is not merely founded on fleet size, but on high standards and quality. The status of a reliable flag is attested by the flag's high ranking on the White Lists of the Paris MoU and Tokyo MoU.

The dynamic yachting industry requires a regulatory and operative framework to support sector's needs. In this respect Malta's legal framework, while offering concrete security and peace of mind to financiers, provides a high degree of flexibility to owners and charterers. The Malta flag offers the possibility of registering yachts and superyachts either as private pleasure yachts or commercial yachts depending on the intended use and operations of the vessel. Whether a yacht will be used for commercial or private purposes, the Maltese framework offers different setups tailored to maximise benefits derived from the yacht.

Commercial Yachts

Registration of commercial yachts is principally regulated by the Commercial Yacht Code 2006 which is modelled on international regulations and international technical standards. The Commercial Yacht Code 2006 has proved highly successful with leading IACS classification societies and major yacht and superyacht builders resulting in a considerable increase in registrations under the Malta flag over the past years.

Commercial yacht registration procedures under the Malta flag are straight-forward and efficient.

The registration process is staggered into two stages - provisional and permanent registration. Yachts are initially registered on a provisional basis for a period of 6 months (extendable) during which period all necessary documentation will be submitted to the Malta flag administration. Upon presentation of all documentation and payment of the relative registration fees, the yacht is permanently registered under the Malta flag.

Flexibility is also offered in terms of ownership and financing options. No restrictions on nationality are imposed on the ownership or crewing of yachts and superyachts. This policy also extends to shareholders, directors and officers of corporate bodies. Malta-flagged vessels may also be owned through corporate bodies, such as companies, trusts and foundations registered in Malta with foreign shareholders and directors. Yachts owned by non-EU citizens or entities would be required to appoint a local resident agent to represent the yacht owner in Malta.

Fiscal issues are amongst the main considerations of owners when choosing a flag jurisdiction. Malta offers highly competitive fiscal packages.

Yachts registered in the commercial register which do not carry cargo and do not carry more than 12 passengers may be eligible to benefit from ‘tonnage tax regime'. This tax package would enable commercial yacht owners to pay a fixed annual tonnage tax depending on the yacht tonnage in lieu of income tax. Yachts in commercial use in the classes listed below will qualify for the special ‘tonnage tax scheme':

•Yachts of not less than 15m and not more than 24m in length;
•Superyachts of more than 24m and less than 500GT;
•Superyachts of more than 24m in length of more than 500GT but less than 3,000GT.

Registration of commercial yachts under the Maltese Flag is likewise attractive to financiers. Malta boasts of a reliable legislative framework which provides a high degree of protection to financiers, thus assuring peace of mind while facilitating financing opportunities to owners. Notably, Maltese law permits the insertion of covenants on the mortgage instrument to limit or prohibit the transfer of the vessel and/or the registration of further mortgages of the yacht without the prior written consent of the financier. Mortgages also vest financiers with self-help remedies such as the right to take possession of the yacht and the right to sell the vessel without taking recourse to complex court procedures. In fact, enforcement procedures contemplated in Maltese law are non-bureaucratic, effective and efficient.

Chartering of Commercial Yachts

Malta continues to emerge as an international centre of excellence for chartering operations backed by a high standard cluster of yachting services and talented pool of professionals. Malta's unique geographical position and connectivity to major airports renders the Malta flag an attractive hub for chartering operations.

To sustain the growth of the chartering sector, recent legislative amendments have been introduced. Yachts registered for commercial use are chargeable to Malta VAT on charter services, subject to the conditions that the charter commences in Malta and that charter terms do not exceed the statutory maximum periods. Charterers may benefit from mitigated VAT rates calculated on the basis of the length and means of propulsion of the yacht.

Commercial yachts operating in international chartering may also claim input tax incurred on supplies to the yacht, including yacht maintenance costs and fuelling. As noted earlier, commercial yachts are effectively exempt from income tax on revenue generated from chartering operations if the yacht qualifies for registration under the ‘tonnage tax regime'. In cases where a commercial yacht does not satisfy the criteria to qualify for the tonnage tax regime, generated revenue is chargeable at an effective income tax rate of 5% through a system of refunds. Foreign income tax suffered on the yacht's chartering operations may be treated as a tax credit vis à vis Malta income tax possibly mitigating exposure to Malta income tax to nil.

Private Yachts

Pleasure yachts intended for private use may also be considered for registration under the Malta flag. Registration procedures for private yachts are similar to procedures contemplated for commercial yachts and similarly staggered into two phases - provisional and permanent registration.

A certification of provisional registration is issued by the Malta flag administration upon submission of preliminary vessel documentation. Following initial approval and the submission of final technical documentation, a private yacht will be permanently registered under the Malta flag.

For registration purposes, private yachts will not be required to be in class or satisfy the specialised technical criteria for registration of commercial yachts.

International and local yacht owners may benefit from competitive registration fees and competitive fiscal structures, including Value Added Tax (VAT) mitigation measures.

Malta also offers attractive importation setups and complementary fiscal incentives. The concept of yacht finance leasing for private yachts has been successfully utilised by yacht owners to structure VAT payments chargeable on importation of private yachts. In essence, the scheme would enable structuring of VAT payments on the basis of the deemed use of the yacht within European Union territorial waters. VAT calculations factor in the length and means of propulsion of the yacht. By way of example, motor boats exceeding 24 metres in length would be liable to an overall effective VAT rate of 5.4%. This scheme also permits leasing entities to exercise the option of purchasing the yacht at the termination of lease.

Yachting Services in Malta

Owing to Malta's strong maritime tradition, an experienced and diverse cluster of yachting services is may be availed of by owners and charterers. Yachting services range from state of the art marinas to maintenance, refitting and dry docking facilities, bunkering, supplies, crewing, brokerage and other ancillary services.

Significant investment and the island's business-centric policies, coupled with an international repute, renders the Malta flag a favourable candidate for yacht and superyacht registration and for the setting up yacht chartering operations.

Spiteri Bailey & Co.

Spiteri Bailey & Co. is a tax, audit and advisory firm established in Malta and a member of Prime Global, an international association of independent accounting firms.

At Spiteri Bailey & Co. we know that every client's business and personal circumstances are unique. Our firm's approach is to understand and analyse the client's key business drivers and strategies to provide customised solutions. Our firm offers an array of bespoke services to private and commercial yacht owners, charterers and financiers, including:
•advisory on tax-driven yacht and superyacht ownership structures, financing, leasing and charters
•yacht and superyacht registration
•mortgage registration and deletions
•formation of corporate bodies, re-domiciliation, mergers and acquisitions of yacht owning companies
•handling of yacht importation procedures and liaison with Maltese tax authorities and customs
•tax consultancy and compliance
•auditing and accountancy
•management and maintenance of corporate bodies, including ancillary and back office corporate services

Spiteri Bailey & Co. offers consultancy and other services to businesses operating in wide array of commercial sectors.

 

 

For more information on Yacht Registration and Yacht Chartering in Malta, contact us here or send us an email on advice@spiteribailey.com or call us on +356 21499248/21499250. Web: http://www.spiteribailey.com