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The Malta maritime registry now boasts over 5,830 vessels totalling 45.6 million tonnes, making Malta the largest ship register in Europe. This achievement was still possible despite the high standards and reputation for which the Maltese Shipping Flag is renowned for.

What makes Malta such an ideal International Maritime Service Centre?

  • Malta's strategic geographical position in the middle of the Mediterranean Sea and our time zone (European Central Time) have always helped in rendering business more convenient;
  • Malta recognises that the shipping industry never sleeps and continuously demands high levels of efficiency. The island is endowed with a highly competent authority that seeks to attend any issues 24/7;
  • Despite the magnitude of its flag, Malta is not a flag of convenience and considerable attention is given to the quality of the ships registered;
  • Malta encompasses a low polluting and low risk fleet with the average age of vessels continuously decreasing, currently at 12.78 years;
  • Malta fully complies with EU and other international shipping regulations and this has helped in attracting further top quality ship operators;
  • Malta offers a sound legal system and safeguards to both financiers and ship-owners;
  • Malta has a straight forward procedure for registering vessels and offers low ship registration costs;
  • Malta offers an income tax exemption with respect to income from qualifying shipping activities.

The Tax System

Malta offers a complete exemption from income tax on the income that is derived from shipping activities of Maltese vessels (both commercial ships and yachts) of 1,000 net tonnes and over. Instead of income tax, Maltese shipping organisations pay an annual tonnage tax. In the case of ships and yachts which are less than 1,000 net tonnes, but which are used to carrying out shipping activities as defined below, this may still be declared as tonnage tax ships through a special concurrent from the Minister for Finance.

‘Shipping activities’ refer to the international carriage of goods and passengers by sea and related services. A ‘Shipping Organisation’ is an entity which:

  • owns, operates (under charter or otherwise), administers and manages vessels registered under the Malta flag or under the flag of another State; or
  • holds shares or other equity interests in entities, Maltese or otherwise, established to carry out any of the above operations; or
  • raises capital through loans, issues guarantees or issues securities when the purpose is to finance its or other companies’ shipping activities.

Further Fiscal Benefits in Malta

  • No restrictions or taxation on the sale and mortgaging of Maltese registered ships;
  • Exemption from duty on documents on the sale or transfer of a tonnage tax ship;
  • Exemption from duty on documents on the allotment or transfer of shares in Maltese companies;
  • No restrictions on the nationality of the ship’s captain, officers and crew;
  • Non-resident officers or employees of the licensed shipping organisation, as well as the shipping organisation itself, are not subject to social security contributions.

Ship Management Activities

Recent amendments have extended the shipping regime benefits which were already enjoyed by shipping organisations to persons carrying on ship management activities as well. Such ship management activities include technical management and crew management activities.
Similar to shipping organisations, subject to certain conditions being satisfied, any income derived by a ship manager from ship management activities will be deemed to constitute income derived from shipping activities and will thus be exempt from tax under the Maltese Income Tax Act.

What if the tonnage tax system does not apply?
If the conditions for the tonnage tax system (i.e. the income tax exemption) are not met, then the profits derived from the commercial shipping activities would be subject to the normal tax refund system, bringing an effective corporate tax rate of only 5%, the lowest in the EU.

VAT implications for commercial shipping activities
In addition to the income tax exemptions, vessels carrying commercial activities are generally subject to a very wide VAT exemption.