Malta’s long maritime tradition and culture have led to the country becoming a well-established ship register under which all types of vessels, from pleasure yachts to oil rigs may be registered. As for the aviation industry in Malta, it enjoys stable growth, with a solid legal backbone to sustain it. The benefits of Malta with respect to both industries are geographical, reputational and fiscal. We can tap into the unique strengths of each of the firm’s specialised units to seamlessly deliver a bespoke service to the varying needs of every client.
With the introduction of private aircraft leasing, availing of a VAT leasing structure reduces the percentage of VAT charged on the value of the aircraft to as low as 5.4%, which rate is calculated on the aircraft range in kilometres and the percentage of community use. Commercial craft comes with their own VAT-related benefit whereby the intra-community acquisition, importation or supply of aircraft destined for use by an airline operator for reward, within the international transport of passengers or goods is considered to be an ‘exempt with credit’ supply. A similar arrangement is in place in the context of leasing of yachts and superyachts for pleasure, whereby VAT is due at reduced rates calculated on the effective use and enjoyment of the vessel in EU waters, with no VAT being chargeable on the use of the yacht by the lessee in non-EU and international waters. VAT benefits also attached to short term chartering of pleasure boats and on the fulfilment of a number of conditions, notably that the yacht is to be placed at the disposal of the customer in Malta, in satisfaction of the ‘place of supply’ rules.
The fiscal benefits present to stimulate growth in the local aviation and maritime sector are substantial. In addition to the VAT savings that may result pursuant to leasing operations for both aircraft and pleasure yachts, Malta is considered as one of the EU’s best regulated and most tax-efficient jurisdictions for cross-border aircraft finance, related operations and the aviation business in general. Some such measures include the participation exemption regime, the tax refund mechanism, the absence of withholding taxes on outbound dividend, the exemption on interest and royalties derived by non-residents and not least the extensive double taxation treaty network and other forms of double taxation relief.
Notably, Malta deems all income derived from the ownership, lease and operation of an aircraft engine used for the international transport of goods or passengers to arise outside Malta. Additionally, all income derived from the ownership, lease and operation of an aircraft engine used for the international transport of goods or passengers are deemed to arise outside Malta. Not least, Malta’s tax treaties are generally based on the OECD model and income derived from the operation of aircraft in international traffic is generally taxable only in the state where the effective management of the enterprise is situated and where this is Malta. The operator can benefit from a full imputation system of taxation, the absence of withholding tax on outbound payment of dividends and interest, and refunds of tax paid to non-resident shareholders.
The Qualifying Employment in Aviation (Personal Tax) Rules, 2016, present a favourable measure introduced to attract EEA / Swiss and third-country nationals to hold an eligible office in the aviation sector in Malta. Persons receiving an income from an ‘eligible office’ under the Rules would be entitled to benefit from a flat tax rate of 15%. The tax benefit applies to EU, EEA or Swiss nationals from the first year the individual is taxable in Malta and for a consecutive period of 5 years. A further extension of 5 years for a maximum of 10 years may be applied for. As for third-country nationals, they are eligible to a reduced tax rate for 4 years and thereafter for a once-only extension of another 4 years. Let us help you identify your eligibility under the Rules. Other eligibility criteria apply, and we can help you ascertain your eligibility under the Rules and with your application thereunder.