Malta Tonnage Tax Regime
After 5 years of discussion with the European Union, the Malta Tonnage Tax Regime has been approved by the European Commission. Upon doing so, it has been accepted that this scheme is in line with EU State Aid Guidelines, and will nonetheless ensure a level playing field between Malta and other European Shipping Companies. This scheme will promote the registration of ships in Malta as well as those within Europe, strengthening Malta’s prominent position within the merchant shipping industry.
Once it has been determined that the shipping organisation in question is eligible under this scheme, the shipping entity undertaking shipping activities will be taxed on the basis of its ship net tonnage, rather than its actual profits. It will, therefore, be exempt from income tax under the Income Tax Act once payment of the tonnage tax is made. Other fiscal benefits may also apply under this scheme, including the inapplicability of the Social Security Act, the Duty on Documents and Transfers Act, the External Transactions Act, as well as the exemption from tax on the distribution of profits.
The requisites for the Tonnage Tax Regime to apply are quite generous, where the shipping organisation must meet the following conditions:
- The ship is operated through a genuine shipping organisation;
- The vessel is in accordance with the relevant Maltese regulations;
- The activities of the shipping organisation are defined as shipping activities under Maltese law;
- The shipping organisation owns, operates, administrates or manages at least 60% of its total tonnage under the flag of an EU/EEA state;
- Separate accounts are kept to distinguish receipts and payments relating to shipping activities from those of other business;
- Tax returns and documentation are submitted clearly showing eligible and non-eligible income; and,
- The ship registration fees and tonnage tax are paid.
The Maltese Tonnage Tax System Approved
Malta has been negotiating with the European Commission since 2011 regarding the tonnage tax system which was proposed. Various amendments were made in order to ensure that the rules in place would be compatible with EU State Aid Rules. The Commission outlined that the tax relief granted under the Malta tonnage tax regime is an appropriate instrument to address global competition and will provide the right incentives to maintain maritime jobs within the EU, whilst preserving competition within the EU Single Market.
Malta’s maritime sector has always played a prominent role in Malta’s economy due to its ideal location in the middle of the Mediterranean Sea. Through this scheme, Malta’s merchant shipping sector would be able to further flourish and truly establish itself as a maritime hub.
Learn More about the Malta Tonnage Tax System
Do you have questions on the Malta Tonnage Tax System? Feel free get in touch with Dr Silvana Zammit, Partner, Global Property, Yachts & Aircraft Lawyer for Chetcuti Cauchi Advocates
