The 1920s marked the beginning of civil aviation in Malta, and it was from this decade that a keen interest in aviation was established in the Maltese. The experience Malta has gained throughout the years has rendered it a popular destination for internationally renowned aviation companies. The Aircraft Registration Act, which has been implemented into Maltese Law in 2010, has helped identify Malta as a highly competitive jurisdiction and has brought about economic development within various areas of the aviation industry, including maintenance, repair and overhaul operations, back-office setups, R&D and the production of aircraft components. The legal infrastructure that has been established, Malta’s geographic location, the recognition of rights in aircraft, the attractive fiscal regime as well as the freedom of movement within European Union Member States on international and internal flights have made Malta an ideal jurisdiction for private aircraft registration.
Aviation Law in Malta
Within the past decade, Malta has introduced the Aircraft Registration Act, which has broadened the services offered by the aviation sector. The main changes that have been noted include wider registration possibilities, encouraged growth within the industry, recognition of fractional ownership of aircrafts, the introduction of the possibility of leasing an aircraft and the use of trusts. Since the implementation of this Act there has been a significant increase in the number of registered aircrafts in Malta, where according to the current aircraft registry list, 262 aircrafts have been registered in Malta as of September 2017.
Before registering an aircraft, article 6 of the Act holds that the registrant must satisfy certain requirements, where the following are eligible to register a private aircraft:
- A citizen of Malta or of a Member State of the EU or of an EEA State or Switzerland, who has a place of residence or business in Malta, the EU, the EEA or Switzerland. This includes persons sharing in the ownership of an aircraft through the community of acquests.
- A person mentioned in the point above who, directly or indirectly, owns or controls not less than 50% of undertakings which are formed and are in accordance with the Laws of Malta, or those of an EU Member State, or of an EEA state or of Switzerland. It is also required that the person has a registered office, central administration or principal place business in Malta, an EU Member State, an EEA State or Switzerland.
- A natural person who is a citizen of, or has an established undertaking in an approved jurisdiction (besides those mentioned above), provided that such person has the legal capacity to own or operate an aircraft under the law in which is has been established or registered, and that it complies with the requirements held in this act and any relevant regulations or guidelines. The Director-General must be satisfied that there will be observance of the laws of Malta in relation to civil aviation, and that the requirements applicable for international registrants are satisfied.
- If the registrant is a trustee, the Director-General must ensure that the beneficiaries of the relevant trust are eligible to register an aircraft under this act.
Article 5 also holds that, in addition to the persons eligible to register an aircraft, a registrant may also be an owner of the aircraft who operates it, a buyer of an aircraft under conditional sale or title reservation or having a similar agreement.
It has been argued that by increasing the eligibility of registrants, legal issues, particularly those related to finance would be addressed. The process has been made easier for those owning a private aircraft as they are not subject to the qualifying requirements for air services. Fractional ownership has also been introduced and entitles a holder to use the aircraft for a specific amount of time, providing flexibility and lowering costs for business aviation. Trusts have also been introduced in relation to the plurality of ownership of private aircrafts, allowing the registration of an aircraft according to the terms laid out in the beneficial trust. The aircrafts will consequently be registered under the national aircraft register.
According to Article 8 of the act, applications for registration are to be made in writing to the Director-General and must present evidence in relation to the aircraft, the ownership, acquisition, chartering and operation and the qualifications of the registrant. This information will be used by the Director-General in order to determine whether to issue a Certificate of Registration, and under which classification the aircraft will fall under in order to establish which rules and regulations apply to that particular aircraft. Once the Director-General is satisfied, he shall register the aircraft and shall include the following details relating to the aircraft:
- The certificate registration number
- The nationality marks
- The registration marks assigned to it
- The name of the constructor and its designation
- The serial number
- The manufacturer, serial numbers and physical details of the engines attached to the aircraft and any replacement engines which are designated for use on the aircraft.
The Cape Town Convention
One of the main benefits of the Aircraft Registration Act was the ratification of the Cape Town Convention on International Interests in Mobile Equipment and Aircraft Protocols into national legislation. The main aim of this convention is to ensure enforceable rights and remedies in aircraft objects, despite the fact that they have no fixed location. The convention also regulates cross border financing and aviation leasing transactions, and allows persons to register an international interest, creating priority ranking of certain security interests. Therefore, it can be noted that this convention ensures international interest on such issues, and will ensure that specific needs of the aviation industry are met.
Tax Benefits for Private Aircrafts
Malta’s efficient tax system in the aviation industry has rendered it an ideal jurisdiction for aircraft business, including maintenance, registration and leasing.
With the recent introduction of private aircraft leasing, a VAT treatment has been introduced to reduce the percentage of lease charges. The VAT rate can be calculated based on the time the aircraft has been used in the EU airspace, the aircraft range in kilometers and the percentage of community use. The relevant VAT treatment will hence be applied.
The nature of private aircrafts, since their use is private and no income is generated, are not subject to any tax obligations in Malta. Fringe Benefits resulting from the use of a private aircraft by non-residents is also not subject to tax in Malta.
Aviation Law Services
Chetcuti Cauchi has gained plenty of experience in the aviation industry, where, as a result of its good relationship with the local civil aviation department, it provides efficient service to its clients. Our Malta Aviation Team is well versed in:
- Registering aircrafts in Malta
- Aircraft Leasing
- Negotiating and drafting aviation related service agreements
- Insurance
- Managing of structures for VAT and tax planning maximisation
- Assisting with applications for Air Operator Certificates and Operating Licences
- Aircraft mortgage
- Aircraft sales and purchases
- Aircraft charter and lease
- Aircraft finance and insurance
