Malta - Aviation Registration Fact Sheet Acumum Legal & Advisory


Published on

Malta, an EU country, has flexible registration, low tax & generous fiscal rules to attract the aviation industry.
Low Tax
No Import Duties
15% income tax for employees
A legitimate low tax EU jurisdiction.
5% effective corporate tax rate, no withholding, capital gains or entry or exit taxes. No inheritance or wealth taxes.

Published in: Business
  • Be the first to comment

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Malta - Aviation Registration Fact Sheet Acumum Legal & Advisory

  1. 1. Aviation Law Registration & Services Registration Requirements Leasing & Financing Taxation & Corporate Structuring (SPVs) VAT - New Reduction Rules Fringe Benefit & Income Tax Reduction Why Malta? Aviation, highlighted by the Maltese Govern- ment as a growth industry is actively encouraged with the provision of very attractive fiscal benefits. As a highlighted industry, Malta has undergone some significant changes in order to encourage the aviation industry:  Aircraft Registration Act, 2010 - has opened up and increased flexibility in the registration and use of financing for aircraft  Acceding to the Cape Town Convention of International Interests in Mobile Equipment & Aircraft Protocol - the international standard - ensures added security to creditors; allowing ‘self help’ remedies without recourse to Courts; possibility of ‘Cape Town discounts’ on interests rates for financiers  As a member of the EU, Malta issues commercial opera- tors with EU-OPS 1 certification (aircraft) and JAR-OPS 3 (helicopters); providing 24/7 registration. Eligibility to Register Aircraft Persons, trusts or undertakings that may register aircraft: Commercial Registrations  Government of Malta,  Owners operating or owing aircraft, under construction, or temporarily not in operation or managed,  Operators of aircraft, under a temporary title (i.e. lessee),  Buyers under conditional sale or title reservation or simi- lar agreement, satisfying certain conditions & has opera- tion authorisation,  Trustees of qualifying beneficiaries. Private Registrations No EU restrictions: individuals, citizens of a recognised undertaking established in a OECD member country, or another country approved by the Government of Malta, if such individual: (i) can legally own or operate an aircraft; (ii) appoints a Malta resident agent to represent the owner’s registration interests in Malta; and (iii) complies with applicable regulations. Security Registration - National Aircraft Register Malta has introduced flexible rules so as to allow as many owners & operators as possible to register aircraft with the Malta aircraft registry:  Citizens of EU member states, EEA or Switzerland having a place of business or residence therein  Companies or other undertakings in a form recognised by Maltese law (comparable to UK Companies Act), having its registered office, central administration & principal place of business within EU, EEA or Switzerland. A non qualifying natural person who is a citizen of, or a company or undertaking established in an approved jurisdiction, can register an aircraft under construction, or not used to provide air service. Fractional Ownership An aircraft’s title may be split between co-owners in (Continued on page 2) Malta - Promoting & Incentivising the Aircraft Industry 100% EU & OECD Compliant—A Legitimate Low Tax EU Country Malta’s International Legal & Advisory Firm Legal | Tax | Accounting
  2. 2. Aviation Law Registration & Services fractions or percentages; each fraction can be financed and secured by different creditors. Each fractional ownership interest may be:  Noted in the National Aircraft Register - certifications are issued by the Director General of Civil Aviation,  Treated as separate international interests via the Cape Town Convention - each interest capable of being sepa- rately registered in the International Registry. Fractional interests are also recognised under the Cape Town Convention; each fractional interest may be registered in the International Registry. Security of Creditors’ Interests Under Maltese law, mortgages are used as security over aircraft for creditor’s interests in respect of loans or debts. Mortgages can be executed in favour of a security trustee who would be entitled to exercise all rights in relation to the mortgage. As such a pool of financiers may appoint one of themselves (or another) to expedite or oversee matters relating to the mortgage. Owners’ Priority. In bankruptcy or insolvency matters, all owner claims have security preference over all other creditors. Security over an aircraft and the engine (whether attached or not) is separated in so far as the assets are the property of different owners. Self help is available in the even of a mortgage default, without requirement of the Courts. Subject to giving notice to the debtor, the owner may sell, take possession in full or share portion, maintain registration, lease, and / or receive payments and income, of the aircraft. Taxation - Income Remittance: As an ex-British colony, Malta retains the prin- cipal of domicile . A foreign incorporated and therefore not domiciled SPV, resident in Malta —subject to certain conditions analogous to ’effective management & control’ & type of income - will not be subject to Malta tax if foreign sourced income is not remitted to Malta. (See Remittance System Fact Sheet for further information) Effective Corporate Tax Rate Malta is the only EU country with a full imputation tax system, resulting in a 5% effective corporate tax rate after the application of tax refunds & credits. The 5% corporate rate can be further reduced by claiming:  Accelerated tax depreciation,  ‘Step-Up’ of aircraft value from book value to fair market value upon migration to Malta,  A foreign tax credit on payments made to Malta. Finance & Leasing The finance lessee and not the financing lessor is regarded as the owner of the aircraft, resulting in the following benefits: Operating Leases  Lessor - tax is only levied on the full amount of lease income. If responsible for maintenance, tax depreciation for wear & tear, can also be deducted.  Lessee - can deduct full amount of lease payments &, if responsible, for maintenance, can claim the tax depreciation for wear & tear, can also be deducted. Finance Leases  Lessor - is taxed only on the interest portion of the finance charge which is income. If lessor exercises an option to purchase an aircraft at the end of the lease period, the purchase price is considered to be of a capital nature & no Maltese tax is due from lessor.  Lessee - is regarded as owner and can deduct finance charges & costs for repairs, maintenance & insurance & claim tax depreciation. (Continued on page 3) Malta’s International Legal & Advisory Firm Legal | Tax | Accounting Acumum Legal & Advisory - Maltese, UK & International Lawyers Knowledgeable | Superb Client Service |Cost Efficient | | Skype ID: acumum Malta Office: +356 2778 1700 260 St Albert’s Street, Gzira, GZR 1150 Information for guidance purposes only © Acumum 2012. All Rights Reserved
  3. 3. Depreciation - Short Wear & Tear Periods Depreciation can be accelerated Minimum years over which items can be deducted: Per Annum 6 16.7 6 16.7 6 16.7 4 25% Aviation Law Registration & Services VAT - New Reductions—Mitigation The lease of an aircraft is considered a ‘service’, subject to EU VAT, which is levied on the amount of time the air- craft supplies services within EU airspace. The leas- ing service being deemed to be supplied in Malta, the VAT due on the lease is at the standard VAT rate in Malta of 18%. However, new rules issued by the Maltese Government dictates that VAT is due only on the period that the aircraft is used within EU airspace. Malta utilises a technical test to determine the exact amount of time an aircraft has spent within EU airspace and consequently the VAT due. The test takes into consideration: the features of the aircraft - including aircraft type, MTOM, maximum fuel capacity, fuel burn, optimum altitude and optimum cruising speed. As mentioned above, VAT is then due solely on the period of use of the aircraft in the EU as per the calculations. To access the Government of Malta’s Aviation VAT calculator, please go to: Importation of Aircraft - Malta (EU) - 0% VAT Depending on the structure employed, importation of an aircraft into Malta (and therefore the EU), can be or- ganised so that no VAT is levied. For aircraft operating under a Maltese AOC, there is an automatic exemption and as such no VAT is levied. Investment Tax Credits Any person that carries on a trade or business consisting of the repair, overhaul or maintenance of aircraft, engines or equipment incorporated or used in such aircraft may benefit from investment tax credits against the tax due on its chargeable income to Malta. Unutilised investment tax credits may be carried forward against tax due in subsequent years at a multiplied amount. Other Aviation Fiscal Benefits  No import duties for civil aircraft,  No Stamp Duty on any aircraft, as aircraft are not deemed chargeable assets under Maltese tax law. Fringe Benefits - No Tax No tax is due on the private use of aircraft by non- residents & to certain entities engaged in the ownership, leasing, or operation of aircraft / engines used in the inter- national transportation of passengers or goods. This is particularly useful for owners of private aircraft, wishing to benefit from Malta’s low tax system in the operation of their aircraft. Reduced Employment Income Tax Rates For expats working in Malta:  with a minimum annual income of €78, 207 (RPI adjusted),  employed under an applicable employment con- tract,  holding senior level titles, only 15% tax on income is levied (See High Earner Tax Scheme) for four or five years. Conclusion. Malta offers the aviation industry a legitimate, onshore, low tax jurisdiction within and through which to operate aircraft and structure ancillary assets. Please con- tact us for more information in respect of the registration of aircraft, securitisation and / or structuring of aviation SPVs Acumum Legal & Advisory: Maltese, UK & International Lawyers Knowledgeable | Superb Client Service | Cost Efficient | | Skype ID: acumum Malta Office: +356 2778 1700 260 St Albert’s Street, Gzira, GZR 1150 Malta’s International Legal & Advisory Firm Legal | Tax | Accounting
  4. 4. Malta - An Aviation Jurisdiction Benefits At A Glance No withholding taxes on lease payments made by Maltese lessees to non-residents in respect of aircraft operated in the international transport of passengers or goods No withholding taxes on interest payments made by the Maltese lessees to non-resident financial lessors Competitive depreciation allowances for aircraft and engines Tax credits for companies engaged in the repair, over- haul or maintenance of aircraft, engines or equipment incorporated therein Tax refunds to shareholders on distribution of profits No taxable fringe benefits arising from the private use of aircraft by non-resident individuals who are sharehold- ers, employees or officers of companies involved in the international transport of goods or passengers. Extensive double tax treaty network - 64 and counting Acumum’s Aviation department can provide you with a variety of services International tax efficient structuring & optimisation of aircraft purchases, financing, leasing, corporate & of operator’s business Registration, amendment, transfer &deletion of aircraft Registration, amendment, transfer and discharge of national and/or international security rights of Malta-registered aircraft Chartering & leasing agreements Purchase & sale transactions Servicing, maintenance & repair agreements. Searches of the Malta national aviation register - aviation & Maltese aircraft – owning entities Structuring & implementation of aircraft financing & re-financing transactions Preparation & review of - loan agreements, security agreements, - statutory mortgages over aircraft body and engines, - collateral deeds of covenants, issuing of legal opinions Enforcement of claims against Malta-registered aircraft & their engines, and aircraft situated in Malta Co-ordination of all technical requirements for the operation of commercial aircraft with industry experts Malta’s International Legal & Advisory Firm Legal | Tax | Accounting Acumum Legal & Advisory— Maltese, UK & International Lawyers Knowledgeable | Superb Client Service | Cost Efficient | | Skype ID: acumum Malta Office: +356 2778 1700 260 St Albert’s Street, Gzira, GZR 1150 Information for guidance purposes only © Acumum 2012. All Rights Reserved