The Maltese Government has recently confirmed its commitment towards the Shipping and Maritime cluster through the recently introduced Legal Notice 140 of 2018 aimed at attracting Ship and Yacht Management activities to Malta.
Ship management activities represent the operational side of the shipping industry. Maltese authorities, conscious of the scarce presence of third party managers on our shores, together with industry stakeholders, analysed the deficiencies in our current legal framework and have, for this reason, decided to take action in a consistent manner concurrently with the recently revamping of its tonnage tax rules.
The intention of Maltese Authorities is clearly that of attracting players on Maltese shores in order to strengthen the already robust ship registration and financing offering. These rules, together with the recently revamped tonnage tax regime, the sound corporate tax measures and the attractive social security policies are set to make Malta as the perfect home port for ship management activities.
Legal Notice 140/2018 in a nutshell
The Qualifying Employment in Maritime Activities and the Servicing of Offshore Oil and Gas Industry Activities (Personal Tax) Rules, 2018 introduced a favourable Tax Rate of 15% chargeable on employment income derived by individuals with respect to work or duties carried out in Malta (or in respect of any period spent outside Malta in connection with such work or duties).
The employers need to be:
- Undertakings holding either a Document of Compliance (DOC) issued in terms of the International Safety Management Code or a Seafarer Recruitment and Placements Services Licence issued in the terms of the Maritime Labour Convention; or
- Any undertaking involved in works on board of ships, with the exclusion of ships involved in regular ferry services on board of ro-ro and fast ferry ships; or
- Any undertaking providing services to offshore oil and gas and ancillary services industry.
The beneficiaries from such exemption could be:
- Chief Executive Officer;
- Chief Operations Officer;
- Managing Director;
- Chief Financial Officer;
- General Manager;
- Crewing Manager;
- Technical Manager;
- Technical Ship Superintendent;
- Designated Person Ashore;
- Chief Mate;
- Second Officer;
- Chief Engineer;
- Second Engineer;
Servicing of the Offshore Oil and Gas and Ancillary Services Industry Activities
- Chief Executive Officer;
- Chief Operating Officer; and
- Head of Training Academy (which Academy must be certified by an international accreditation institution).
In order to benefit from this favourable tax treatment, the employee must:
- be employed to fill one of the above mentioned senior categories and be in possession of professional qualifications or acceptable professional experience;
- be entitled to remuneration of at least €65,000 (exclusive of the annual value of any fringe benefits);
- be in receipt of stable and regular resources which are sufficient to maintain him/herself and his/her family members without recourse to the Maltese social assistance system;
- reside in accommodation regarded as normal for a comparable family in Malta;
- not be domiciled in Malta;
- be in possession of a valid travel document;
- be in possession of adequate sickness insurance in respect of all risks normally covered for Maltese Nationals for himself/herself and the members of his/her family;
- be protected as an employee under applicable Maltese laws.
In order for an eligible person to benefit from the reduced 15% rate he/she would be required to apply to the Authority for Transport in Malta (“TM”) for a formal determination confirming eligibility to the favorable tax rate. The eligible person would then need to submit a prescribed form endorsed by Transport Malta to the local tax authorities together with his/her tax return.
The eligible person must be a citizen of the EEA or a Third Country Nation and can avail of this tax benefit for a period of 5 years (4 in the case of third country nationals) with the possibility to extend such period for a similar period of time 5 years up to a maximum period of 10 years (9 in case of third country nationals) of assessment.
Ship Manager’s treatment under Tonnage Tax Rules
In addition to the above and as an alternative to the ordinary corporate tax on income, Ship Managers may be eligible to benefit from the tonnage tax exemptions with respect to the income derived from the management of vessels.
The conditions to be fulfilled in order to benefit from the tonnage tax exemption are the following:
- Provision of technical and/or crew management services. Commercial management is excluded from the exemption.
- Ship management companies must be set-up as Shipping Organisations in accordance with the provisions of the Merchant Shipping Act (Cap. 234 Laws of Malta) and duly approved as such by the Authority for Transport in Malta;
- Must be established in the European Union (EU) or in the European Economic Area (EEA);
- Maintaining of separate accounts clearly distinguishing the payments and receipts by the ship manager with respect to ship management activities from those not connected to such activity; and
- At least two-thirds of the tonnage of the ships to which the ship manager provides ship management activities is managed from the territory of the European Union or EEA;
- The tonnage in respect of which the ship manager provides ship management activities satisfies the flag-link requirement.
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