Taxation of Ship Management Companies in Malta, by Dr. Larry J. Gauci LL.M. (IMLI), LL.D. of Hugh Peralta & Associates – Advocates
Last Updated on 20 July 2010
For a ship management company to qualify for the fiscal benefits under the new tonnage tax regime as amended, the company has to operate from Malta. Therefore the company must have an office in Malta manned with qualified personnel.
Basically, qualifying ship management companies will not pay any income tax on profits arising in Malta, provided they pay 25% of the annual tonnage tax for each vessel under their management. This applies both to ship management companies providing technical management and, also, to crew management companies.
This tax advantage is attractive for jurisdictions like Norway, Denmark and UK where the cost of operations are much higher than Malta's.
Following the publication of the EU Commission’s Communication providing guidance on State aid to ship management companies (2009/C132/06) last year, Malta has amended the fiscal benefits available under Malta’s tonnage tax regime with a view to extend the tonnage tax benefits to other qualifying persons, including, ship management companies. The link to the Malta flag is no longer a sine qua non requirement, and it is now possible for a Maltese shipping organization (private, limited liability) to own a vessel registered in a Shipping Register of another Member State, provided certain conditions are met.
The amendment tonnage tax regulations cater for 3 new scenarios, which are the following:
A Maltese shipping organization owning a vessel registered under another EU flag.
The new regulations have extended the fiscal benefits granted pursuant to the tonnage tax regime to vessels which qualify as “Community ship’. A vessel shall only qualify as a “Community ship” if the shipping organization has paid in Malta 25% of the annual tonnage tax that would be payable had the ship been flagged in Malta.
In order for a Non-Community ship to be eligible under this category, a number a conditions have to be fulfilled:
The last 2 conditions (iii) and (iv) are deemed to have been satisfied if, in the discretion of the Registrar-General, there is a commitment by the shipping organization to increase or at least to maintain the share of tonnage under the flag of 1 of the Member States.
Moreover, 25% of the tonnage tax that would be payable had the ship been flagged in Malta, will have to be paid in respect of such vessel.
Income Tax exemptions to ship management companies:
A ship management company is a shipping organization which is established in the Community, which has assumed responsibility for either or both of the technical or crew management of a vessel and in respect of which the ship management company has paid 25% of the annual tonnage tax payable in respect of the particular vessel. Furthermore, the ship management company has to comply with international standards and fulfils requirements established under EU and Maltese law.
The ship management activities in respect of which the tax exemption applies are those activities carried out by a ship manager and consisting in, but not limited to, the entire crewing of a ship, and, or the provision of technical management thereto. In other words, the income of a ship management company is exempt from tax in Malta, provided the following conditions are met;
Again, the last 2 conditions are deemed to have been satisfied, if in the discretion of the Registrar-General, there is a commitment to increase or at least maintain the share of Community tonnage, in respect of which ship management activities were being provided by it on the 11th June 2009 or 1 year from when the ship manager began to operate.
Posted in: Shipping in Malta