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Shipping registration under the Maltese flag

Malta's old maritime tradition offers the international shipping community a reputable open ship register that is one of the eight largest registers in the world.  The Malta Flag is a flag of confidence and enjoys ‘white flag’ status. Owners and operators have come to recognize the island as a secure and cost-efficient centre for the registration and management of vessels.

  1. Advantages of the Malta Flag
  2. The Maltese ship Mortgage
  3. The Registration Process
  4. Bareboat Charter Registration
  5. Licensed Shipping Organisations
  6. Tax incentives
  7. Registration fees and annual tonnage tax
  8. Ship Management Companies


Ship registration is regulated by the Merchant Shipping Act, 1973 (the Act) as amended. The Act harmonizes Maltese legislation with the provisions of international maritime conventions including among others, IMMARSAT, LL66/88, the STCW 95, ISM Code, the ILO Convention and applicable EU legislation.

All types of vessels, from pleasure yachts to oil rigs, may be registered under the Malta flag, irrespective of their owners nationality. A Maltese ship may also be bareboat charter registered under another flag.

Eligibility of vessels to be registered under the Malta Flag

There is no age limit for a vessel to be eligible for registration under the Malta flag. However:

  • Ships of 15 years and over, but under 20 years, must pass an inspection by an authorized flag state inspector before or within one month of provisional registration; and
  • Ships of 20 years and over but less than 25 years must pass an inspection by an authorized flag state inspector prior to being provisionally registered.

As a rule, trading ships of 25 years and over may not be registered under the Malta Flag

Advantages of the Malta Flag

  • Low company formation and ship registration fees
  • Low tonnage tax
  • Licensed Shipping Organisations are exempt from income tax
  • No restrictions or taxation on the sale or transfer of shares of a company owning Maltese registered ships
  • Beneficial VAT regulations whereby any VAT paid in connection with the maintenance of the ship and the Maltese company (such as the legal and accountancy and compliance fees) may be reclaimed back
  • Reduced compliance requirements for certain types of licensed shipping organisations
  • No restrictions on the nationality of the ship owner
  • No restrictions on the nationality of the master, officers and crew
  • No trading restrictions
  • An effective mortgage system


The Maltese ship Mortgage

A ship registered in Malta together with its equipment, machinery and other accessories, or any share therein, may be made a security by way of mortgage. A mortgage is indivisible notwithstanding the divisibility of the underlying debt which it may secure. A mortgage over a Maltese ship shall have effect vis-à-vis third parties once it is duly recorded in the register.   The priority of mortgages over the said ship is determined by the date and time of their record in the register.

Maltese mortgages offer adequate protection to ship financiers for the following reasons, among others:

  • They enjoy a high priority in an eventual ranking of claims against a Maltese ship
  • Mortgages constitute executive titles and may be enforced immediately without the need to institute lengthy court proceedings
  • They attach to any proceeds from any indemnity as well as any insurance proceeds
  • A mortgagee may prohibit the registration, without his prior written consent, of subsequent mortgages in favour of other creditors, unless such further mortgage is executed in favour of an existing mortgagee
  • The Registrar of Ships is bound to notify the mortgagee upon the transfer of a registered ship to a new Maltese owner
  • The sale of a Maltese ship to a foreign owner requires the prior written consent of all registered mortgagees;
  • A mortgagee may apply for any extensions, pay fees and do all such things in the owner’s name in order to maintain the status and validity of the ship’s registration.

A foreign mortgage is recognized as having the status and rights attaching to a Maltese mortgage if such mortgage has been validly recorded in the ship registry of the country under whose laws the ship is documented and other conditions are satisfied.


The Registration Process

Provisional Registration

The registration of a ship under the Malta flag commences with the provisional registration which is a fairly straightforward procedure and initiated by the filing of the following documentation:

  • A duly executed original Power of Attorney authenticated by a notary and legalized by Apostille in terms of the Hague Convention, 1961 to act for the ship owner in the registration of the vessel under the Malta flag; (a draft Power of Attorney may be provided on request)
  • An application for registration (Form MS (R) 21A)
  • A copy of the ship's International Tonnage Certificate
  • A declaration of ownership made before the Registrar by the owner or an authorized local representative
  • In the case of corporate owners, the memorandum & articles of association of the company
  • I.S.M. Code Declaration
  • Application for a Minimum Safe Manning Certificate
  • A Seaworthiness Certificate
  • An application for a change of name of vessel, if required

We would also require a copy of:

  • The Certificate of Registry under which the vessel is currently registered
  • The existing Safe Manning Certificate
  • The current Radio Licence
  • Class Certificate
  • SOLAS Certificates (Safety Equipment / Safety Radio / Safety Construction or Safety Passenger)
  • Load Line Certificate
  • IOPP Certificate
  • Document of Compliance of the vessels Management Company
  • The current SMC and ISSC Certificate
  • Copy of last Continuous Synopsis Record

Provisional registration produces the same legal effects as permanent registration.  It has a validity of six months, which can be extended for a further six months.  During this period of provisional registration, any remaining documentation for permanent registration but not yet submitted, must be submitted, particularly, evidence of ownership and deletion of former registry. 

  • Upon provisional registration, the Registrar of Ships would issue the following:
  • A non-operational provisional Certificate of Malta Registry
  • A Minimum Safe Manning Certificate
  • A ships Carving and Marking Note
  • The Declaration in terms of Art. 3.1 of the ISM Code.

The Registrar of Ships will also authorise the relevant classification society to issue the following documents to the vessel on behalf of the Government of Malta:

  • Statutory Certificates including
  • Safety Management Certificate (SMC) in terms of the ISM Code, and the International Ship Safety Certificate (ISSC) in terms of the ISPS Code

Once the necessary surveys are successfully completed and the statutory certificates issued, and SMC and ISSC audits satisfactorily concluded, the Registrar would then issue the Operational Certificate of Malta Registry.



Permanent Registration

The following documents are to be submitted for permanent registration:

  • A bill of sale or any other document of title, in original
  • A deletion certificate from the last country of registry, evidencing the vessel to be free from any encumbrances
  • A certificate of Survey and a copy of the Tonnage Certificate (ITC69), certifying that the vessel has been surveyed in accordance with Maltese regulations
  • A ships Carving and Marking Note
  • At least one crew list


Bareboat Charter Registration

Inbound Bareboat Charters

Maltese law allows a ship registered under a foreign flag to be registered as bareboat charter under the Maltese flag provided that the ship is registered in a compatible registry. Ships which may be registered as a bareboat charter under the Maltese flag should satisfy the following conditions:

  •  The ship is bareboat chartered to a citizen of Malta, or to bodies corporate or such other persons qualified to own a Maltese ship
  •  The ship is not a Maltese ship, and is registered in a compatible registry and s not registered in another bareboat charter registry


The following certified documents should be submitted to the Registrar on application for the registration of a ship as a bareboat charter:

  • An application for registry under this Part of this Act made by the charterer or his authorized agent containing such information as may be required by the registrar;
  •  A declaration of bareboat charter made by the charterer accompanied by a copy of the charter agreement, which charter agreement shall not be available for public inspection;
  •  A transcript or an extract of the underlying registration of the ship which shall include a description of the ship, the owners and, where applicable, all registered mortgages and encumbrances of the ship, and such document shall be available for public inspection; and
  • The consent in writing for the ship to be bareboat charter registered in Malta of:
  • The appropriate authorities of the underlying registry who may be further required by the registrar to declare that during the period of bareboat charter registration the ship will not be entitled to fly their flag
  • The owners of the ship
  • All registered mortgagees


Outbound Bareboat Charters

Similarly, a ship registered under the Maltese flag may be registered in a foreign registry under a bareboat charter. An outbound bareboat charter of a Maltese ship required the foreign bareboat charter registry where the ship is to be registered to be a compatible registry

The following documents are submitted to the Registrar in Malta in order to give consent to registration in a foreign registry:

  • An application for bareboat charter registration in a foreign registry made by the owners
  • The consent in writing to such registration of all registered mortgagees
  • A written undertaking by the owners to surrender the certificate of registry issued in terms of Maltese Law  within thirty days from entry into the bareboat charter registry
  • A written undertaking by the charterer that the Maltese flag shall not be hoisted during the period of bareboat charter registration
  • A copy of the bareboat charter

Licensed Shipping Organisations

A licensed shipping organisation is a tax efficient legal vehicle used to own and operate ships and vessels. A licensed shipping organisation may be set-up with one or more of the following objects:

  • The ownership, operation (under charter or otherwise), administration and management of a ship or ships registered as a Maltese ship and the carrying on of all ancillary financial, security and commercial activities in connection therewith
  • The ownership, operation (under charter or otherwise), administration and management of a ship or ships registered under the flag of another state and the carrying on of all ancillary financial, security any commercial activities in connection therewith
  • The holding of shares or other equity interests in entities, established for any of the purposes stated in this article and the carrying on of all ancillary financial, security and commercial activities in connection therewith
  • The raising of capital through loans, the issue of guarantees or the issue of securities by the company when the purpose of such activity is to achieve the objects for the shipping organisation itself or for other shipping organizations within the same group
  • For the carrying on of such other activities within the maritime sector which the Minister may, on the advice  of the Authority, from time to time prescribe by regulations as qualifying for the above purpose


Types of entities

 A licensed shipping organisation may be set-up as a:

  • Limited liability company
  • Limited partnership
  • General partnership

Where the shipping organisation is set-up as a company it may enjoy the status of a:

  • A public company; or
  • A private company.

In addition to the above, a shipping organisation may also be any foreign corporate body or other entity enjoying legal personality in terms of the law under which it has been established or constituted and which has established a place of business in Malta.


Tax incentives


Exemptions from income tax in Malta

  • Income from shipping activities derived by a licensed shipping organisation is exempt from income tax
  • The liquidation, redemption, cancellation, or any other disposal of shares, securities or any other interest, including goodwill, held in any licensed shipping organisation (owning, operating, administering or managing a tonnage tax ship) is exempt from income tax
  • Interest or other income payable to a person in relation to any financing of the operations a of licensed shipping organisation is exempt from income tax


Exemptions from stamp duty

  • The registration of a tonnage tax ship under the Merchant Shipping Act
  • The issue of shares or securities in of a licensed shipping organisation or the purchase, transfer, assignment or negotiation of any security or interest of any licensed shipping organisation
  • The sale or other transfer of a tonnage tax ship or any share thereof
  • The registration of any mortgage in relation to a tonnage tax ship or a licensed shipping organisation
  • The assignment of any rights and interests, in respect of any ship


Exemptions from Social Security Contributions

Persons not resident in Malta who are officers or employees of a licensed shipping organisation, and the organisation in respect of such officers and employees, shall be entitled to be exempt from the provisions of the Social Security Act provided that this provision shall apply only in respect of transactions, operations, things and persons that are relevant and necessary to the purposes for which a licensed shipping organisation is constituted, or to its management or administration thereof. 


Reduced tax compliance requirements


Licensed shipping organisations which only derive income which is exempted from tax are not required to file a tax return. Such organisations are only required to file a simple declaration stating the income of such organisations is income exempted from the provisions of the Income Tax Act.


Registration fees and annual tonnage tax


A. Subject to the provisions of sub article (4) of article 7 of this Act, when there is a change in the particulars or category of a registered ship and the new applicable fee payable on registration or annually is higher than that already payable, the provisions of sub-article (7) of article 19 of this Act in respect of laid up vessels shall apply mutatis mutandis.

Ship

Fee on registration

Basic fee

Annual Tonnage Tax

(i) Ships less than 24 meters length overall

Fishing vessels of category A, B and C

€70

€25

€36

Commercial Yachts

€115

€105

€175

All other ships less than 24 metres length overall

Less than 50 gross tonnage

€115

€175

of 50 gross tonnage or more

€115

€175

Ships of 24 metres length overall or more:

(ii) Pleasure yachts

23 cents per net tonnage subject to minimum of €172.50

€220

35 cents per net tonnage subject to minimum of €350

(iii) Commercial yachts; which do not fall under category (iv)

Rates as appear in para B

€590 for year of registration, €1060 thereafter

Rates as appear in para B

(iv) Non-propelled barges, bareboat charter registered in a foreign registry, laid up or under construction excluding ships in
category (ii)

Rates as appear in para B subject to reduction as appear in para C

€115

Rates as appear in para B subject to reduction as appear in para C

(v) Commercial vessels and fishing vessels less than 2500 gross  tonnage, and do not fall under categories (ii), (iii) and (iv) above  

Rates as appear in para B subject to reduction as appear in para C

€220

Rates as appear in para B subject to reduction as appear in para C

(vi) All other ships of 24 metres length overall or more and do not fall under categories (ii), (iii), (iv) and (v) above
 

Ships less than 300 gross tonnage

Rates as appear in para B subject to reduction as appear in para C

€335 for year of registration, €805 thereafter

Rates as appear in para B subject to reduction as appear in para C

Ships of 300 gross tonnage or more

Rates as appear in para B subject to reduction as appear in para C

€590 for year of registration, €1060 thereafter

 

B.The rates per net tonnage payable on registration and annual tonnage tax when referred to in paragraph A

Ship of Net Tonnage (NT)

Exceeding

Not Exceeding

Fee on Registration

Annual Tonnage Tax

0

2500

€575

€875

2500

8000

€575 plus 23 cents for every NT in excess of 2,500 NT

€875 plus 35 cents for every NT in excess of 2,500 NT

8000

10 000

€1,840 plus 7 cents for every NT in excess of 8,000 NT

€2,800 plus 19 cents for every NT in excess of 8,000 NT

10 000

15 000

€1,980 plus 7 cents for every NT in excess of 10,000 NT

€3,180 plus 14 cents for every NT in excess of 10,000 NT

15 000

20 000

€2,330 plus 7 cents for every NT in excess of 15,000 NT

€3,880 plus 12 cents for every NT in excess of 15,000 NT

20 000

30 000

€2,680 plus 7 cents for every NT in excess of 20,000 NT

€4,480 plus 9 cents for every NT in excess of 20,000 NT

30 000

50 000

€3,380 plus 7 cents for every NT in excess of 30,000 NT

€5,380 plus 7 cents for every NT in excess of 30,000 NT

50 000

n/a

€4,780 plus 7 cents for every NT in excess of 50,000 NT

€6,780 plus 5 cents for every NT in excess of 50,000 NT



C.Reduction or increase on the rates per net tonnage on registration and annual tonnage tax, when referred to in paragraph A.

Age of Ship (Years)

Exceeding

Not Exceeding

Reduction or Increase on Annual Tonnage Tax (%)

0

5

-30

5

10

-15

10

15

-

15

20

+5

20

25

+10*

25

30

+25*

30

n/a

+50*

* Subject to minimum increase of €1164.69

D.Where the annual tonnage tax for any one year is paid after the anniversary of registration for that year it shall be increased by ten per cent.

E.For the purposes of these registration fees:

  1. ‘Age’ in relation to a ship, means the difference between the year in which the ship was built and the year in respect of which the fee is due
  2. ‘Commercial vessel’ means a vessel granted a licence or permit to operate in terms of the Commercial Vessels Regulations, 2002 and which is valid
  3. ‘Fishing vessel’ means a vessel granted a licence or permit to fish in terms of the Fisheries Conservation and Management Act and which is valid
  4. ‘Gross tonnage’ , ‘length overall’ and ‘net tonnage’ shall be that as may be ascertained in terms of the tonnage regulations made under the Act
  5. ‘Laid up vessel’ means a vessel which is not a pleasure yacht or a commercial yacht and which qualifies as a laid up vessel in terms of sub-article (7) of article 19 of the Act

 

Ship Management Companies

Malta companies which derive income other than the type of income exempted from income tax such as ship management companies may be set-up as a normal company constituted under the Companies Act.

The income derived by a ship management company constituted under the Companies Act is subject to a corporation tax of 35%. Any expenses related to the activities derived by such companies may be deducted from the chargeable income. 

Tax refunds
Despite the relatively high corporation tax rate, such companies are entitled to avail themselves from a Maltese tax refund system. Under the tax refund system, the distribution of profits entitles the shareholders of the company to claim a 6/7ths refund of the corporation tax paid in Malta. Malta does not levy any withholding tax on the distribution of a dividend.

The refund of the corporation tax together with the absence of withholding tax on outbound dividends creates potential opportunities for ship management companies who want to establish themselves in a reputable EU jurisdiction and yet enjoy a low effective rate of tax.

shipping-illustration

For more information, kindly contact:

Neville Cutajar - Managing Partner: This email address is being protected from spambots. You need JavaScript enabled to view it.