Malta Tonnage Tax Regime

| Published on 29 Mar 2018

Tonnage Tax Scheme

Over the past decade, Malta has become the EU’s largest shipping registry and the sixth largest globally. Such significant progress within the maritime transport sector can be attributed to Malta’s steady adherence to international standards, a relatively quick registration procedure and its advantageous tax regime. To further promote Malta as an ideal jurisdiction for ship registration, Malta will be introducing a new Tonnage Tax Rule as of 1st April. After 5 years of discussion within the European Commission, it has been decided that the Malta Tonnage Tax Regime is in line with EU State Aid guidelines and will nonetheless ensure a level playing field between Maltese and other European Shipping Companies. The aim behind this regime is to strengthen our tonnage tax principle, and therefore promote the registration of ships within Malta as well as registration within Europe. This scheme will be applicable within the next 10 years.

Application of the Malta Tonnage Tax Regime

The Malta Tonnage Tax Regime holds that any income, profits or gains which have been derived from a licensed shipping organisation from shipping activities may be exempted from tax under the Income Tax Act, provided that all relevant registration fees and tonnage taxes are duly paid. The requirements of this scheme further hold that for it to apply, one must have a Maltese company with a vessel registered within the EU which transports passengers or cargo. It is also essential that separate accounts are kept for shipping and non-shipping activities in order to properly distinguish between them. 
The Malta Tonnage Tax Regime works through the payment of a flat rate depending on the net tons, upon which the scheme itself specifies the standard rates applicable. This rate, however, also depends on the age of the ship, where the standard rate is applicable to those that are 10-15 years old, those which are older than 15 years are subject to a surcharge of maximum 50%, those which are between 0-5 years are subject to a reduction of 30 years, and those between 5-10 years are subject to a 15% reduction. 
Persons benefitting from the Malta Tonnage Tax Regime will also benefit from the inapplicability of the Social Security Act, provided they are operating as officers of employees within the licensed shipping organisation, which is not a resident in Malta. They will also be exempt from duty on documents in relation to the tonnage tax ship and will also not be subject to the restrictions held within the External Transactions Act relating to the ownership, operation, administration, management and purchase of a Malta Tonnage Tax Ship. 



Other Tonnage Tax Regimes

Malta has been recognised for its highly advantageous corporate tax rates as well as its social security tax rates. Currently, the corporate tax rate is 35%, however, this may be reduced to 5%, whilst the social security tax rate is 10%. Upon comparing such rates with those of other jurisdictions which also offer some form of a tonnage tax scheme, it may be deduced that Malta’s rates are quite favourable to foreigners. The UK Tonnage Tax Regime normally offers a corporate tax rate of 19% and a social security tax rate at 13.8% whilst the Greek Tonnage Tax Regime offers a corporate tax rate of 29% and social security tax is 25.06%. Therefore, the proposed tonnage tax regime within Malta is quite attractive to commercial ships, especially when considering the reputability of the Malta flag. 

Malta’s Flag Registry

It has been duly noted that Malta’s growth within the flag registry has grown 10.1% per year within the period of 2012-2016 and has subsequently been placed within the top 10 flag states in the world. Many hold that the Tonnage Tax Regime will continue to attract foreign ship companies to register in Malta and bear the Malta flag. Upon endorsing the Malta Tonnage Tax Regime, the Commission has outlined that the tax relief granted through this regime will play an important role within global competition, providing an incentive to increase tonnage registration within the EU in the coming years, whilst preserving competition within the EU Single Market.

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Key Contacts

Dr Charlene Mifsud

Partner, Corporate & Commercial

+356 2205 6298

Dr Priscilla Mifsud Parker

Senior Partner, Corporate, Tax & Immigration

+356 22056122

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