Tax of Shipping Activities

Tonnage Tax System

Tax of Shipping Activities


The revamped Malta tonnage tax system, fully endorsed by the European Commission and aligned with EU State Aid Rules, entered into force on the 1st of May 2018. The system restates that vessels involved in the international carriage of goods or passengers by sea, including commercial yachts, qualify as tonnage tax ships and, therefore, are entitled to avail themselves of the benefit of not paying tax under the provisions of the Income Tax Act, but, instead, paying an annual fixed tax — tonnage tax — calculated on the basis of the net tonnage of the vessel.
The regulations set out qualifying criteria and provisions for a shipping organisation to qualify for the tonnage tax benefits, including provisions on shipping management activities, vessels under charter out agreements, ancillary activities that may be regarded as shipping activities, as well as the conditions for towage and dredging activities to benefit from the tax exemption. In addition to the tonnage tax system, Malta offers cost-effective social security contribution rates.
The revived Malta tonnage tax system ensures legal certainty to the shipping industry and strengthens Malta’s position as a leading flag state, not only committed to the loftiest international standards but also to provide a highly effective business environment to the industry.






Country Highlights

FLAG: Largest registry in Europe,
6th in the world
TONNAGE TAX SYSTEM: EU approved
REGISTRY GROSS TONNAGE: Over 57 million TAX ON SHIPPING ACTIVITIES: Exempt
NO. OF VESSELS REGISTERED:: Over 11,000 TAX ON OTHER TRADING ACTIVITIES: 5% effective tax rate


Legal Basis

The Malta Tonnage Tax regime is governed by the Merchant Shipping Act (Chapter 234 of the Laws of Malta) as amended by legal notices 127 and 128 of 2018 and Merchant Shipping notice 143 of 2018 specifically issued to re-instate and implement the amended and EU approved tonnage tax system.
Shipping organisations are also subject to the Merchant Shipping Regulations under the Licensing of Shipping Organisations (S.L. 234.41) and to the Shipping Organisations - Private Companies (S.L. 234.42) Regulations.
The main fiscal advantages of the tonnage tax system for a shipping organisation covering shipping activities include:
• exemption from coporate tax under the Income Tax Act on shipping activities;
• exemption from tax under the Income Tax Act on any income, profits or gains derived from the sale or other transfer of ship tonnage tax ship which had been acquired or sold whilst under the regime or from the disposal of any rights to acquire a ship which when delivered would qualify as a tonnage tax ship; and
• exemption from tax on the distribution of profits derived from shipping activities to the shareholders.


Benefits

  • Exemption from Income Tax
  • Easy Same Day Incorporation
  • Relatively Low Establishment and Operating Fees
  • EU Approved
  • No Notary/court Process Required


Eligibility

  • The ship is operated through a genuine shipping organisation
  • The ship is declared as tonnage tax ship in accordance to
    the Maltese regulations
  • the activities undertaken by the shipping organisation are
    shipping activities
  •  the flag link requirement is fulfilled


Process & Timeline




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Key Contacts

Dr Silvana Zammit

Partner, Global Property, Yachts & Aircraft

+356 22056423

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