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14 May 2010
Deemed source provision
One of the tax measures introduced by Act 1 of 2010 ( Budget Measures Implementation Act) deals with income derived from the ownership, leasing or operation of aircrafts or aircraft engines used in international aviation business such as transport of passengers or goods. This type of income is deemed to arise outside Malta regardless of the country of registration of the aircraft/engines or whether the aircraft calls at or operates from Malta.
This rule is of particular interest to companies or entities that are resident in Malta but not domiciled (that is, not registered or incorporated in Malta). A foreign registered / incorporated company or entity whose management and control are exercised in Malta is resident in Malta for tax purposes and income derived from the ownership, leasing or operation of aircraft or engines used in international operations will be taxable in Malta only if and to the extent remitted to Malta (remittance basis).
This rule, combined with the rules on the operation of aircraft in international traffic contained in Malta's double taxation agreements, presents interesting tax planning opportunities for airline and aviation operators setting up their residence in Malta.
New rules on depreciation of aircraft
At the same time, new rules amending the minimum period of wear and tear of aircraft for income tax purposeshave been published by means of Legal Notice 291 of 2010. Prior to the coming into force of this Legal Notice (which amends the Deduction for Wear and Tear of Plant & Machinery Rules), the minimum period for aircraft depreciation was 12 years.
With effect from basis year 2009, depreciation of aircraft and related parts will be spread over a minimum number of years as follows:
- Aircraft airframe - 6 years
- engine - 6 years
- engine or aircraft overhaul - 6 years
- interiors and other parts - 4 years
For further information please contact Damien Fiott or This e-mail address is being protected from spambots. You need JavaScript enabled to view it