FFF-Legal

The Maltese flag

The Maltese shipping industry relies on a highly regulated jurisdiction and has access to a number of international maritime conventions (including INMARSAT, TONNAGE 1969, LL 66/88, CLC and FUND 92, STCW 78, MARPOL 73/78, SOLAS, various International Labour Organizations Conventions). Maltese legislation features a comprehensive set of rules on mortgages and also provides for a number of tax planning opportunities for shipping activities, inlcuding management and financing. 

Registration of a ship under the Maltese flag is relatively straightforward and cost effective. Registration is regulated by the Transport Malta (TM) and registration is open to vessels owned by Maltese and non-Maltese owners. In practice any kind of vessel may be registered including a vessel under construction. Bareboat charter registration (both inwards and outwards) is also allowed, and the certificate of registry may be issued in the name of the vessel's charterer (including a time charterer).

Registration of a vessel under the Maltese flag is open to:

• any Maltese and other European Union citizen; or
• any company registered in Malta or in the EU; or
• a non-EU body corporate or entity which is capable of ensuring due observance of the laws of Malta relating to registration.  

Registration Procedure

Initially the vessel may be provisionally registered, pending the completion of all the formalities required for a permanent registration. The provisional registration is valid for six months and may be extended for further short periods at the discretion of the Registrar of Ships in limited cases. Provisional registration mainly involves the filing on the relevant application form together with a declaration of ownership and the production of an International Tonnage Certificate. 

A permanent registration certificate is issued following the submission of further documentation within 6 months of provisional registration – these documents include

• Builders’ Certificate
• International Tonnage Certificate (if applicable)
• Proof of title
• Class registration (if applicable)
• Survey report issued by Government approved surveyors or an authorized Classification society.
• In cases of SOLAS  vessels, copy of the last updated Continuous Synopsis Record issued by an approved surveyor of ships

All vessels are required to obtain a Radio Ship Station licence – this can be obtained provisionally and later rendered permanent following the filing of a radio survey report. 

Bareboat Charter Registration 

Maltese law provides both for bareboat charter registration of foreign ships under Malta Flag and also for the bareboat charter registration of Maltese ships under a foreign flag. The main principles adopted at law are, the compatibility of the two registries and, that matters regarding title over the ship, mortgages and encumbrances are governed by the underlying registry, while the operation of the vessel falls under the jurisdiction of the bareboat charter registry. Within these parameters ships bareboat charter registered in Malta enjoy the same rights and privileges, and have the same obligations, as any other ship registered in Malta. 

The requirements and registration procedure is similar to normal registration, except that:

• Ship is bareboat chartered to a body corporate, entity or such other person qualified to own a Maltese ship
• Ship is not a Maltese ship, and is registered in a compatible registry
• Ship is not registered in another bareboat registry

The following documents need to be produced:

• Application for registration by the charterer or an authorised representative 
• Declaration of bareboat charter accompanied by the charter agreement
• Transcript or an extract of the underlying registration
• Copy of the ship’s International Tonnage Certificate
• Consent in writing of the underlying registry, owners and mortgagees.

Resident agents for foreign owners

Where the person under whose name a ship is registered is not resident in Malta he is required to appoint a Maltese resident agent. A resident agent is a person who is a habitual resident of Malta and who acts as a communication channel between the local authorities and the foreign ship owner. Registration of a ship through a Maltese company (that is, having a Maltese company as the ship owner) is not necessary. However, having a Maltese company can facilitate the registration procedure, the registration of a mortgage on the vessel in Malta and other related matters. Furthermore, registering a company in Malta is a relatively straightforward and cost-effective procedure.

Tax exemptions for shipping activities  

Maltese law contains attractive tax benefits for licenced entities operating qualifying ships/ships and carrying on certain shipping activities. The information contained under this heading is relevant for those clients who intend using their vessels for commercial purposes (including for example, chartering) and not for private use). Clients who intend using their vessels for a commercial purpose may consider taking advantage of an exemption from income tax on profits derived from qualifying shipping activities as explained in more detail below: 

• Qualifying shipping activities include the ownership / operation / administration / management of ships registered in Malta and in other countries as well as the holding of shares or interests in entities carrying any of the above activities
• A qualifying vessel is referred to as ‘tax tonnage ship’ – a tax tonnage ship is either a ship (including a ship) of 1,000 net tons and over that is registered in Malta or a ship/ship (of any tonnage) that is authorized by the competent authority in Malta
• The qualifying vessel must be owned, chartered, operated, administered or managed by a Shipping Organisation (SO) licensed in Malta. An SO can be a Maltese or foreign limited liability company, a partnership, trust or foundation.

In practice, this means that a licenced SO may operate or own any ship or ship (including vessels under construction) and whether registered under the Malta flag or not and benefit from the tax exemptions. The law provides for: 

• an exemption on income tax in respect of profits derived by a SO from shipping activities – the exemption applies as long as the SO has paid the relevant tonnage tax and as long as the SO fulfils certain other conditions (under general rules, the profits would be charged to tax at the standard corporate rate of 35%)
• an exemption from capital gains tax on transfers of shares or securities in a licensed SO
• an exemption from stamp duty on the transfer of securities or shares in a licenced SO (under general rules, a transfer of shares would be subject to stamp duty at 2%)
• an exemption from tax on any interest or other income received in respect of the financing of licensed SOs and the financing of tonnage tax ships.

Mortgages

Mortgages registered in Malta are considered to be a very good security by financiers intending to finance the purchase/refit of ships registered in Malta. Registration of a mortgage over a ship is dependent on the existence of a provisional or permanent registration with the Transport Malta. The registration is affected by means of the filing of a statutory mortgage form with Transport Malta. The form will contain the basic details of the ship and the basic terms and conditions of the security being provided by the mortgagee.

The advantages of a mortgage are substantial in the mortgaged vessel is treated by law as constituting a particular class of movable which is separate and distinct from the other assets of the vessel owner for the security of actions and claims to which the vessel is subject. Further, in the event of bankruptcy of the mortgagor (the vessel owner), all actions and claims to which the ship may be subject will have preference over all other debts of the estate. Mortgages rank in accordance with the priority of registration. 

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