YMG Malta / Montenegro Flag
Malta Commercial Yacht Registration:
Why Malta flag?
The advantages of flying the Malta Flag include:
Yachts may be registered on behalf of legally constituted corporate bodies or entities irrespective of nationality;
Low company formation, ship registration and tonnage tax costs;
Attractive tax incentives to yacht and superyacht owners encouraging commercial operation;
No restrictions on the sale or mortgaging of Maltese registered yachts and superyachts;
Twenty four hour, seven days a week service in response to urgent matters;
A good international reputation as a flag of choice and confidence;
Availability of a whole range of maritime services including very reputable and experienced legal and corporate services supporting registration, management and administration;
A dynamic administration with one of the largest ship registers in the world and very active in European Union fora and international organizations.
A clear strategic political vision supporting business and the marine industry;
A sovereign State, member of the European Union with political, fiscal and social stability.
Fiscal Incentives:
The Commercial Yacht Code gives the opportunity to superyacht owners to have their yachts registered under the Malta flag as a commercial vessel which therefore enables them to pay an annual tonnage tax on the tonnage of the yacht in lieu of income tax on earnings.
Also, Maltese VAT legislation, in line with the 6th VAT Directive, provides for certain exemptions from VAT which could be relevant in the context of commercial yachts. The law contains an exemption from VAT on:
The importation or supply of vessels used for navigation on the high seas and carrying passengers for a reward or used for the purpose of commercial activities;
The supply of services consisting in the hiring, leasing, chartering, modification or maintenance of the vessels referred to in the paragraph above.
Therefore, the law exempts from VAT the importation, sale, chartering, leasing and a number of services relating to yacht engaged in commercial activities. The fact that a yacht is registered in the Malta Commercial Register is evidence that the yacht is fit for navigation on the high seas and fit to be used for commercial activities.
This kind of exemption is attractive for yachts, in particular, new-buildings, imported into Malta from the EU or from outside the EU. The advantage of registering a commercial yacht in Malta would therefore be that of having an exemption throughout the EU. As explained above, the exemption would also apply in the case of services supplied to the commercial yacht, such as, maintenance, refit, works, berthing and other similar services.
Registration procedure:
All yachts covered by the Commercial Yacht Code are to be surveyed and certified upon the provisional registration of the yacht in the Commercial Register. Yachts are divided into three categories as follows;
1.Yachts below 24 meters in length
2.Yachts over 24 meters in length but below 500GT
3.Yachts over 24 meters in length and above 500GT.
The registration of a superyacht in the Commercial Registry is quite a straight forward procedure which includes a provisional six month registration period during which all documentation needs to be submitted for registration to be finalized. The following applications forms have to be completed and returned to us for filing with the Registry;
1.Application for the registration of a yacht
2.Application for the change of name (if required)
3.Application for Minimum Safe Manning Certificate;
4.Application for Ship Radio Station License.
5.ISM & ISPS Declaration (yachts over 500GT but less than 3000GT)
6.Evidence of Seaworthiness
7.Copies of Survey Report, ITC of the previous flag State and Load Line, if applicable.
8.A Certificate of Compliance to trade as a Commercial Yacht (below 24 meters in length will be issued)( over 24 meters in length but below 500GT) (over 24 meters in length and above 500GT)
For the permanent registration of the vessel the following documents / certificates have to be filed with Registrar;
1.Builders’ Certificate and / or Original Bill of Sale as the case may be
2.Original Deletion Certificate, if applicable
Yachts of twenty five years of age or over are not eligible for registration in the Commercial Registry.
We can assist our clients with setting up of the yacht holding structure, drafting of documents and provide regulatory and compliance advice in connection with the VAT registration, fiscal exemptions and commercial yacht registration.
Malta Yacht Leasing Scheme:
For VAT purposes, when a Maltese company purchases a pleasure yacht and lease-purchases it to third parties (Maltese or non-Maltese person or company), then VAT is due on the lease at the normal rates of VAT in Malta i.e. 18%, since the supply of services would be deemed to be supplied in Malta. The activity of the Malta Company should be considered to be a normal business transaction and therefore it is advisable that a profit element of approximately 10% is generated by the lessor. The supply of services is taxable only on the portion of the use of the yacht, attributed within the territorial waters of the European Union.
The VAT department, bearing in mind the difficulty in tracing the movement of yachts in the EU waters, established through the Guidelines a set of criteria to establish the percentage portions according to the type of yacht and its length.
Income Tax Implications:
As a result of the lease arrangements with respect to the pleasure yacht to be purchased by the Malta Company (lessor) which is required for the VAT special scheme purposes, the Malta Co. would receive lease payments from the lessee (together with an approx profit element of 10%). The income received by the Lessor would be deemed to be trading income since it arises from trading activities (lease of the pleasure yacht) and would be subject to income tax at the rate of 35% in Malta. In terms of Malta tax legislation, the shareholders of the Lessor, may, following receipt of dividends claim a refund of 6/7ths of the Malta tax suffered at company level on the dividends distributed from this income stream. The tax treatment of the dividend income and the corresponding refund in the jurisdiction where the shareholders are tax resident must however be verified by competent advisors in the jurisdiction of the shareholder.
Procedure:
Each yacht is held by a Malta registered Special Purpose Vehicle, the shares of which may be held in trust by our trust company to ensure confidentiality of the identity of the beneficial ownership of the yacht. The Maltese company purchases the yacht using private equity or a loan from a Bank. The yacht will then be leased for a maximum period not exceeding three years, at a rate marginally higher of the value of the yacht. VAT will be payable in Malta at rates of between 5.4% and 7.2% depending upon the length of the yacht, with 50% of the VAT due being payable upfront, the reminder paid during the 3 year lease term. A final payment of VAT is required at 18% on 1% of the value of the lease. Upon payment of the 50% of the VAT due, a provisional confirmation of VAT compliance will be issued by VAT Department.
Example:
Yacht’s value = Euro 6,000,000
Leasing Period = 1 year (12 monthly instalments)
Yacht’s LoA = 97 feet
Total VAT and Income Tax payments when resorting to the Malta Yacht Leasing Scheme on a yacht valued at Euro 6,000,000
amounts to Euro 397,200.
Total VAT that would have been payable at the normal rate of 18% amounts to Euro 1,080,000
The values mentioned in the example above are book values and no cash need actually change hands between lessor and lessee, provided, the VAT and Income Tax payments are made to the respective tax authorities. Any transaction under this Scheme has to be reported in advance to the Commissioner of VAT and his approval must be sought.
We are happy to assist you through the whole registrartion process with our local Partner in Malta.
Please send your request to ab@ymg.ch
Also if you are interested in Montenegro non EU Flag
we will assist.