Month: March 2021

Background

Malta has implemented an aircraft registration regime, structured in a manner to accommodate efficient registration of smaller aircrafts, in particular business jets.  The regime is governed by The Aircraft Registration Act Chapter 503 of the Laws of Malta which will serve as the framework for registration of aircrafts in Malta.

In recent years Malta has actively positioned itself as a favourable aviation base in the EU.  It has attracted several international carriers to operate from Malta and more importantly, the successful establishment of aircraft maintenance facilities such as those of SR Technics and Lufthansa Technik.

The Aircraft Registration Act addresses several important issues such as different types of registrants, the concept of fractional ownership and the protection of creditors and special privileges which may exist on the aircraft.  Aircraft registration is administered by the Authority for Transport in Malta.

The Registration Process – Key Information

An aircraft may be registered by the owner, operator, or its buyer, under a conditional sale. Only qualified persons and entities are entitled to register an aircraft in Malta.

Qualified persons are citizens of the European Union, EEA or Switzerland and qualified entities are entities that should be beneficially owned at least to the extent of 50% by individuals who are citizens of the European Union, EEA, or Switzerland. Qualification for registration is more flexible when it comes to the registration of private jets. 

An aircraft which is not used for ‘air services’ may be registered by any undertaking established in an OECD Member State. Registration caters for issues of confidentiality in the sense that it is possible for the aircraft to be registered by a trustee. Foreign undertakings registering an aircraft in Malta are obliged to appoint a Maltese resident agent.

Maltese registration allows the possibility for separate registration of the aircraft and its engines. An aircraft which is still under construction may also be registered in Malta. The notion of fractional ownership is fully recognised by Maltese law allowing the ownership of an aircraft to be split into one or more shares. Details recorded on the public register include the physical details of the aircraft, physical details of its engines, name and address of the registrant(s), details of any registered mortgage(s) and details on any irrevocable de-registration and export request authorisation.

Registering a Mortgage on an Aircraft

Maltese law allows the aircraft to act as a security for a debt or other obligation.

A mortgage on an aircraft may be registered and as such all registered mortgages including any special privileges are not affected by the bankruptcy or insolvency of its owner.  Furthermore, the law protects the judicial sale of the aircraft (instituted by the registered mortgage) from being interrupted by the administrator overseeing the bankruptcy proceedings of the owner. A mortgage may be transferred or amended according to the relevant preferences and circumstances of the creditor. Special privileges are granted in respect of certain judicial costs, fees owed to the Malta Transport Authority, wages payable to the aircraft’s crew, debts owed in relation to the repair and preservation of the aircraft and, if applicable, to wages and expenses in relation to salvage. Interpretation of the provision of the governing legislation has been consolidated and facilitated by Malta’s ratification of the Cape Town Convention.

Taxation of Aviation Activities in Malta

The regime is supported by attractive fiscal incentives:

• Income derived by a person from ownership, operation of leasing of aircrafts is not taxable in Malta unless this is remitted to Malta.
• 0% withholding tax on outbound lease and interest payments made to non-resident persons.
• Beneficial depreciation period for wear and tear.
• The Fringe Benefits (Amendment) Rules 2010 – in some cases, entities may be exempt from fringe benefit taxation (for example, the private use of an aircraft by an individual who is not resident in Malta and who is an employee of an entity whose business activities include ownership, leasing or operation of aircraft or aircraft engines, used for international transport of passengers/goods, shall not be considered as a fringe benefit, and is therefore, not taxable as a fringe benefit).

The Malta Highly Qualified Persons Programme and the Aviation Sector

The Highly Qualified Persons Programme is directed towards professional individuals earning over €86,938 per annum, employed in Malta on a contractual basis within the aviation sector.

This scheme is open to EU nationals for five years, and to non-EU nationals for four years.

Tax Advantages Available to Individuals – Highly Qualified Persons Programme

• Income tax is set at a flat rate of 15% for qualifying individuals (instead of paying income tax on an ascending scale with a current maximum top rate of 35%).
• No tax is payable on income earned over €5,000,000 relating to an employment contract for any one individual.

How can Dixcart help?

Through our team of experienced professionals, Dixcart Management Malta Limited will assist you in all aspects of registering your aircraft in Malta. Services range from incorporation of the entity owning the aircraft in Malta and full corporate and tax compliance, to the registration of the aircraft under the Maltese Registry, whilst ensuring full compliance with Maltese Aviation legislation.

 Additional Information

If you would like further information regarding Aircraft Registration in Malta, please speak to Henno Kotze or Jonathan Vassallo (advice.malta@dixcart.com) at the Dixcart office in Malta or your usual Dixcart contact.

The International Shipping Register of Madeira (MAR) was established in 1989 as part of the Madeira International Business Centre (“MIBC”) “package” of taxation benefits.

Over half a million vessels are now registered with MAR and it is ranked the fourth international shipping register in the EU. If you are in the process of deciding where to register your vessel, Portugal should be considered.

Vessels registered with MAR carry the Portuguese flag and are subject to the International Treaties and Conventions entered into by Portugal. The register is of a high standard, has EU credibility, is not regarded as a flag of convenience, and is whitelisted in both Paris MoU and Med MoU. Moreover, it has never been regarded by the ITF as a flag of convenience.

It is important to note that the Portuguese Government is determined to boost the maritime economy, taking concrete steps to put MAR among the leading European flags. In this context we must point out that MAR is one of the first flags to fully introduce an efficient digital system, allowing for the dematerialisation of all procedures and the issuing of electronic certificates following the IMO Guidelines for the use of electronic certificates.

In the words of MAR’s Technical Commission, “Portugal considers digitalization in the maritime transport as a very relevant development, namely in respect to expediting sharing of information, improving security and traceability of documentation and reducing administrative burdens.”

It is therefore clear that MAR is offering the best quality package to owners worldwide, as any individual or entity can register a vessel with MAR. There are no nationality requirements for ship-owners of vessels registered in MAR and they are not required to have their head office in Madeira. In addition, if the entity is registered with the International Business Centre of Madeira (MIBC), and undertakes maritime transportation, it can enjoy specific tax incentives provided by the MIBC.

Advantages of Yacht Registration with MAR:

• EU register – yacht registration in MAR provides unrestricted access to EU waters.
• Yacht owners are not required to have their head office in Madeira (it is sufficient to have local legal representation with adequate powers).
• Low levels of taxation.
• The yacht does not have to sail or be moored in Madeira.
• No citizenship requirements for the crew of commercial yachts and a flexible social security regime.
• The existence of a flexible mortgage system which allows the mortgagor and the mortgagee, by written agreement, to choose the legal system of a particular country that will govern the terms of the mortgage.   
• Reduced costs of registration.

Advantages of Ship Registration in MAR:

• EU Flag – the register is of a high standard and has complete EU credibility, with access to continental and island cabotage.
• The register is included in the Paris MoU Whitelist.
• Competitive registration fees, there are no annual tonnage taxes.   
• Only 30% of the safe manning must be “European”. This includes nationalities such as Polish, Russian, and Ukrainian, as well as citizens of Portuguese-speaking countries. This requirement may also be derogated if duly justified. This allows for flexible manning.
• Crew wages are exempt from income tax and from social security charges in Portugal.
• If an MIBC company is formed, with the object being maritime transportation, there is no share capital requirements.
• Shipping companies licensed to operate within MAR benefit from a corporate income tax rate of 5% until 2027. They also enjoy:
  • automatic VAT registration,
  • access to the Portuguese double taxation treaty network,
  • exemption from withholding taxes on the distribution of dividends,
  • exemption from withholding taxes on interest, royalties and service fees paid to non-residents,
  • and exemption from capital duty, notary, and registration fees.
  • If certain requirements are met, shipping companies may also be exempt from capital gains tax when subsidiaries are sold.
• The existence of a flexible mortgage system which allows the mortgagor and the mortgagee, by written agreement, to choose the legal system of a particular country that will govern the terms of the mortgage.   
• Eight International Classification Societies are recognised in Portugal. MAR can delegate some of its functions to these societies. This can be simpler and more convenient for ship owners.          
• Temporary registration is allowed by law (bareboat charter: “In” and “Out”).
• Vessels under the Portuguese flag are included in the Qualship 21 Index of the United States of America. This certificate recognises the exceptional standards of the Register.

Summary

If you are interested in registering your vessel in Portugal and would like to take advantages of the benefits listed within this article, please contact: advice.portugal@dixcart.com, or your usual Dixcart contact. 

Where to Moor Up for More Benefits

Choosing the right jurisdiction for the registration and domiciliation of a yacht is key. Especially for your luxury yacht.

Malta’s  reputation as an international centre of Maritime excellence, makes it a popular choice for yacht registration. This applies for both commercial registrations whereby a yacht undertakes commercial chartering, and also in terms of pleasure registrations where leasing is popular.  

Cyprus is another attractive jurisdiction in the EU for yacht registration and leasing.

Alternatively, Guernsey, close to the UK, is of interest to owners of certain types of pleasure yacht, and the Isle of Man is attractive due to a number of tax efficiencies.

The Dixcart office in Madeira (Portugal) has registered yachts in the Azores and in the low tax international business centre of Madeira. The Azores (Portugal) can be a preferred location for yacht importation into the EU due to its low rate of VAT.

Whether you are a prospective buyer or an existing owner – these top tips are for you.

• Registering your Luxury Yacht – Speak to an Adviser

Advisers often need to guide clients on the most suitable jurisdiction to flag a vessel. Historically, advisers have preferred tried and tested jurisdictions, but in today’s competitive world there is increasing importance on other issues such as jurisdiction perception, international transparency, time differences, appropriate legal systems, expertise, and growing costs associated with certain jurisdictions.

“Best practice” to select a suitable flag would generally include consideration of the following criteria:

• Strong economic international standards – a minimum ‘A rating’.
• Robust legal system.
• A commercially run register – emphasis on service and response.
• A strong performance in the areas of safety, security, and environmental protection.
• A jurisdiction that is Whitelisted by the Paris & Tokyo Memorandum of Understanding (Paris/Tokyo MoU) – and has a low-risk rating.
• A jurisdiction strong on reputation, compliance, and transparency.
• A jurisdiction with low registration costs, simplified bureaucratic procedures, and an appropriate tax regime.

Owners who choose a flag outside of their country of residence do so for one of the above reasons. Just remember, once you have chosen where to register your vessel, some of that particular country’s laws may apply to your yacht since a yacht is considered as an extension of the country under which it is flagged.

• Understanding VAT

VAT is chargeable on any commodities imported into the EU, and yachts are no exception. VAT is also charged on commercial use of such yachts within EU territorial waters. Therefore, it is important to understand how VAT affects you.

As expected, EU member states have different VAT rates and also have their own interpretation regarding certain EU VAT directives. There may also be local practical procedures which differ from those of other countries – so it is important to speak to a professional adviser to clarify the legislation and procedures that could apply to you. Once the VAT element is settled, a yacht can circulate freely throughout the EU.

On the other hand, any private yachts owned by a non-EU resident registered under a non-EU flag may be allowed to enter EU waters for up to 18 months without VAT implications, on a Temporary Import Basis. If this applies to you, more information can be provided on request: advice@dixcart.com.

Ownership Structures

Corporate entities can register yachts, and this is the option chosen by the majority of yacht owners. Most yacht owners will choose an LLC in order to reduce their personal liability associated with the yacht, however alternative options also exist.

But why? What are the benefits? One of the most common reasons is limited liability. By registering a yacht under a limited liability company, the owner can mitigate their personal liability and protect their personal assets.

In addition, if the decision is made to sell the yacht, by holding it under an entity, the ease of transferring the shares from the holding company to the buyer, is far easier especially if the buyer wishes to maintain the existing structure, crew, flag, and setup. Instead of selling the yacht, the owner can sell the company itself, which may be exempt from sales tax, depending on the circumstances.

Summary

Where a vessel owner decides to register their yacht or ship and the relative owning structure is an important consideration. It can present significant implications in terms of managing the vessel and the tax effects that may result.

Structured ownership can provide various opportunities in terms of yacht acquisition and subsequent operation. The challenge is getting it right.

Dixcart Air Marine can assist clients with the registration of the yacht in a number of jurisdictions, provide a complete service in terms of the formation and management of the corporate entity, ongoing maintenance of the yacht registration itself, and additional concierge services, from assisting with crewing, including crew contracts, and payroll.

For more information, please contact:advice@dixcart.com or your usual Dixcart contact.

Dixcart Trust Corporation Limited, Guernsey: Full Fiduciary Licence granted by the Guernsey Financial Services Commission. Guernsey registered company number: 6512.

Dixcart Management (IOM) Limited is licensed by the Isle of Man Financial Services Authority.

The Team and Activity

Dixcart Air Marine assists clients with the registration of yachts, ships, and aircraft in a number of different jurisdictions.

Our team of experienced professionals across the various Dixcart offices, provide a complete service for clients. Professionalism, coupled with practical experience, help guarantee a smooth process for our clients and enables them to access a range of attractive measures that are available in the different jurisdictions.

Dixcart Air Marine can coordinate the entire yacht, ship, or aircraft purchase and/or ownership. To maximise the benefits, one of our professionals should ideally be involved as early as possible – as soon as the thought of owning the asset has occurred to the client. To see the full range of services available, please click here.

Introduction to Jonathan Vassallo and Gisela Martins

Jonathan Vassallo from the Malta office and Gisela Martins from the Madeira office are two key members of the Dixcart Air Marine team that we are introducing you to today.

Jonathan joined Dixcart in September 2009. He is a member of the Association of Chartered Certified Accountants, the Malta Institute of Taxation, the Malta Institute of Accountants, and the Malta Institute of Management. Jonathan is also a member of the Yachting Business Section of the Malta Chamber of Commerce, Enterprise and Industry. He is the Managing Director of the Dixcart office in Malta.

Gisela Martins joined the Dixcart Group in 2010 as a senior lawyer in the legal and compliance department. Her practice is focused on Corporate, Tax, Shipping and Residency programmes. Gisela graduated in Law from the Catholic University of Portugal, in Lisbon, and worked for the international law firm Miranda & Associados.

She holds a Post-Graduate Degree in Management and Tax from the Portuguese Institute for Finance and Tax Studies (IESF).

Jonathan Vassallo – Jonathan.vassallo@dixcart.com

Jonathan was appointed Director of Dixcart Management Malta Limited at the start of 2013 and Managing Director during 2018. His role is to develop and implement strategy for the Malta office ensuring that the Group’s high standards of compliance and operational control are maintained. He manages a number of relationships with international clients and particularly specialises in the areas of yachting, residence, and VAT. He has extensive experience with the registration of yachts and superyachts, the formation and administration of the relevant holding structures, and the ongoing management of yachting structures.

Before joining Dixcart, Jonathan Vassallo was involved in the manufacturing industry in Malta for thirteen years. During this term, he served as an Accountant and Financial Controller for two major furniture firms in Malta.

Gisela Martins – Gisela.martins@dixcart.com

Gisela is a member of the Air Marine department at the Dixcart office in Madeira (Portugal). She has extensive experience regarding yacht and ship registration, gained over 20 years, and is a member of the Women’s International Shipping & Trading Association (WISTA).

Gisela provides advice on the setting up of appropriate ownership structures for the vessel, assists with VAT and yacht importation, and has been involved in several yacht and ship transactions and mortgages.

Gisela has been involved in a wide variety of domestic and international transactions, advising corporate clients in sectors such as mergers, commercial contracts, corporate transactions, including share acquisitions and disposals, and corporate reorganisations and restructuring. She has also provided tax and legal assistance to several private clients wishing to relocate to Portugal in order to benefit from the special tax regime, the Non-Habitual Residents Programme.

2020 was mired with uncertainty, but with an end to Brexit negotiations, vaccines, and the promise of further freedoms around the corner, 2021 will hopefully be a return to calmer waters. You, or your clients, may even have started to consider what happens next with regards to their Yachting activities.

With the dust settling in the wake of the UK’s departure from the EU, resulting in a nearly 1,300 page EU-UK Trade and Cooperation Agreement, there is now more clarity on the Agreement’s impact on Yachting activities and potential tax implications.

One such clarification being that, following the UK’s exit from the EU, the Isle of Man is no longer deemed EU resident by association. As such, Yachts owned via an Isle of Man entity may qualify for Temporary Admission into EU waters. In this article, we will be covering the following topics to provide a quick overview:

• Temporary Admission (TA) for Private Yachts
• How to Meet the Requirements of Temporary Admission (TA)
• What Next? Things to Consider When Planning Your Yacht Fiduciary Services

Temporary Admission (TA) for Private Yachts

Temporary Admission (TA) is a Customs procedure, in line with the Istanbul Convention 1990, which allows certain goods (including means of transport – e.g., private Yachts) to be brought into the Customs Territory with total or partial relief from import duties and taxes, subject to conditions.

For example, the goods must be imported for ‘Specific Purpose’ and are intended for re-exportation within a specified period.

Whilst owners established outside of the Customs area are exempt from VAT under TA, Customs Duty relief varies, dependent on the jurisdiction’s classification of the vessel and its Specific Purpose for being imported.

For quick reference we have provided a table of the headline details/requirements below:

How to meet the requirements of Temporary Admission (TA)

Thankfully there is a lot of scope for meeting the requirements for those wishing to set sail in the EU under TA:

1. Registration of the vessel

For a TA procedure to apply with full VAT and Customs Duty relief, the Yacht must be registered in a jurisdiction outside of the EU (it will use the flag of a Non-Member State).

Following its departure from the EU, the Isle of Man now meets this criteria, alongside traditional favourites such as the Cayman Islands.

• Establishment of the individual

For our purposes, ‘individual’ refers to both Natural Persons and Corporate Entities. In this way we can have an individual established in a separate jurisdiction to the Ultimate Beneficial Owner (UBO) – often by way of a holding company, that will own the Yacht and which in turn will be subject to the local tax regime.

The jurisdiction of establishment in this case does not necessarily have to be the same as the chosen flag of the vessel.

• Establishment of the Ultimate Beneficial Owner (UBO) 

For the purposes of TA, so long as the UBO is resident outside of the EU, they will qualify.

What Next? Things to Consider When Planning Your Yacht Fiduciary Services

When selecting a suitable ownership structure for the registration of a Private Yacht, which will benefit from TA within EU waters, we would suggest checking the following broad criteria.

Choosing a Jurisdiction for the Holding Structure

• Strong economic international standards – a minimum ‘A rating’. (S&P / Moody’s)
  • Robust legal standards.
  • An OECD Whitelisted jurisdiction with a strong reputation for compliance and transparency.
  • Beneficial tax regime taxes.

Choosing a Yacht Fiduciary Service

To assist with the specialist advice, corporate structuring, and administration of the Yacht, we would recommend ensuring that your service provider ticks the following boxes:

• Geographic location – with relation to the local tax regime and time zone (for accessibility and ease of dealing). 
  • A proven track record –how established the provider is in the sector, as well as familiarity with this category of service.
  • Access to experts – with many providers, their scale often prevents direct and regular dealings with senior qualified staff members; you will want access to experts whenever you have a query or action that is required, and not to always have these dealt with by juniors.
  • Your business is valued – in an ideal situation, your business will be a priority to the provider, not just another client on the books. Finding a provider that is adaptable and responsive is key to service excellence.

What are Your Yacht Fiduciary Service Options?

With so many well-established shipping registrars and a wide selection of beneficial jurisdictions for incorporating a holding structure, you would be forgiven for having flashbacks of 2020’s uncertainty. This is where we can help.

At Dixcart, your needs are our priority – we provide a bespoke and personal service for those looking to manage and administer their luxury assets; giving you access to experts as and when you require them.

Because we are based in the Isle of Man, we benefit from our Aa3 rated jurisdiction’s political, economic and environmental stability. The Island is a self-governed Crown Dependency, setting its own laws and rates of taxation.

Whilst we can access any number of shipping registers, our local registrar has an exceptional track record of service excellence; providing an approach that blends modern flexible services and competitive rates without compromising on quality.

The beneficial tax regime, business friendly government and OECD ‘Whitelist’ status ensure that the tax vehicles we offer can help you achieve your goals whilst remaining globally compliant.

An Isle of Man registered Company enjoys the following benefits:

• 0% rate corporation tax (subject to limited exceptions not relevant to Yachts)
• No capital gains taxes
• No stamp duty (including on share transfers)
• No inheritance tax or death duties

We have been assisting clients and their advisers for over 45 years with the effective structuring and administration of wealth, having experience of utilising multiple shipping registers to ensign vessels in line with their desired purpose. If you would like to discuss how we can assist you in achieving the effective and efficient administration of a vessel we would be delighted to hear from you. Please contact Paul Harvey at the Dixcart Office in the Isle of Man: advice.iom@dixcart.com.

Alternatively, you can connect with Paul on LinkedIn or find out more about our Dixcart Air Marine services here.

Dixcart Management (IOM) Limited is licensed by the Isle of Man Financial Services Authority.

This information is provided as guidance as at 01/03/21 and should not be considered advice. The most appropriate vehicle is determined by individual client needs and specific advice should be sought.