Superyacht Planning: Working Case Studies (2 of 2)

Our short series on planning for a superyacht aims to provide a foundation of understanding for those considering building or purchasing a vessel. In this, the second article in the series, we will take a closer look at how the various elements come together in the operation of a superyacht, through two simple case studies.

If you have not read article one and would like to, please follow the link below:

In this article we will take a look at two case studies:

Case Study 1: MY-20

MY-20 is a new build 20m yacht, that has been purchased by a UK resident ultimate beneficial owner (UBO). The purpose of MY-20 is to cruise domestically within the Mediterranean waters, with no intention of sailing internationally. The UBO does not intend to engage a yacht management professional as it will be primarily utilised as a dayboat, and crew will be engaged on a day rate basis.

Ownership

Whilst MY-20 will be used as a private vessel, there are still many potential liabilities that need to be abated. An owning entity is always recommended to mitigate any unwarranted personal liabilities that the UBO may be exposed to through operating MY-20. For example ringfencing any exposure to personal claims e.g. tortious, contractual etc.

Further, to prevent the UBO being deemed an employee or de facto Director of the entity, it is best to utilise a transparent vehicle, such as a Limited Partnership. The Isle of Man Partnership can apply for separate legal personality, and therefore limited liability at outset.

For this arrangement our UBO will be the Limited Partner, whose liability is limited to their contributions to the Partnership. The General Partner has unlimited liability and therefore will be a Special Purpose Vehicle (SPV). Here, the SPV is an Isle of Man Private Limited Company (IOM Co Ltd) which of course also benefits from separate legal personality and therefore limited liability.

As General Partner, IOM Co Ltd will provide management and control of MY-20 and its operations. In doing so, IOM Co Ltd will administer the vessel, including holding board meetings, making decisions, making annual filings, accounts including the settlement of invoices, review and agree any applicable contractual agreements, and of course work closely with the Captain. It is imperative that the UBO is not seen to engage in any of this activity, lest they be deemed a General Partner and defeat the planning.

Flag

The UBO’s choice of flag will define the laws and regulatory standards that MY-20 will sail under. It will also have implications for the ease of administration. Therefore, the choice of registry is an important one.

As MY-20 is due to only sail within EU waters, an EU flag state will make most sense. From the available registries, the Malta Ship Registry is the largest in Europe and one of the biggest ship registers in the world. The Merchant Shipping Directorate defines MY-20 as a private registered yacht, because it is a pleasure yacht used for the sole purpose of the owner, is 6m+ in length, is not engaged in trade and does not carry passengers for consideration.

The Malta flag is beneficial in our case because:

The registration process is relatively straightforward as the Malta registry is a modern and administratively efficient shipping register.

Registration will only be granted once the Malta Maritime Administration is satisfied that the vessel conforms to all of the manning, safety and pollution prevention standards required by the applicable international conventions. During the registration process relevant evidential documentation is also required. The documentation must include evidence of ownership from a former registry unless the vessel is new.

You can read more about why Malta is a great location for flagging a vessel, here.

Import / Export

Whilst the UBO and owning entity are non-EU resident and MY-20 is a private vessel, Temporary Admission will not be an option as the ensign will be Maltase and the yacht will not be travelling outside of EU waters. Therefore, the UBO must pay VAT on the initial importation of the vessel to an EU Member State, and must carry evidence of this thereafter.

Whilst Luxembourg offers the lowest rate of VAT in the EU @ 17%, it is also landlocked, making it logistically unrealistic to import a yacht there. This means that Malta’s rate of VAT @ 18% is the lowest in the EU for the importation of yachts.

As MY-20 is a 20m yacht, special dispensation must be obtained from the Malta authorities for a one-off voyage to cross the Med and sail to Malta for importation. Malta Customs authority require a valuation of the yacht to approve MY-20’s importation.

Upon approval of the valuation and arrival in Malta, Customs authorities will inspect MY-20 and request the payment of VAT @ 18% based on the value of MY-20. After receipt of payment, Malta authorities will issue a VAT paid certificate, at their discretion.

In order to enact this a Malta VAT agent is required. IOM Co Ltd will engage with Dixcart Malta, who will act as VAT agent to ensure that the yacht is imported properly.

Case Study 1: In Summary

The UBO’s solution calls for an Isle of Man Limited Partnership with separate legal personality, which has an SPV acting as General Partner. MY-20 will be registered in Malta and VAT paid on importation. MY-20 will cruise the Med, and on the proviso that it does not leave EU waters for a period long enough to jeopardise its VAT paid status, then the yacht can continue to be in free circulation in EU waters.

Case Study 2: MY-50

For sake of ease, we will use the same UBO, except the vessel is a 50m superyacht. The UBO has purchased the superyacht with the intention of both private and charter usage, to assist with ongoing upkeep. The superyacht may be used to cruise in the EU and further afield.

Due to the intended arrangement, MY-50 will require a suite of professionals, including a yacht manager, yacht broker, tax adviser, a corporate service provider such as Dixcart and possibly a crewing specialist, if the yacht manager does not provide such services.

For our purposes, we will refer to the superyacht as MY-50.

Ownership

Due to the UBO being a UK resident, the same structuring can be used to ensure the individual is not deemed an employee or shadow Director of the owning entity – a Limited Partnership with an SPV acting as General Partner (IOM Co Ltd).

IOM Co Ltd will administer MY-50 in a similar way to MY-20, managing all board meetings, decisions, annual filings, contracts. This will include the management accounting associated with not only the ongoing maintenance and payment of invoices etc. but also the operation of any charter agreements.

IOM Co Ltd will work closely with the UBO, Captain, yacht manager, yacht broker and tax adviser to ensure that the structuring remains effective and the superyacht is managed efficiently.

Flag

In order to utilise the Temporary Admission VAT procedure when the superyacht is being used by the UBO, a non-EU flag will be required. Temporary Admission allows the vessel to cruise in EU waters for a period of time without VAT being due on import/export. You can read more about Temporary Admission here.

Further, as MY-50 will also be used for commercial charter, the UBO can elect to use the Yachts Engaged in Trade Scheme by registering the vessel in either the Cayman Islands or Marshall Islands. Both options qualify for both Temporary Admission and allow commercial chartering to take place, subject to conditions, and are highly regarded registries.

Yachts Engaged in Trade (YET) Scheme

For those with yachts flagged in the Cayman Islands and Marshall Islands the YET Scheme presents a hybrid approach, whereby the yacht can be used for both private and commercial charters, albeit subject to stringent conditions.

For example, the YET Scheme allows private yachts which are ensigned with the Cayman Island flag to sail under commercial charter in the territories of France and Monaco with VAT exemption. The use of the YET Scheme allows the skipper to switch between YET and Temporary Admission, pausing the 18-month Temporary Admission period, when using the boat for commercial purposes.

Whilst the YET Scheme provides clear benefits to the UBO, there are stringent conditions for use, e.g. the area for commercial charter is restricted whilst in EU waters, the period of commercial charter is restricted to a maximum of 84 days, the yacht must be 24m+ in length and requires a compliance verification survey, a French VAT agent is required etc.

If complied with, the YET Scheme can ensure that no VAT will be payable on the hull importation, and as such will not require disbursement. Correct application of the YET Scheme can provide a cashflow neutral VAT solution. Contravention of any of the requirements may be subject to the application of taxes, penalties or fines by the local authorities.

The YET Scheme is currently limited to the Marshall Islands and Cayman Islands registered vessels.

For our purposes, we will use the Cayman flag.

Case Study 2: In Summary

The ownership of MY-50 will also require an Isle of Man Limited Partnership with separate legal personality, once again meaning that the UBO must have no part in the superyacht’s ongoing management and administration. Further, the flag chosen is non-EU and the vessel is equipped to sail in international waters, therefore the Temporary Admission procedure is applicable when MY-50 is being used as a private superyacht.

As the chosen flag is the Cayman Islands, the UBO can use the YET procedure to commercially charter MY-50 in French and Monegasque waters, subject to conditions. How does this work?

The yacht broker engaged would market MY-50 for those seeking a luxury charter experience. Once a customer has requested to charter MY-50, they work with the yacht manager to create a standardised MYBA charter agreement, detailing the dates of the charter along with the costs applicable to the customer including VAT amongst other information.

Once the agreement has been signed and delivered to the Cayman Islands register, the superyacht is issued a Temporary Certificate of Registry for Yachts Engaged in Trade by the flag state. The certificate will state the limitation period regarding the commercial charter.

When the UBO is onboard, the superyacht is a private vessel and can have free circulation within the EU under Temporary Admission (i.e. there is no charter agreement, fee or VAT required).

Get in touch

If you require further information regarding yacht structuring and how we can assist, please feel free to get in touch with Paul Harvey at Dixcart.

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

Planning for a Superyacht? Here is What you Need to Consider (1 of 2)

When you or your client think about their new Superyacht it might conjure visions of luxurious relaxation, crystal clear blue waters and basking in the sun; conversely, I highly doubt the first thing that comes to mind is the need to meticulously plan for the tax and management implications that go hand in hand with such a prestigious asset.

Here at Dixcart, we wanted to create some helpful and informative articles to serve as easy to digest introductions to some key concepts for superyacht planning:

  1. The key considerations for Superyacht ownership; and,
  2. A closer look at the ownership structure, Flag, VAT and other considerations via working case studies.

In article 1 of 2, we’ll take a brief look at vital elements such as:

What Holding Structures Should I Consider For a Superyacht?

When considering the most effective ownership structure you must take into account not only direct and indirect taxation, but also mitigation of personal liability. 

One way of managing this position is through the establishment of a corporate entity, which acts as a holding structure, owning the vessel on the Beneficial Owner’s behalf.

The tax planning requirements and available structures will help define desirable jurisdictions. The entity will be subject to the local laws and tax regime, therefore modern offshore jurisdictions like the Isle of Man may provide tax neutral and globally compliant solutions.

The Isle of Man offers a wide variety of structures to the Ultimate Beneficial Owner (UBO) and their advisers; such as Private Limited Companies and Limited Partnerships. As noted, the form of structuring is generally determined by the client’s circumstances and objectives, e.g.:

  • The vessel’s intended use i.e. private or commercial
  • The UBO’s tax position

Due to their relative simplicity and flexibility, Limited Partnerships (LP) or Private Limited Companies (Private Co) are commonly elected. Typically, the LP is operated by a Special Purpose Vehicle (SPV) – often a Private Co.

Yacht Ownership and Limited Partnerships

LPs formed on the Isle of Man are governed by the Partnership Act 1909. The LP is an incorporated entity with limited liability and can apply for separate legal personality at outset under the Limited Partnership (Legal Personality) Act 2011.

An LP consists of at least one General Partner and one Limited Partner.  Management is vested in the General Partner, who engages in the activity carried out by the LP i.e. the day-to-day management and any requisite decision making etc. Importantly the General Partner has unlimited liability, and therefore is liable to the full extent of all burdens and obligations incurred. For this reason the General Partner would usually be a Private Co.   

The Limited Partner provides the capital held by the LP – in this instance, the method of financing the yacht (debt or equity). The Limited Partner’s liability is limited to the extent of their contribution to the LP. It is of vital importance that the Limited Partner does not participate in the active management of the LP, lest they be deemed a General Partner – losing their limited liability and potentially defeating the tax planning, leading to unintended tax consequences.

The LP must have an Isle of Man Registered Office at all times. You can read more about what a Registered Office is, here.

The General Partner would be a Special Purpose Vehicle (“SPV”) taking the form of a Private Co managed by the service provider – for example, Dixcart would establish an Isle of Man Private Limited Company as General Partner with Isle of Man Directors, and the Limited Partner would be the UBO.

Yacht Ownership and SPVs

It may be useful to define what we mean when we say SPV. A Special Purpose Vehicle (SPV) is a legal entity established to achieve a defined purpose, normally incorporated to ringfence risk – be it legal or fiscal liability. This can be to raise financing, conduct a transaction, manage investment or in our instance, act as General Partner.

The SPV would arrange any matters required for the effective and efficient management of the yacht; including the provision of financing where appropriate. For example, instructing the build, purchase of tenders, working with various third-party experts to crew, manage and undertake maintenance of the Yacht etc.

If the Isle of Man is the most appropriate jurisdiction of incorporation, there are two types of Private Co available – these are Companies Act 1931 and Companies Act 2006 companies.

Companies Act 1931 (CA 1931):

The CA 1931 company is a more traditional entity, requiring Registered Office, two Directors and a Company Secretary.

Companies Act 2006 (CA 2006):

By comparison the CA 2006 company is more administratively streamlined, requiring Registered Office, a single Director (which can be a corporate entity) and a Registered Agent.

You can read more about what the role of Registered Office and Registered Agent are here.

Since 2021, CA 2006 companies can re-register under the CA1931 Act, whereas the inverse was always possible since the commencement of the CA 2006 – thus, both types of Private Co are convertible. You can read more about re-registration here.

We tend to see the CA 2006 route elected by most yachting structures, due to the relative simplicity offered. However, the choice of corporate vehicle will be governed by the planning requirements and the objectives of the UBO.

Where Should I Register The Superyacht?

By registering the vessel to one of the many shipping registries available, the owner is choosing whose laws and jurisdiction they will sail under. This choice will also govern the requirements regarding the regulation and inspection of the vessel.

Certain registries offer more developed tax and registration procedures, and the jurisdiction may also offer various legal and tax benefits. For these reasons, the British Red Ensign is often the flag of choice – available through Commonwealth countries, including:

In addition to Cayman and Manx registrations, we tend to also see clients favour the Marshall Islands and Malta. Dixcart has an office in Malta who can fully explain the benefits that this jurisdiction offers and have extensive experience flagging vessels.

All four of these jurisdictions offer administrative benefits, modern legislative environments and are compliant with the Paris Memorandum of Understanding on Port State Control – an international agreement between 27 Maritime Authorities.

The choice of flag should again be determined by the UBO’s objectives and how the boat is intended to be used.

What Are The Implications For The Import/Export of a Superyacht?

Depending on a mix of factors relating to ownership and registration etc. sailing between territorial waters will often require serious consideration. There can be significant Customs Duties due, in mishandled circumstances.

For example, non-EU yachts must be imported into the EU and are subject to full rate VAT on the value of the yacht, unless an exemption or procedure can be applied. This can present significant costs for the owner of a superyacht, now potentially liable for up to 20%+ of the yacht value, at the time of importation.

As noted above, with proper planning, procedures can be applied which can abate or extinguish this liability. To name a few:

VAT Procedures for Private Charter Yachts

Temporary Admission (TA) – Private Yachts

TA is an EU Customs procedure, which allows certain goods (including private Yachts) to be brought into the Customs Territory with total or partial relief from import duties and taxes, subject to conditions. This can provide up to 18 months of exemption from such taxes.

In brief:

  • Those non-EU vessels must be registered outside of the EU (e.g. Cayman Islands, Isle of Man or Marshall Islands etc.);
  • The legal owner must be non-EU (e.g. an Isle of Man LP and Private Co etc.); and
  • The individual operating the vessel must be non-EU (i.e. the UBO is not an EU citizen). 

You can read more about TA here.

VAT Procedures for Commercial Charter Yachts

French Commercial Exemption (FCE)

The FCE procedure allows commercial yachts operating in French territorial waters to benefit from VAT exemption.

In order to benefit from the FCE, the yacht needs to comply with 5 requirements:

  1. Registered as a commercial yacht
  2. Used for commercial purposes
  3. Have a permanent crew onboard
  4. The vessel must be 15m+ in Length
  5. At least 70% of charters must be conducted outside of French Territorial Waters:
    • Qualifying voyages include those cruises outside of French and EU waters, for example: a trip starts from another EU or non-EU territory, or where the yacht cruises in international waters, or starts or ends in France or Monaco via international waters.

Those that meet the qualifying criteria can benefit from VAT exemption on importation (normally calculated on the value of the hull), no VAT on the purchase of supplies and services for the purposes of trading commercially, including no VAT on the purchase of fuel.

As you can see, whilst beneficial, the FCE can be operationally complex, particularly with regard to complying with point 5. A “non exemption” alternative is the French Reverse Charge Scheme (FRCS).

French Reverse Charge Scheme (FRCS)

Article 194 of the EU Directive on the Common System of Value Added Tax was brought into force to reduce the administrative VAT burden of both the EU Member States and non-established persons doing business in EU member states. Due to the discretion afforded with regards to implementation, the French Authorities were able to extend this Directive to offer non-established entities certain VAT benefits via the implementation of the FRCS.

Whilst EU entities must make 4 importations in a 12 month period, to be eligible for the FRCS, non-EU entities (such as incorporated Isle of Man LPs) do not need to meet this criterium. They will however still need to engage a French VAT agent to assist with the local administrative duties and formalities.

No VAT will be payable on the hull importation under the FRCS, and as such will not require disbursement. Albeit, VAT on goods and services will still be payable, but can be reclaimed later. Therefore, correct application of the FRCS can provide a cashflow neutral VAT solution. 

Once the FRC importation has been completed and the yacht has been imported into France, the yacht is granted free-circulation and can operate commercially within any EU territory without restriction.

As you can see, due to the formalities and potential tax liabilities at stake, importation needs to be carefully planned and Dixcart work with specialist partners to ensure proper compliance with formalities.

Malta VAT Deferral

In the case of a commercial chartering activity, Malta provides an additional benefit when it comes to importation.

Under normal circumstances, importing a yacht into Malta would attract Vat at the rate of 18%. This would need to be paid upon importation. At a later date, when the company uses the yacht for  commercial activity, the company would claim the Vat refund back in the Vat return.

The Malta authorities have devised a Vat deferral arrangement which eliminates the need to physically pay out the VAT on importation. The VAT payment is deferred, until the first VAT return of the company, where the VAT element will be declared as paid and claimed back, resulting in a VAT neutral position from a cashflow point-of-view upon importation.

There are no further conditions attached to this arrangement.

As you can see, due to the formalities and potential tax liabilities at stake, importation can be complex and needs to be carefully planned. 

Dixcart has offices in both the Isle of Man and Malta, and we are well placed to assist, ensuring proper compliance with formalities.

Crewing Considerations

It is common for the crew to be employed via a third-party agency. Under such circumstances, the third-party agency will hold a crewing agreement with the owning entity (i.e. the LP). The agency will be responsible for vetting and supplying crew members of every level of seniority and discipline – from Captain to Deckhand. They will work alongside service providers like Dixcart to ensure the best possible experience for the UBO and their guests.

How Dixcart can Support your Superyacht Planning

Over the last 50 years, Dixcart has developed strong working relationships with some of the yachting industry’s leading experts – from tax and legal planning, to building, yacht management and crewing.

When combined with our extensive experience in the effective and efficient operation of corporate entities, registration and administration of yacht structures, we are well placed to assist with superyachts of all sizes and purposes.

Get in Touch

If you require further information regarding yacht structuring and how we can assist, please feel free to get in touch with Paul Harvey at Dixcart.

Alternatively, you can connect with Paul on LinkedIn

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

Malta Aircraft Registration Cleared for Take-off

Background

Malta’s strategic geographical position has assisted its aviation industry to present numerous economic opportunities, for many years. The importance of the Malta aviation sector has led the Maltese Authorities to strengthen its aviation framework to further enhance aircraft registration and aircraft operator licensing.

Malta and the Aircraft Registration Act

Malta has aimed to position itself as one of the primary aviation hubs in the EU by continually reviewing and bolstering its aviation registry. The available aviation legislation provides the aviation industry with a solid foundation. This is further complemented by; competitive aviation registration costs, the authority’s practical understanding of the aviation sector, and favourable corporate structures. As a result, the aviation framework provides several benefits to individuals seeking to register an aircraft on the island.

The importance of Malta’s flag has already been proved within the aviation industry and the inception of the Malta Aircraft Registration Act in 2010, positioned Malta as having one of the most reputable aircraft registers, within the aviation sector.

The Aircraft Registration Act has helped to enhance the aviation framework on the island. Malta has also implemented the ‘Cape Town Convention in Interests in Mobile Equipment’ and its ‘Aircraft Protocol’. Malta took additional measures to boost the aviation industry in 2012, by establishing the Safi Aviation Park, providing a number of aviation services, including training and repairs.

Benefits of Aircraft Registration in Malta

There are many benefits and innovative concepts relating to aircraft registration in Malta.

Amongst these, as mentioned above, was the enactment of the Aircraft Registration Act (Chapter 503, Laws of Malta), which came into force on 1st October 2010. This new regime was implemented to regulate the registration of aircraft, mortgages, and other securities relating to aircraft.

  • In terms of Maltese legislation, an aircraft may be registered by; an owner who operates an aircraft, or an owner of an aircraft under construction (or an aircraft temporarily not being used or managed), or an operator of an aircraft under  temporary title (subject to certain conditions), or a buyer of an aircraft under a condition of sale or title reservation agreement.

Additional benefits include:

A. More visibility of rights and interests in relation to aircraft, through the updating of the National Register;

B. Incentives to encourage the development of finance and operating leases relating to aircraft. Legislation provides clear rules on the tax treatment of the finance charge, available tax deductions to finance lessors, and capital allowances for lessees;

C. Broader registration options, extending to aircraft under construction or temporarily not in service and aircraft under a temporary title;

D. Recognition of fractional ownership of aircraft;

E. No withholding tax on lease payments where the lessor is not a tax resident of Malta;

F. Competitive minimum depreciation periods for aircraft;

G. The private use of an aircraft by an individual who is not resident in Malta and is an employee/officer of an employer/company/partnership, whose business activities include the ownership/leasing/operation of aircraft used for international transport, does not constitute a taxable fringe benefit.

H. Legislation implementation including the provision of the Cape Town Convention on ‘International Interests in Mobile Equipment’ and its ‘Aircraft Protocol’, thereby granting secured lenders more protection and more effective remedies whilst also enabling lower borrowing costs.

Tax, Standards and Flexibility Advantages of Private and Commercial Aircraft Registration in Malta 

Tax

Since 2007, Malta has offered an attractive corporate tax system whereby non-residents can claim tax refunds. In practical terms, the standard 35% corporate tax rate is often effectively reduced to between 0% and 5%.

If you are considering aircraft registration in Malta, another tax benefit is that income, from the international transport of goods and passengers outside the country, is exempt from Maltese tax.

As an EU member state since 2004, the Maltese aircraft register permits free circulation of aircraft in the eurozone, which allows tax-free commercial operation.

VAT Treatment

The VAT treatment for aircraft leasing makes Malta an attractive jurisdiction for private and commercial aircraft registration, whilst ensuring full adherence to EU laws and regulations. The rules take into account the amount of time spent by an aircraft within EU airspace.

The imposition of VAT in Malta varies according to how an aircraft is used. The key differentiation is between, an aircraft being used by an airline operator mainly for ‘reward’ in relation to the international transport of goods or passengers, or an aircraft that is being used purely for private use.

VAT implications, such as those applicable in other EU member states, are also relevant in relation to; importations, intra-community acquisitions, and/or supply of aircraft. The intra-community purchase, importation or supply of aircraft destined for use by an airline operator chiefly for international transport of passengers or goods is classified as an exempt credit supply.

The following are additional exempt credit supplies:

(a) Supplies of equipment to constructors, owners, or operators of an aircraft;

(b) Supplies of services consisting of the modification, maintenance, chartering and hiring of an aircraft.

The VAT treatment applies to all aircraft, other than those used by airline operators for international traffic, as a VAT exemption applies in this latter case.

According to Malta’s VAT legislation, the lease of an aircraft, which airline operators do not use for international traffic, is the supply of a service subject to VAT, with the right of deduction of input VAT by the lessor.

In terms of the VAT simplification procedure, the portion of the lease that will be subject to VAT, depends on the amount of time that the aircraft is used in EU airspace. As it is difficult to identify the movement of a plane in advance and the period in which the aircraft will be operated in EU airspace, Malta applies an ‘expert technical test,’ to estimate the portion of the lease that will be subject to VAT. The standard Malta VAT rate of 18% is applicable on the established percentage of the lease that is deemed to be related to the use of the aircraft in EU airspace.

In addition, Malta offers a very solid legislative environment, with an extensive double-tax treaty network and transparency of rights and interests.

Standards

Falling under the jurisdiction of the European Union Aviation Safety Agency (EASA),  the Maltese aircraft register implements some of the highest levels of regulation in the world. Aircraft registration in Malta offers business jet owners peace of mind, with its International Civil Aviation Organisation (ICAO) rating, testament to stringent safety and security standards.

In addition, Malta adheres to the Cape Town Convention on ‘International Interests in Mobile Equipment’, which specifies international standards for leases, security interests and the registration of contracts.

Flexibility

Aircraft registration in Malta offers unparalleled flexibility for international operators. Aircraft on the Maltese aircraft register can be based and freely operated from anywhere globally.

It is also possible to add an aircraft that is currently under construction or ‘out of action’ to the Malta aircraft register.

Aircraft registration in Malta allows operators to take advantage of fractional ownership of a single aircraft. The potential benefits are enormous, with several co-owners being able to detail a percentage stake, each financed by a separate creditor.

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 Jonathan Vassalloadvice.malta@dixcart.com, at the Dixcart office in Malta or to your usual Dixcart contact.

Yacht Registration is on The Rise – Where to Register Your Pleasure Yacht?

The global tourism industry was brought to a halt as COVID-19 restrictions saw holidays being cancelled ‘en masse’ last year. As international travel looks to be opening up again, HNWIs will play a key role in reviving the sector and one particular trend we have seen them be part of, is the purchase and registration of private yachts and/or the chartering of private yachts.

Registering your Yacht

As with any valuable asset, the ownership structure of your yacht must be carefully considered and the jurisdiction in which the yacht is to be registered is also very important. The flag chosen for registration is one of the most important decisions. Dixcart has extensive expertise in registering yachts in a variety of jurisdictions, where we have offices, in order to help simplify the process.  Here are also some top tips to think about when registering your yacht: Luxury Yachts – Top Tips for Tax Efficient Registration.

Here is a snapshot of some of the best jurisdictions for yacht registration around the world:

CYPRUS

Cyprus is a key maritime centre and is recognised as one of the most accessible registries in the EU. It has not only grown in size in the last two decades but has also made a considerable effort to increase the quality of its fleet and related services. As a result, the Cyprus flag is now classified on the whitelist of the Paris and Tokyo MOUs*.

Due to its strategic location at the gateway of Europe, Africa, Asia, and the Middle East, it is a hub for shipowners and investors from all over the world, and there has been a rapid growth in the number of Cyprus shipping companies in recent years.

The procedure for registering vessels under the Cyprus flag has been designed to attract foreign investment and to build a dependable reputation, to be recognised by all of the international shipping authorities. 

Cyprus offers competitive yacht registration fees, low ongoing annual fees for yacht owners, and an attractive tax treatment for officers and crew working on a Cyprus registered yacht (whereby they are not subject to income tax), as well as a series of other tax advantages including no tax on profits from operational or management profits, no tax on income or dividends received from a ship management company, and a favourable tonnage tax scheme, based on gross tonnage.

The common practice for those wishing to register a vessel under the Cyprus flag is to incorporate a company in Cyprus, which will either acquire the yacht in its name, or bareboat charter the yacht. Cyprus offers a competitive rate of corporate income tax at 12.5% and low operating costs for Cyprus-owned companies. In addition, there is no estate duty on the inheritance of shares in a Cyprus shipping company and no stamp duty is payable on the ship mortgage deeds.

Find out more: Key advantages of registering your pleasure yacht in Cyprus

GUERNSEY

As a crown dependency, Guernsey has a very reputable yacht registry. It is a member of the ‘Red Ensign Group’ of British ship registries and its yachts enjoy the high standards associated with the red ensign flag.

By registering a yacht in Guernsey, owners can benefit from the advantages of a tax efficient and stable jurisdiction and the favourable tax laws of the Bailiwick of Guernsey. There is also the advantage of using a Guernsey Corporate structure to own and operate a yacht which can provide asset protection for the owner, together with other benefits.

Guernsey registration is valid internationally and all documentation is issued in English which is widely accepted around the world. There are no requirements for a Guernsey-registered yacht to physically visit Guernsey and owners have the ability to obtain a provisional registration to cover the vessel for navigation immediately after purchase. 

Another very attractive factor is that Guernsey is outside the VAT territory of the EU making the register useful for non-EU resident owners wanting to operate their vessel VAT free in Europe, and who are eligible to do so under Temporary Admission (Temporary Importation) relief.

Find out more: Benefits of Registering a Yacht in Guernsey

MALTA

Malta has the largest shipping register in Europe and is the sixth largest in the world. The procedure for registering a yacht in Malta is relatively straightforward; the Maltese authorities are approachable, whilst at the same time, meticulously follow a rigid framework of guidelines and regulations, creating a cutting edge for Malta within this sector.

The Malta flag is a European flag, a flag of confidence and a flag of choice.

Many leading international banks and financiers often recommend the Maltese register. This is due to the several advantages available:

  • No trading restrictions and preferential treatment in many ports.
  • The Maltese flag is on the white list of the Paris MoU, Tokyo MoU and on the Low Risk Ship List of the Paris MoU*. In addition, Malta has adopted all international Maritime Conventions.
  • All yachts can be registered in the name of legally constituted corporate bodies or entities (irrespective of nationality), or by European Union Citizens.
  • A Maltese yacht may also be bareboat charter registered under another flag.

Provisional registration is valid for six months, although this can be extended by a further six months; by this time all of the documentation must have been completed for the permanent registration. 

Individuals interested in registering their yacht in Malta, might wish to consider using a Maltese Cell Company. Shipping and Aviation Cell Company Regulations provide the opportunity to use a new cell structure for companies operating in the fields of shipping and aviation, and are treated as separate legal entities. This means assets and liabilities relevant to the individual cell can be segregated from the assets and liabilities of non-cellular elements, and from the other cells which may be held within the structure. A relatively simple example might be where one cell owns yacht A, the second cell owns yacht B, the third cell owns yacht C, and cell D owns the business matters in relation to ‘yacht management’. They can all be separated within the structure to ensure extra protection of the assets.

Malta is continuously reviewing their maritime legislation and introducing new regulations, ‘leading the way’ in terms of new initiatives in this sector. This includes yacht owners that have larger vessels and need to meet obligations for commercial passenger ships.

It is widely recognised when considering the operational pattern and risk profile of yachts, that these requirements, are in some instances disproportionately onerous and impractical in terms of design and implementation. As the trend for larger commercial yachts is growing, the 12-passenger limitation rule has become more problematic, resulting in an increase in administration for a number of organisations. This, combined with encouragement from the yachting industry, has provided impetus for Malta to develop the ‘Passenger Yacht Code’, to meet industry demands.

The introduction of the ‘Malta Passenger Yacht Code’ is applicable to passenger yachts which carry between 12 and 36 passengers, do not carry cargo, and which sail internationally. It is certainly a welcome development for those who plan to register larger commercial yachts under the Malta flag. It offers a solution to the many technical issues and concerns which were previously faced by prospective registrants.

Find out more: Why Malta is a great location for flagging or reflagging a yacht

PORTUGAL – MADEIRA

Madeira is part of Portugal and has full membership of the EU. This enables yacht purchasers to fully comply with EU legislation and the International Shipping Register of Madeira (MAR) is internationally recognised as a credible and competitive option in comparison to other shipping registers.

MAR maintains the high quality and safety standards of an EU register. It is regarded by the International Transport Workers’ Federation (ITF) as a flag of convenience and is included in the Paris Memorandum of Understanding (MOU) White List*.

An advantage of registering a yacht in Madeira is that it is an EU Register which allows full access to navigation in EU waters without any types of restriction for either commercial or private yachts.In addition, its EU standing has the advantage of providing substance to the VAT status of yachts registered in Madeira that operate within EU waters.

Madeira also takes into consideration the purchase of second-hand yachts. Portuguese VAT is applied to the lower acquisition price, as rules allow for devaluation suffered by the yacht (deemed market value). This can lead to a significant reduction in VAT.

Yachts that are commercially registered in MAR and are (i) used for navigation on the high seas and (ii) engaged in commercial/charter activities, benefit from several VAT exemptions:

  • the acquisition price of the yacht;
  • repair, modification and maintenance operations of the yacht;
  • fuel and oil supply;
  • the supply of goods (provisions) to have on board; and
  • the supply of equipment.

In addition, there are no citizenship requirements for the crew, and they are exempt from personal income taxes. The crew also benefit from a flexible social security regime; crew members are not obliged to contribute to the Portuguese social security regime, provided that an alternative pension scheme is guaranteed.

As mentioned above, when we have looked at other jurisdictions, many yacht owners choose to register their vessel via a company structure. The International Business Centre of Madeira (MIBC), with its advantageous tax regime, provides a highly competitive package of tax benefits. Its reduced direct taxation, with effective corporate income tax rate of 5% until 2027, combined with an exemption from withholding tax (providing the shareholders are resident in an EU jurisdiction) on payments of dividends, interest, and royalties to non-residents of Portugal, makes it an attractive location for yacht operating companies.

Madeira companies also benefit from automatic VAT registration on incorporation and are instantly provided with a VAT registration number. This makes it easier for such companies to take advantage of the various benefits available.

Madeira yacht owning companies are exempt from the initial yacht registration fee and receive a 20% reduction in the annual yacht registration fee. Plus, withholding taxes on dividends can be eliminated by routing the investment in the Madeira company through an EU holding company, for example a Maltese holding company.

Find out more: Why consider Portugal for yacht registration?

Summary

Dixcart Air Marine assists clients who own, or wish to own, a yacht. Our team of experienced professionals can provide a wide variety of services including; pre-structuring and ownership advice, registering the yacht, the accounting, added value services, tax planning, assistance with crewing and payroll (if required), and ongoing annual requirements. If you would like to speak to one of our professional advisers, please get in touch:

*White List Paris and Tokyo MOUs: Flags securing the highest rating in relation to the Memorandum of Understandings on Port State Control.

Full Fiduciary Licence granted by the Guernsey Financial Services Commission. Guernsey Registered Company Number: 6512.

Aviation Funding And Leasing Services In Malta

Background

In the last decade, aviation has become an even more relevant sector to Malta, not only due to the fact that it is the primary way that the island connects with other countries.

The jurisdiction is well known for aircraft registration with almost 500 aircraft registered in Malta. Similarly, the number of Air Operator Certificate Holders has increased to 40.  It is no surprise that Malta has become the fastest growing Registry in Europe.

This growth has been spearheaded by the introduction of various incentives and changes in legislation during recent years.

Aircraft Leasing 

One of the niche sectors which Malta is keen to expand is the aircraft leasing sector. Charles Pace, head of Transport Malta’s Civil Aviation Directorate, stated that the tendency nowadays is for airlines to lease aircraft rather than buy.

Malta is working to attract major aircraft leasing players which will help boost the aircraft sector in Malta further, both in terms of registrations as well as; maintenance, repair and overhaul activities.

Taking the Cape Town Index into account, Malta ranks well and is featured in the top 10, with a score of 85%. Taking advantage of this opportunity, the Malta Civil Aviation Director Charles Pace, is clear that he wishes to expand the Malta aviation sector to compete with strong leasing jurisdictions, such as Singapore, Hong Kong, or Ireland.

Leasing Types

When it comes to rental business, regardless of the aircraft, there are two types of leases: short-term (also known as wet leases), or long-term (also known as dry leases). 

Short leases are generally used by airlines for clients who need a plane for specific events or when faced with some technical problems within their own fleet. The lessor will pay the airport fees, taxes, fuel, insurance, maintenance, and crew. The fee paid by the lessee will depend on how many hours the aircraft is used.

However, for long leases, the only thing included in the price is the aircraft. The customer (the lessee) will be responsible for all charges in relation to; insurance, fuel, taxes, maintenance and crew. 

Benefits of Malta Aviation Companies

  • Investment Aid initiatives are available through the Malta Enterprise Corporation. The  aim of this assistance is to ease financial pressure at start up, as well as incentives to lessen the burden during ongoing operations.
  • Loan guarantees/subsidies and soft loans provided to facilitate entry into market.
  • Key personnel employed in the Aviation industry may benefit from the ‘Highly Qualified Persons Rules’.
  • Access to the aviation park situated in Safi.
  • Attractive taxation incentives including tax depreciation and taxation refunds.

Additional Information 

If you require any further information regarding aircraft leasing or the funding available to set up an aviation company in Malta, please speak to Jonathan Vassallo at the Dixcart office in Malta: advice.malta@dixcart.com.

Malta-nomad-residence-permit

Malta Implements a New Passenger Yacht Code: More Than Twelve Passengers

Background

Malta is a well-known and popular jurisdiction within the yachting sector. It has the largest shipping register of vessels in the EU and the 6th largest in the world. It is also a jurisdiction that is ‘leading the way’, with a number of initiatives in this sector.

Current Obligations

Yachts need to meet obligations for ‘commercial passenger ships’ and it is widely recognised when considering the operational pattern and risk profile of yachts, that these requirements, are in some instances disproportionately onerous and impractical in terms of design and implementation.

As the trend for larger commercial yachts increases, the 12 passenger limitation rule has become more problematic and has resulted in an increase in administration for a number of organisations, including the Malta Merchant Shipping Directorate. This, combined with encouragement from the yachting industry, has provided impetus for Malta to develop the ‘Passenger Yacht Code’, to meet industry demands.

The Malta Passenger Yacht Code

The Malta Passenger Yacht Code is applicable to passenger yachts, which carry between 12 and 36 passengers, do not carry cargo, and which sail internationally. The Code is intended to cater exclusively to the yachting sector of the market, it is not intended to apply to the excursion and/or ferry passenger sectors of the industry.

The new yacht code has been drafted by the Authority for Transport in Malta, in consultation with various industry stakeholders including; yacht designers, yacht builders, repair yards, specialised service providers and manufacturers, appointed surveyors and recognised organisations. This has been to ensure a wide representation of the industry.

Details of the Malta Passenger Yacht Code

A passenger yacht must be; surveyed, certified, audited and issued with Class and Statutory Certificates, applicable to passenger vessels, by a recognised organisation. Class Rules relating to passenger vessels will apply. Approval staff, auditors and surveyors must be experienced and qualified in passenger ship planning, audits, and surveys.

The Malta Passenger Yacht Code provides addition regulation, in particular in relation to safety, for example; life- saving appliances and arrangements, life at sea safety, navigation safety, and protection of personnel.

Passenger Yachts Chartered on a Static Basis

Where a passenger yacht remains static; berthed or anchored at sea, the yacht may be allowed to carry more than 36 passengers, as provided for in The Malta Passenger Yacht Code. For a passenger yacht to be able to be chartered on a static basis, the yacht would need to be issued with a statement by the Flag Authority, permitting static charters.

The Certification Process

Once owners submit the necessary documentation and complete the designated survey and inspections, the Maltese Flag Authorities will issue the vessel with a Statutory Certificate.

All passenger yachts must, in addition, be classified by a Recognised Organisation (RO), and must maintain a valid classification throughout the validity period of the yacht’s statutory certificate. The applicable RO Rules for classification purposes are those used for the classification of passenger ships. Upon satisfactory completion of  the required surveys or audits, the yacht’s RO needs to issue a certificate, confirming compliance with the Malta Code.

Passenger yachts certified under the remit of the Code may carry out International (Unrestricted) Voyages or Short International Voyages, as defined by The International Convention for the Safety of Life at Sea (SOLAS).

Advantages of the Malta Passenger Yacht Code

The introduction of the Malta Passenger Yacht Code is a welcome development for those who plan to register larger commercial yachts under the Malta flag. It enables larger yachts to carry between 12 and 36 passengers.

It offers a solution to the many technical issues and concerns which were previously faced by prospective registrants.

Additional Information

If you would like further information regarding the registration of a yacht and opportunities available through Malta, please speak to Jonathan Vassalloadvice.malta@dixcart.com, at the Dixcart office in Malta or your usual Dixcart contact.

Malta

Malta Initiative Moves Forward – A Shared Database of Ships Linked to Criminal Activity

Background

Crime-linked vessels are an unfortunate reality worldwide. The lack of information about vessels can result in countries flagging or re-flagging ships involved in criminal activities, or letting such vessels sail out of their ports unimpeded.

Main Concerns for Malta

Malta has had long-term concerns regarding contraband  linked to Italian organised crime as well as to Libyan militia groups.

The head of Malta’s sanction board Neville Aquilina, detailed in an International Maritime Organisation (IMO) Assembly “mechanisms for the full implementation of UN sanctions requirements are either too weak or inexistent”.

In addition, vessels which have been sanctioned in one country are able to sail to another jurisdiction, to obtain their license. This is possible because countries which de-flag vessels do not have the obligation of informing other countries about this and/or other actions taken.

International Database Proposal – A Shared Database of Ships Linked to Crime

In March 2020, in a meeting arranged by the IMO and the International Maritime Law Institute (IMLI), Malta proposed an idea to the EU to deal with this issue:

  • Malta suggested the idea of building a global database of vessels or companies, connected to illicit activities or subject to international sanctions, and for this database to be shared between countries, to help them make informed decisions.

The goal is to strengthen international maritime law, specifically, making it more difficult for criminals to obtain vessel licenses when they sail from one country to another, after their ship has been de-flagged for sanction violations in a previous country.

In addition, this new information about vessels worldwide will make it easier to carry out investigations. Currently these can take years to complete because of the lack of information available.

International Database Creation

Malta raised this idea again in 2021, during a follow-up event. In April 2021 the European Commission agreed to start working on a database across the EU, and to introduce it as soon as possible, in the forthcoming months.

Malta’s Standing

Located centrally in the middle of Europe and to the north of Africa, Malta is ranked sixth in terms of world ship registration and regards this new initiative as being extremely important.

Implementation Intentions

Even though the objective for the shared database of ships linked to crime is to be used by all of the IMO state members, the IMO has not, as yet, committed to a date to implement the database.

Dixcart will keep you updated.

Additional Information

For further information about the Malta flag please contact Jonathan Vassallo, at the Dixcart office in Malta: advice.malta@dixcart.com. Alternatively, please speak to your usual Dixcart contact.

Dixcart Malta Managing Director – Co-opted to Malta Chamber’s Yachting Services Executive Committee

Jonathan Vassallo has been co-opted to join the Executive Committee of the Yachting Services Business Section, within the Malta Chamber.

Jonathan Vassallo

This section represents one of the biggest categories within the Chamber in terms of members.

During the past couple of years the Chamber has been dealing with the challenges faced by the industry. It has continued to work closely with the authorities to propose new, and re-visit existing practical applications and procedures, designed to have a positive impact on the yachting industry in Malta.

This is an ongoing exercise to ensure that this yachting sector remains dynamic and at the forefront of the industry internationally. A number of procedures and guidelines have been adopted and fine-tuned, and this has helped to ensure that Malta remains an attractive jurisdiction for yacht owners and operators.

Jonathan is keen to be part of this team and use his experience to contribute to the Executive Committee for the benefit of this sector within the Malta economy.

For the next two years, the key objective of the Committee is to continue to offer a robust platform for the yachting industry and to collaborate with the authorities and stakeholders to improve Malta’s already strong position within the yachting world.

You can contact Jonathan, in the Dixcart Malta office at: advice.malta@dixcart.com

The Malta Aircraft Registration Regime – A Favourable Aviation Base in the EU

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 Benefits of Ship or Yacht Registration in Portugal, with the International Shipping Register of Madeira (MAR)

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.