Category: Air Marine

Background

The Archipelago of the Azores is composed of nine volcanic islands and is situated in the North Atlantic, about 1,500 kilometres west of Lisbon. These islands are an autonomous region of Portugal.

What Advantages are Offered by the Azores for Yacht Importation into the EU?

• The standard rate of Portuguese VAT is 23% but the Azores benefits from a reduced VAT rate of 18%.

In relation to the EU as a whole, the Azores has the second lowest rate of VAT within the EU (equal to Malta), with only Luxembourg enjoying a lower rate at 17%. The low rate of VAT is a major reason why the Azores continues to be a popular location for yacht importation into the EU.

The Azores also provides a geographical advantage as it is on the route used by yachts crossing the Atlantic, from the US and the Caribbean, to Europe.

Dixcart: Yacht Importation Services Using the Azores

Dixcart has extensive experience importing yachts through the Azores.

The yacht must physically travel to the Azores and it must  be moored there for two to three working days, to enable customs clearance to take place.

Dixcart undertakes the preparation work at their office in Madeira and then organises for the appropriate professionals to travel to the Azores, to be there at the correct time and for the relevant number of days. These professionals assist with the customs clearance procedures and payment of VAT.

Steps and Procedures

Four steps take place:

Step 1: Application for a VAT number for the yacht owning company, as a Portuguese taxpayer

Requirements:

1. Relevant documents to prove the yacht owner’s identity.
2. Power of Attorney from the yacht owner in favour of the relevant Dixcart company. This company will apply for a VAT number and will be registered as the yacht owner’s fiscal representative, for VAT purposes, with the Portuguese Tax Authorities.

Step 2: Preparation of the relevant VAT and other customs forms

Requirements:

1. ‘Declaration of Conformity’.
2. ‘Bill of Sale’ and related invoices.
3. Customs in the Azores will make their own evaluation as to the value of the yacht.

Step 3: Importation

The Azores Customs Authority will:

1. Survey the yacht.
2. Calculate the applicable VAT on importation, and any other relevant charges.
3. Implement the customs clearance.

Step 4: VAT payment

The Portuguese tax representative of the yacht owner (provided by Dixcart) will pay the VAT applicable on the yacht importation and will receive the following items:

1. ‘Declaration of Importation’. This document confirms customs clearance for the yacht and details of the relevant VAT payment. It must be kept on board the yacht at all times.
2. Receipt of payment.

Additional Information

If you require additional information regarding yacht importation using the Azores, please speak to your usual Dixcart contact or reach out to the Dixcart office in Madeira: advice.portugal@dixcart.com.

Dixcart can provide clients with a number of alternative ship registration solutions.

This note provides a brief overview of the shipping regimes in Cyprus, the Isle of Man, Madeira (Portugal) and Malta. More detailed information is available on request regarding shipping in each of the jurisdictions considered in this Article.

Cyprus

Cyprus is a major ship management centre attracting foreign ship owners through the highly favourable tax provisions available for shipping companies on the island. It is recognised as one of the most accessible registries in the EU.

The Cyprus shipping registry 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 white list of the Paris and Tokyo MOUs*.

Key advantages relating to the shipping sector in Cyprus include:

• A competitive tax regime for shipping companies, with an EU approved Tonnage Tax System (TTS) that is based on the net tonnage of the vessel rather than the corporation tax on the actual profit. This allows for mixed activities within a group, shipping activities are subject to TT and other activities are subject to 12.5% corporation tax.
• Competitive operating costs, ship registration costs and fees.
• The income of officers and crew on Cypriot registered vessels is not subject to income tax.
• There are no nationality restrictions for officers or crew.
• Cyprus also offers a series of tax advantages which are applicable to ship and ship management companies: exemption from tax of dividend income (subject to limited conditions), exemption from tax on profits from foreign permanent establishments, and exemption from withholding tax on the repatriation of income (dividends, interest and nearly all royalties).
• More than 60 Double Tax Treaties.
• No estate duty on the inheritance of shares in a Cyprus shipping company and no stamp duty is payable on ship mortgage deeds.

Madeira (Portugal)  

The International Shipping Register of Madeira (MAR) was established in 1989 as part of the Madeira International Business Centre (“MIBC”) “package” of taxation benefits. Vessels registered with MAR carry the Portuguese flag and are subject to the International Treaties and Conventions entered into by Portugal.

The key advantages of ship registration in MAR are detailed below:

• The register is of a high standard, has EU credibility, is not regarded as a flag of convenience and is included in the Paris MOU white list.
• There are no nationality requirements for ship-owners of vessels registered in MAR. They are not required to have their head office in Madeira. It is sufficient to have local legal representation with adequate powers.
• 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.
• The existence of a flexible mortgage system 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.
• Competitive registration fees, there are no annual tonnage taxes.
• 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”).
• Shipping companies licensed to operate within MAR benefit from a corporate income tax rate of 5% until 2027. They also enjoy automatic VAT registration and have access to the Portuguese double taxation treaty network.

Malta

Malta provides a reputable flag and ensures compliance with international and European standards. Registration of vessels under the Maltese flag take place in two stages. A vessel is provisionally registered for a six month period. During this provisional registration period, the owner is required to submit additional documentation and the vessel is then permanently registered under the Maltese flag.

There are a number of attractive tax reasons to consider ship registration in Malta:

• The standard corporate tax rules do not apply to shipping activities in Malta, due to a specific exemption. No tax on profits from shipping activities is therefore due. Following recent amendments this exemption has also been extended to ship management companies.
• Shipping operations are subject to an annual tax comprising an annual registration fee and a tonnage tax based on the net tonnage of the vessel. The rates of tonnage tax are reduced according to the age of the vessel.
• There is an exemption from stamp duty in Malta on the registration or sale of a ship, shares relating to a licensed shipping organisation and the registration of a mortgage relating to a ship.
• Individuals not resident in Malta who are officers or employees of a licensed shipping organisation, and the organisation that they work for, are exempt from social security contributions.

Dixcart Shipping Services

Dixcart can assist in all aspects of registering a ship in Cyprus, the Isle of Man, Madeira and Malta.

Services include the incorporation of the owner entity, coordinating the appropriate corporate and tax compliance, and registration of the vessel.

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

Additional Information

If you would like additional information on this topic, please see our Air Marine page or speak to your usual Dixcart contact or to:

• Charalambos Pittas in Cyprus
• Catarina Sardinha in Madeira
• Jonathan Vassallo in Malta

Over the past decade, Malta has consolidated its status as an international, Mediterranean centre of maritime excellence. Currently Malta has the largest shipping register in Europe and the sixth largest in the world. In addition, Malta has become a world leader in terms of commercial yacht registration.

In order to avoid the risk of shipping companies relocating or flagging to low-tax countries outside the EU, the European Commission’s 2004 Guidelines on State Aid to Maritime Transport (commercial shipping activities) was introduced to allow Member States to implement financial benefits for shipping companies. One of the most important benefits was to replace traditional methods of taxation with a tonnage tax.

In December 2017, the European Commission approved the Maltese tonnage tax regime for a period of 10 years, following a review of its compatibility with EU State Aid Rules.

The Maltese Shipping Tonnage Tax System

Under the Malta Tonnage Tax System, tax is dependent on the tonnage of the vessel or fleet belonging to a particular ship-owner or ship-manager. Only companies that are active in maritime transport are eligible under the Maritime Guidelines.

Standard corporate tax rules do not apply to shipping activities in Malta. Instead shipping operations are subject to an annual tax consisting of a registration fee and annual tonnage tax. The rate of tonnage tax reduces according to the age of the vessel.

• As an example, a trading ship measuring 80 metres, with 10,000 gross tonnage, built in the year 2000, will pay a fee of €6,524 on registration and €5,514 annual tax thereafter.

The smallest category of ship is up to a net tonnage of 2,500 and the largest, and most expensive, are ships over 50,000 net tonnage. Charges are reduced for ships in the 0-5 and 5-10 year age categories respectively and are greatest for those 25-30 years old.

Taxation of Shipping Activities in Malta

As detailed above:

• Income derived from shipping activities by a licensed shipping organisation is exempt from income tax.
• Income derived from ship management activities by a ship manager is exempt from income tax.

In all other circumstances:

• Shipping companies incorporated in Malta are taxed on their worldwide income and capital gains.
• Shipping companies not incorporated in Malta, but where control and management are exercised in Malta, are taxed on local income and capital gains and on foreign source income remitted to Malta.
• Shipping companies not incorporated in Malta and where management and control are not exercised in Malta, are taxed on income and capital gains arising in Malta.

Ship Management Activities

Following a European Commission ruling, Malta has amended its tonnage tax law.

Ship management activities are now included in the tonnage tax system. This means that ship managers are allowed to pay a tonnage tax which is equivalent to a percentage of the tonnage tax paid by the owners and/or charterers of the ships managed. Any income derived by a ship manager from ship management activities is deemed to be income derived from shipping activities and is therefore exempt from income tax.

Ship management organisations can benefit from the tonnage tax measures, provided that the following conditions are met:

• must be a ship management organisation established in the European Union (EU) or the European Economic Area (EEA);
• have assumed responsibility for either technical and/or crew management of a ship;
• must comply with the international standards and requirements of the EU;
• must specifically include shipping activities in their objects and must register with the Registrar General accordingly;
• maintain separate accounts, clearly distinguishing the payments by and receipts of the ship manager with respect to ship management activities from those not connected to such activity;
• the ship manager opts to pay an annual tonnage tax on all ships;
• At least two-thirds of the tonnage of the ships that the ship manager is providing ship management activities for must be managed in the EU and EEA;
• the tonnage that the ship manager provides ship management activities for must satisfy the flag-link requirement.

Maltese Tonnage Tax Eligibility

Tonnage tax is applied to the activities of a shipping company as follows:

• core revenues from shipping activities;
• certain ancillary revenues that are closely connected to shipping activities (capped at a maximum 50% of a ship’s operating revenue); and
• revenues from towage and dredging (subject to certain conditions).

Maltese shipping organisations must register with the Finance Minister by submitting the name of the organisation, the registered office address and the name and tonnage of the ship it wishes to own or operate. The vessel must be declared a ‘Tonnage Tax Ship’ or a ‘Community Ship’, with a minimum net tonnage of 1,000 and be entirely owned, chartered, managed, administered or operated by a shipping organisation.

A shipping company can only benefit from the Maltese Tonnage Tax scheme if it has a significant part of its fleet flying the flag of a European Economic Area (EEA) Member State.

Additional Reasons to Consider Ship Registration in Malta

There are a number of additional reasons to consider ship registration in Malta:

• The Malta registry is on the Paris MOU and Tokyo MOU white lists.
• Vessels registered under the Malta Flag have no trading restrictions and are given preferential treatment in many ports.
• Registration of vessels under the Maltese flag takes place in two stages. A vessel is provisionally registered for a six-month period. This is an easy and fast process. During this provisional registration period the owner is required to submit additional documentation and then the vessel is permanently registered under the Maltese flag.
• There is an exemption from stamp duty in Malta on the registration and/or sale of a ship, shares relating to a licensed shipping organisation and the registration of a mortgage relating to a ship.

Additional Information

If you would like further information regarding the Malta Tonnage Tax System or the registration of a ship and/or yacht in Malta, please contact Jonathan Vassallo at the Dixcart office in Malta: advice.malta@dixcart.com

Established in December 2013, “2-REG”, the Channel Islands Aircraft Registry, is the aircraft registry of the States of Guernsey. The nationality mark is ‘2’ followed by four letters, allowing for attractive registration marks.

There have been 94 registrations to date of lessor owned aircraft, corporate aircraft, including a Boeing 787-8 Dreamliner, and locally owned aircraft. The registry is also able to award Air Operator Certificates, and benefits from being party to the Cape Town Convention, the international aviation standard relating to aviation assets.

The Registration Process

The process for aircraft registration involves a review of corporate and aircraft due diligence. This applies to the 40 countries where financial services business regulations are considered equivalent to local Guernsey standards.

For countries not on this list, the 2-REG requires a Resident Agent in Guernsey, who must be a licensed fiduciary, to be appointed to undertake this work.

What is the Role of a Resident Agent?

The Resident Agent is required to undertake a review of due diligence (corporate and aircraft) to the standard expected by the Guernsey Financial Services Commission, and to report their findings to the registry. In addition, the Resident Agent must act as liaison between the aircraft owner and the registry and submit the registration applications.

Dixcart Trust Corporation Limited in Guernsey is a registered Resident Agent for the 2-REG Registry.

Case Study and How Temporary Registration on 2-REG Solved a Problem

The Dixcart office in Guernsey was recently approached by a Turkish commercial air cargo carrier to act as Resident Agent for a temporary registration of an Airbus A300.

The aircraft was moving from the American FAA registry to the Civil Aviation Register of Turkey. The Turkish register required a Certificate of Airworthiness (CofA) as part of its registration requirements.

The FAA, however, has shifted policy recently and is less willing to issue documents for aircraft that are not in the United States or destined to go to the United States.

The solution was to apply for a temporary registration on 2-REG allowing the appropriate airworthiness inspections to be undertaken and a CofA issued to allow onward registration in Turkey.

On receipt of properly certified due diligence relating to: the company, directors, ultimate beneficial owners and the aircraft, a full compliance review was carried out by Dixcart and this formed the basis of the report to 2-REG, in addition to the relevant registration forms being submitted.

Dixcart Guernsey and International Business Support

This type of fiduciary work it is a good example of the wider support that Dixcart in Guernsey, and other offices across the Dixcart Group, offer to corporate, private and family office clients.

It also reflects the wider business friendly and ‘can do’ environment that the Guernsey Government has fostered and which helps to support and deliver global solutions. These include the 2-REG aircraft registry, the Channel Island Securities Exchange, HNWI relocation and domicile, and highly respected fiduciary, captive insurance and fund sectors.

Additional Information

If you require any additional information on this topic, please speak to your usual Dixcart contact or to John Nelson at the Dixcart office in Guernsey: advice.guernsey@dixcart.com.

A lot of uncertainty has been generated within Europe following on from the Brexit vote, and certain other countries who are beginning to reassess their position within the EU. This is having an impact on the marine industry, with a number of vessel owners seeking to reflag ships and yachts.

The choice of flag registration is an important decision and a jurisdiction must be selected that satisfies relevant criteria relating to how and where the vessel will be used.

The Jurisdiction of Malta and Ship and Yacht Registration

Malta, with its central and strategic position at the heart of the Mediterranean, offers a wide range of international maritime facilities and services. This jurisdiction offers an active International Ship Register, with an excellent reputation, and it currently ranks as the largest merchant shipping flag in Europe.

The Malta Flag is a European Flag, a flag of confidence and a flag of choice. Many leading ship owning and ship management companies register their vessels under the Malta Flag, and international banks and financiers often recommend the Maltese Register and Malta Ship Registration.

Benefits Offered to Ships and Yachts Registered in Malta: Fiscal, Corporate and Legal

A number of advantages are available to vessels registered under the Malta Flag, which include:

• Vessels registered under the Malta Flag have no trading restrictions and are given preferential treatment in many ports.
• The Malta 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 types of vessel, from pleasure yachts to oil rigs, may be registered in the name of legally constituted corporate bodies or entities (irrespective of nationality), or by European Union citizens.
• A Maltese vessel may also be bareboat charter registered under another flag.
• There are no trading restrictions for the vessels.
• Vessels less than 25 years old may be registered. Where relevant, the following criteria apply:
• Ships aged 15 years and over, but under 20 years, must pass an inspection by an authorised flag state inspector before or within a month of, provisional registration.
• Ships aged 20 years and over but under 25 years, must pass an inspection by an authorised flag state inspector prior to being provisionally registered.

Registration of a Vessel in Malta – the Procedure

The procedure for the registration of a vessel in Malta is relatively straightforward.  Provisional registration, which in terms of the law has the same effect as permanent registration, can be effected very quickly.

Authority to provisionally register a ship will only be given once the Malta Maritime Administration is satisfied that the vessel conforms to all of the standards required by the relative international conventions.

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. Specifically this must include evidence of ownership from a former registry, unless the vessel is new. Authority to operate remains dependent on meeting the relevant manning, safety and pollution prevention measures as detailed in international standards.

Bareboat Charter Registration

Maltese law provides for bareboat charter registration of foreign ships under the Malta flag and for the bareboat charter registration of Maltese ships under a foreign flag.

Vessels so registered enjoy the same rights and privileges and have the same obligations as a ship registered in Malta.

The main factor relating to bareboat charter registration is the compatibility of the two registries.  Matters regarding title over the ship, mortgages and encumbrances are governed by the underlying registry, while the operation of the vessel falls under the jurisdiction of the bareboat registry.

A bareboat charter registration lasts for the duration of the bareboat charter or until the expiry date of the underlying registration, whichever is the shorter, but, in any event, for a period not exceeding two years.  It is possible for the bareboat charter registration to be extended.

Yacht Registration Services Offered by Dixcart Malta

Dixcart Management Malta Limited has extensive experience in registering yachts under the Malta Register and providing the ancillary services needed to maintain such a registration.

Dixcart can establish the ownership structure for the vessel and provide advice on the most efficient structure, depending on the type of use of the vessel as well as the place of use.

For further information, please speak to your usual contact at Dixcart or email the Dixcart office in Malta: advice.malta@dixcart.com