Echoing the success achieved in the maritime sector, Malta has established the Aircraft Registration Act coupled with an investment in human resources and facilities. This Act amended the Civil Code and the Code of Organisation & Civil Procedure and implemented the provisions of the Cape Town Convention on International Interests in Mobile Equipment and its Aircraft Protocol which is well known for its benefits to banks and aircraft lessors.
With the number of registered aircraft growing year on year, the success of the Maltese Aviation Registry is sustained a robust legislative framework. Malta has become a stronger jurisdiction for both private and corporate jets with some key players in aviation choosing to relocate to Malta. The sector includes a variety of service providers encompassing aircraft registration, maintenance, repairs and overhauls (MRO), training, crew management and lease finance organisations.
Advantages of registering aircrafts in Malta
Industry related advantages
- Malta forms part of the Eurozone.
- Wide aircraft registration possibilities for applicants including owners of aircrafts under construction, operators of aircraft under temporary title, such as a lease, and buyers under a conditional sale or title reservation agreement.
- Possibility of registering aircraft engines separately thereby allowing for engine financing opportunities.
- Recognition of fractional ownership interests of aircraft entitling the holder to use the aircraft for a designated amount of time over a specified period.
- Possibility of registering an aircraft through a trust. While the trustee may be registered as the owner, Maltese law ensures the rights of the beneficiaries are enforced against the trustee in case of default
- Income derived from the ownership, leasing or operation of aircraft or aircraft engines engaged in the international transport of passengers or goods is deemed to arise outside Malta for Maltese income tax purposes irrespective of the country of registration of the aircraft or aircraft engines and whether the aircraft calls at or operates from.
- In view of Malta’s remittance basis of taxation, companies which are tax resident but not domiciled in Malta will not be subject to tax in Malta on income derived from the operation, leasing or ownership of an aircraft unless such income is remitted to Malta since such income from the operation of aircrafts used for international transport of goods or passengers is not deemed to arise in Malta. In such a case a company will only be subject to tax in Malta on income and capital gains arising in Malta and on foreign income which is remitted to Malta. On the other hand, companies registered and domiciled in Malta will allocate such income arising from international transport to the foreign income account and may thus benefit from double taxation relief.
- Maltese tax legislation provides for an accelerated tax depreciation allowing for larger portions of the depreciation value to be claimed early in the depreciation cycle hence resulting in larger deductions over a shorter depreciation period. The minimum number of years over which aircraft airframe, aircraft engines, aircraft engine or airframe overhaul, aircraft interiors and other parts may be tax depreciated is four years.
- Maltese registered companies are subject to income tax on chargeable income at a standard rate of 35%. The Maltese tax legislation adopts a full imputation system whereby tax paid by the company is credited in full to the shareholder following a distribution of profits. Moreover, a system of tax refunds which shareholders may claim depending on the source of income leads to an effective tax rate which may be well below the 35% tax rate applicable to companies. Furthermore, Malta has an extensive tax treaty network with over 70 jurisdictions which ensures that no double taxation is paid on income derived by the Company. For further details you may wish to refer to Corporate Matters and Double Taxation Relief.
- The private use of an aircraft by a non-Maltese individual who is an employee or officer of an employer, company or partnership whose business activities include the ownership, leasing, or operation of aircraft or aircraft engine which is used for or employed in the international transport of passengers or goods is not considered a fringe benefit thus not subject to taxation in Malta.
- In an attempt to attract qualified employees working in the aviation industry, eligible employees may benefit from a favourable tax rate of 15% on income derived from employment income subject to taxation in Malta. The reduced tax rate of 15% applies when the employment income exceeds €45,000 and is available for a period of five consecutive years for EEA and Swiss nationals and for a period of four consecutive years for third country nationals. It is also possible to apply the 15% tax rate of eligible offices under the Highly Qualified Persons Rules however, under these rules, the minimum employment income for eligible office is higher.
- Companies that carry on a trade or business consisting of the repair, overhaul or maintenance of aircraft, engines or equipment incorporated or used in such aircraft may benefit from investment tax credits. Such tax credits are calculated either as a percentage of qualifying expenditure or wage costs for jobs which are directly created by the project. The investment tax credits are credited against the tax due in Malta.
- L.N. 369 of 2005 governs finance leasing of aircrafts for arrangements not exceeding four years. Guidance was later issued by the Maltese tax department for finance lease arrangements not falling within the ambit of the legal notice.
- The VAT legislation in Malta transposes the EU VAT directives. The VAT legislation exempts with credit both the supply of an aircraft destined to be used by airline operators for reward chiefly for international transport of passengers and/or goods as well as the actual international transport of persons and goods. The said exemptions are also available to other aviation related services.
An Air Operator Certificate (AOC), issued by Transport Malta Civil Aviation Directorate (TM-CAD) is required for an air transport organisation to carry out any air service within the European Community in accordance with Council Regulation 1008/2008 on common rules for the operation of air services in the Community. The Civil Aviation Directorate regulates aviation activities on the basis of its membership in the following organisations:
- The International Civil Aviation Organisation (ICAO);
- The European Civil Aviation Conference (ECAC);
- EUROCONTROL, and
- The European Aviation Safety Agency (EASA).
An applicant for an AOC must:
- Have the principal place of business and, if any, the registered office located in Malta;
- Satisfy the TM-CAD that is able to conduct safe operations;
- Its organisation and management are suitable and properly matched to the scale and scope of the operations;
- Procedures for the supervision of the operations have been defined;
- Provide evidence of ownership or lease agreement, and
- Provide a certificate of de-registration if the aircraft was previously registered in other jurisdictions.
How we can help
Avanzia Taxand is able to provide a one stop shop in delivering your requirements related to the registration and management of the aircraft together with our strategic partner aoc.mt as follows:
- Assistance with indirect and direct tax advice in the realm of aviation and tax compliance;
- Company incorporation and related ancillary services such as book-keeping and administration;
- Assistance to clients in registering their aircraft in Malta and obtaining Air Operators’ Certificates (AOC) and Air Operators’ Licenses;
- Provide advice on operations management finance and aircraft leasing;
- Sale and acquisition of aircrafts, and
- Other compliance matters.