PKF Malta - Shipping

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PKF Malta is a member firm of the PKF International Limited network of legally independent firms and does not accept any responsibility or liability for the actions or inactions on the part of any other individual member firm or firms.

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HOISTING THE MALTA FLAG: A Ship Registration Picking

Introduction In being an island whose opulent history is strewn with sea‐worthy images of victory from monumental episodes like the Great Siege of 1565, the Malta flag was perhaps borne into a pre‐destined fate of all things maritime. Truth be told, Malta has gallantly lived up to its destiny which has been re‐honed, refined and re‐designed to welcome the new waves of every current time. Thus, one notes the transition from horizons filled with the battleships of old, to Malta acquiring the coveted asset of neutrality and beyond. Collectively a journey that has left Malta knighted with various honours, namely those making it a winning bet for a choice of flag, register, port or berth. A rising tide lifts all boats, and this is certainly the case with the Maltese proverbial tide where no rig, yacht or vessel is left behind.” • As reported in March 2012, the Maltese jurisdiction

became heralded as that hosting the seventh largest ship register in the world, a statistic that has made Malta the largest ship register in Europe.

• Observing the Maltese set‐up broadly, it is evident that there are a number of cogs that are rather indispensable in their contribution, where some are the product of hard labour, others the fruit of history and others still the product of good fortune.

• Under the first category, Governmental edifices like Transport Malta make their vital contribution through for instance their provision of the ‘urgent matters’ service which runs a twenty‐four hour service seven days a week, thereby extending its service as an overly available and efficient point of reference.

• Bearing the English language as one of our two official

languages is the precipitate of a long and drawn out

battle between history and politics. Almost having been subrogated by the Italian language, the English language victor has reaped the Maltese islands benefits without end where it was soon crowned the ‘global village’ language, thus adding one of the assets that would prove to be most vital in terms of economic development and business.

• Another salient embellishment is Malta’s

geographic location, which, while not the fruit of an economically strategic thought‐process, this beacon of fortune does and has forever incessantly delivered as though it were.

• A testimony beyond the theory to Malta’s

commitment to the maritime industry is our ratification of the Maritime Labour Convention on the 18th January 2013, which instrument is scheduled to enter into force on the 20th August 2013. This convention is to be transposed into our law through a set of rules which among other things looks to safeguard working conditions as well as fair competition, two key‐stones of modern‐day development.

Sizing Up the Maltese system – Is Malta Special? It is known that there is progressive reduction in registration and tonnage tax for younger ships and that there are other palatable tax exemptions. Ships under 15 years do not require an inspection upon registration while ships between 16 and 20 years may carry out an inspection within a month of provisional registration at no cost. A ship over 20 years but less than 25 years is required to undergo an inspection and to pass the same before it can be provisionally registered. Overall, a shipping company can be registered under any corporate name whether local or foreign, with the same applying to corporate owners, shareholders and directors, provided that same is registered according to the law.

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estimonials:

“During 2011, the Maltese o e

enefits in Brief:

Simple and cost‐efficient shipping company set‐up

of Maltese vessels in some

in terms of nationality of ship

that is:

o from or payments

to the

In this way all the benefits available to Maltese citizens become accessible to all interested parties, on their forming a Maltese corporate body through a Malta registered shipping company. On paper the Maltese ship registration system is a popular choice, but is it really special? Malta is on the Paris MOU White List and Low Risk Ship List, but what does this mean in practice for the Malta flag? First of all, the Paris MOU White List is a world‐wide indicator of flag performance, and thus carries with it a certain weighting. It also means that Malta would have been successful in having a minimum of 30 inspections over the previous 3 year period, as having less than such minimum of inspections disqualifies a jurisdiction from having any ranking whatsoever in the Black‐Grey‐White list. Such inspections are carried out by a Port State Control Officer (PSCO) properly qualified under the Paris MOU and compliance is rewarded by a clean inspection report. Having white‐list status carries with it more than just prestige thus, since its classification is set on flag‐practice and can thus impinge on business performance. As far as the Low Risk classification goes, this is evidence of a successful International Maritime Organization Audit (IMO) on Malta and has been described in terms of practical implications as translating ‘into real benefits to Maltese registered ships in the international maritime sector especially when calling at ports within the Paris MOU region’ in that ‘it will denote significantly less targeting for port State control inspections, thus better efficiency in shipping operations’.

T

register f shipping g nerated over €12 million in revenue to Transport Malta alone” ‐ Ministry for Infrastructure, Transport and Communication

B •

and registration Preferential treatment•

ports No restrictions•

owners/personnel No withholding tax• • 100 % tax exemption

No tax on income derivedmade in the course of financing any shipping activity;

o No tax on income from sale or transfer of a tonnage tax ship;

o No tax on gains resultant from liquidation, or any mode of transfer of shares, security or other interest in relation to a tonnage tax ship;

o No duty payable in relation to registration of a vessel or a mortgage thereon, shipping activity or any issue or transfer or assignment of shares or interests relating thereto.

All types of vessels including but not limited• following may be registered with the Malta ship register: commercial ships, oil rigs, vessels under construction, pleasure yachts and cruise liners.

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ischarging Malta Flag Ship

Interestingly the common law concept of

The Maltese Vessel: A common focal point for Debts, Mortgages and Maritime Privileges

The ‘specialness doctrine’ analogy continues when one looks at the ranking a debt‐claim on a ship has where in the case of bankruptcy such claim is ranked first, to the exclusion of all others in for instance the case of bankruptcy of the ship owner. At law this is facilitated through the separation of the vessel from the rest of the owner’s assets, where the vessel is even legally considered separate and distinct from the owner’s patrimony. The foregoing has made the Maltese vessel a popular mode of securing financing, whether to banks or third parties, by giving their interest in the ship by way of security. DMortgages

mortgage only entered into our law with the advent of the Maritime Shipping Act where the term ‘mortgage’ remains to date undefined in Maltese law. Custom has however neared the meaning of the term to that of a special charge on a ship, where the implication is that the property subject to the charge can be seized by way of discharging a debt.

Since registered mortgages constitute executive titles, this makes the same enforceable without the need of further recourse to the courts, thus providing the creditor with an easily accessible remedy. There is no blatant loophole with a ship‐registered mortgage in the sense that such mortgage cannot be obliterated by simply de‐registering the pertaining vessel, at least not without the explicit consent in writing of the mortgagee. Given that in certain other instances at law consent may be verbal or even implied or deemed to so subsist, this shows the circumstance of the shipping mortgage to be air‐tight in being given the most astute protection. In fact, where such vessel is de‐registered, any registered mortgage remains attached to the vessel, thereby safeguarding the mortgagee’s right to enforce his executive title, which the mortgagee can do by consequently selling the vessel in question to obtain his dues on the same. This is known as court approved private sale which allows the creditor to unilaterally seize the vessel and sell it.

Tonnage Tax Ship Status

Every shipping organisation that is EU or EEA registered is eligible to partake in the Maltese tonnage tax system following amendments to the law in 2010, which also extended the applicability of the system to ship management activities.

• At law, a tonnage tax ship is either

o a Community Ship satisfying a minimum of 1000 net tonnage and which is registered under the laws of either an EU or EEA state and which is altogether operated by a shipping organization and which pays an annual equivalent of tonnage tax of 25% of such tonnage tax that would have been payable had such ship been registered in Malta or

o a tonnage tax ship is any ship declared so to be

by the Minister, in which instance the net tonnage and trade of the ship are not of primary relevance as long as the ship otherwise adheres to the relevant provisions of the law;

• At law, a ship manager is a Community

established, licensed shipping organisation which is mandated with the overlooking of a ships technical and/or crew management.

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The Registration Process

A ship is first registered provisionally for a six month period whereby a ship owner must provide evidence namely of the existence of the ship and its seaworthiness. Such provisional registration occurs upon application but is not automatic to the extent that there is discretion on the part of the registrar who may severally refuse to provisionally register a ship even under different names and this discretion is given to the registrar by way of legal prerogative. This is part of a testimony to the reality that while the Maltese shipping register is widely marketed, it is done so with qualification. Once a ship bears the Malta flag, the implications are that Malta becomes the flag‐state of such ship and exercises its jurisdiction on such ship, in accordance with the Convention on the Law of the Sea. In keeping a register of all the ships flying the Malta flag, our jurisdiction has a reputation to uphold and needs thus to be selective in accepting ‘subscribers’. Within a month of provisional registration a ship owner needs to submit among other things: • a builder’s certificate, • proof of closure of any foreign registration, • proof of issuance of certification required by

conventions, • certificate of survey and • tonnage measurement certificate as well as • a marking note by way of evidence that the ship has

been properly marked in accordance with provisions of the law.

While it is held that at law provisional and permanent registration of a ship have the same standing, the principal difference emerges in that authorization to operate the ship is only granted with permanent registration and once the Maltese Maritime Authority has checked the conformity of the ship against all pertinent conventions.

Pleasure Yachts – always a pleasure

• Maltese ports have gained a reputation widely sought‐after status whether as ‘home port, charter yacht base or winter stop‐over’

• With 5 marinas to choose from there is a berthing site

to meet everyone’s tastes, ranging from modest 22m length per yacht capacity to luxury five star

extravagance catering for leisure yachts of up to 135 m LOA alongside and 100 m stern

• Malta also boasts having one of the few yacht

specific IFSP compliant ports in the Mediterranean, the Grand Harbor Marina in Vittoriosa, incidentally also the only one of its kind in the Maltese islands

• 2013 started with a bang when a berth owner made a purchase of a second berth at Malta’s finest port for pleasure yachts, a testimonial to the highest quality control standards achieved in services rendered that keep attracting high‐end clientele to our waters

• In the captain’s own words:

“the location of being the gateway to either the East or West makes Malta an ideal place to position. Our experience with the Grand Harbour Marina staff has been excellent. Problems that do arise are met with an attitude of ‘how can we fix this and improve’ and not the typical ‘this is the way it is’. Grand Harbour Marina’s offering is one of the finest experienced in my career”‐ Samar Captain

• Malta does not purport to be something it is not, namely always recognizing itself as a player in a market exhibiting ports of clout in terms of costliness where it is perhaps a status symbol for boat owners to otherwise berth in such expensively fashion‐bearing ports.

• In this context it is not so much a case of ‘less is

more’ for Malta as much as a case of having its own audience that identifies with its ‘different’ and obtains from the same a greater benefit:

“Malta is different – the destination is authentic, understated and sensible. Captains and crew are drawn to Malta for a mixture of the personal, the practical, and the quality of life”‐ Kurt Fraser

• In addition to the above, it seems that for Malta size does not in fact matter, where in the words of Grand Harbor Marina General Manager:

“One of Malta’s greatest attributes is its small size, with a government which is able to be nimble and very responsive to the yachting industry”‐ Ben Stuart

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• Talking figures there is the unmistakable advantage in going local where quoted rates per square meter for a luxury yacht berth in Malta come down as far as a quarter of the rates charged by countries like the UK

• Speaking of form one also cannot overlook the

inherent advantage in the Maltese berthing agreement which adopts the sui generis form of a contract of sale, as opposed to lease, whereby there is a complete transfer of ownership, at least for the entire duration of the berthing which is typically made for a stretch of 25 years

• End of 2012 whopper Sale of Super‐

Yacht berth valued at EUR 3.1 M

“Malta’s attraction as a home port for super‐yachts has continued to strengthen relative to other EU and North African countries. The steady support for the yachting sector at government level in Malta, with attendant fiscal certainty, has also resulted in the growth of the necessary facilities and services to make Malta a particularly attractive location as a super‐yacht home port. The level of interest we are experiencing for super‐yacht berths is now at its highest since 2007”‐ Nick Maris, CEO Grand Harbor Marina

• Conditions for yacht registration are the same as are applicable for other vessels

• Straightforward de‐registration of yachts upon owner’s

request save for unsatisfied debts tied to such yacht which are maintained and further preserved through records comprising a detailed description of such unsatisfied debt

• The consumption tax VAT system imposes that such

VAT be paid by all yachts sailing through EU waters • The Maltese system allows for a rated VAT system

which is inversely proportionate to the length and propulsion of the vessel, where there are leasing agreements entered into by Maltese companies having first acquired the vessels in question for such lease or potential eventual sale

• There must be a link between the use of the ship and

the owner’s economic activity, where the presence of

the latter factor via lease or sale suffices to justify deduction of VAT incurred on acquisition

• There is no restriction on the lessee for the benefit

to apply, where the lessee may be an individual or a corporate entity and resident or non‐resident

• Thus in the above scenarios, the greater the length

of the boat, the lower the EU VAT rates incurred with the lowest being at 5.4% for sailing boats and motor boats in length greater than 24 meters

Securely Maritime • Transport Malta operates port inter‐ministerial

security committees whose function relates to development, maintenance and promotion of seaports, ships and related matters

• Unless instructions emanate variously from the

National Maritime Security Committee, all ports in Malta operate at Security level 1

• What does this mean in terms of putting the law

to practice? • In terms of the Ports Security Regulations,

subsidiary legislation 499.35, security level refers to the quantification of the degree of risk that a security incident will be attempted or will occur

• Furthermore, security level 1 means the level for

which minimum appropriate protective security measures must be attained at all times

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this important maritime gateway.

• Giving it a context, security level 1 represents the lower end of a three‐pronged security level spectrum provided for by Maltese law

• Having the lowest security standard as the default

setting, is a representation of the comfort that is implicit in the safety and stability inherent in such directive

• The implementation of security level 1 is tied

inextricably to the concept of the port facility security plan, which in terms of law refers to a plan developed to ensure the application of measures designed to protect the port facility and ships, persons, cargo, cargo transport units and ship’s stores within the port facility from the risks of a security incident

• Malta operates a Maritime Security Compliance

department which operates so as to keep abreast with and help implementation of the relevant EU directives and regulations on port security as well as compliance with the provisions of the International Ship and Port Facility Security (ISPS) Code.

• The ISPC Code was developed in response to the alarm

raised in the aftermath of 9/11, in an international effort of standardising risk management through this medium which comprises both mandatory as well as recommended provisions. In being an offshoot of the same, this Code is binding upon countries who are party to the Safety of Life at Sea Convention (SOLAS), to which Malta has subscribed by way of accession.

Malta the Quintessential All‐Rounder

• Malta a sovereign‐ European • Whatever the scenario, Malta has the structured

solution: • For ships registered under non‐residents, the

Malta flag extends itself provided that a Resident Agent is appointed

• Where ships are registered under local corporate entities, the Malta flag extends itself provided that the corporate entity in question has a Maltese Registered Address

• In all cases it is customary to have appointed a Maltese Representative who may facilitate company formation and ship registration under the Malta flag

• The Maltese law lives up to the testimonies of it being at once nimble and a buttress to an expanding industry for which the Maltese islands are both ripe and excellently equipped.

Situated at the heart of the Mediterranean Sea, Malta’s location has always earned her immense strategic importance throughout history. Many of the world’s great maritime powers, from the Phoenicians and the Greeks to the Romans, French and the British, have all battled for their chance to take control of

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once more to this small but highly sought after island as new

Global Knowledge. Local Expertise

entation in over 125 countries, PKF Malta provides a highly‐ranked

experience in the field, PKF Malta enjoys a reputation founded on an unfaltering commitment

Road, Birkirkara, Malta, and at present the local staff encompasses a team of

der Maltese flag and overseas and dealings with related formalities;

pany

vising on security and other Maltese

ssels, from pleasure yachts to passenger cruise ships, tankers and oil rigs, may register such vessels under the Malta flag and take advantage of

tration of companies and other entities which own, manage or administer such vessels.

gorous procedures to ensure independence and adherence to

Offering international services ur language

Now the maritime spotlight turns

regulations reveal her to be potentially one of the most exciting shipping hub today.

Being a member of PKF International, with repres

global network of local expertise in accounting and business advisory services. PKF is one of the world’s leading full‐service shipping registration specialist firms providing comprehensive support and guidance to those engaged in this industry and offering a complete range of inter‐related services.

With over thirty years

to protecting the interests of its clients. This reputation has been built on the success it has achieved through solid, honest and ethical business practices ‐ together with its unparalleled knowledge of the industry.

PKF Malta is situated at 35, Mannarino

Accountants, Auditors, Legal Advisors and Consultants amongst others. We hold strong links with all sectors of shipping and maritime and the firm’s expert lawyers specialise in all shipping‐related fields of law including ship finance, litigation and admiralty. PKF Malta is the preferred maritime consultancy firm for ship owners seeking the most effective and advantageous financing.

Our maritime law services include:

• flag and ship registration un

• bareboat charter registrations; • ship owning and ship management com

incorporation; • marine mortgages and other forms of securities; • ship finance; • syndicated bank loans; and • generally ad

maritime law matters.

Owners of all types of ve

the various benefits, particularly fiscal, available under Maltese law. As the Malta flag is a flag of confidence and a flag of choice, Malta’s Ship Register is today one of the eight largest ship registers in the world.

We regularly assist clients in connection with the registration of vessels under the Malta flag as well as with the regis

In carrying out our work, we apply the highest standards demanded by the profession. We provide our services objectively and have in place ri

the profession’s and the firm’s ethical rules.

PKF Malta…

that speak yo

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r George Mangion FCCA, CPA, MA (Fin. Services) tner, PKF Malta

kara, BKR 9080, Malta

isclaimer

should not be regarded as offering a ation of the matters that are contained

within this publication. This publication has been

d responsibility to any person, entity or corporation who acts or fails to act as a consequence of any

ny matter or information as contained or implied within this publication without first obtaining

s. le r

o a

For more information please contact:

MPar

+356 21 493041 P: +356 21 484373; F: +356 21 484375 E: [email protected]

m W: www.pkfmalta.co35, Mannarino Road, Birkir

D

This publicationcomplete explan

distributed on the express terms and understanding that the publishers and or the authors are not responsible for the results of any actions which are undertaking on the basis of the information which is contained within this publication, nor for any error in or omission from this publication.

The publishers and or the authors expressly disclaim all and any liability an

reliance upon the whole or any part of the contents of this publication.

Accordingly no person, entity or corporation should act or rely upon a

professional advice from an adequately qualified professional person or firm or advisors and ensuring that such advice specifically relates to their particular circumstance No gal o investment instruction is intended. The opinions expressed are strictly those of the authors. Repr duction in whole, or in part, by ny means without written permission of the publisher is strictly prohibited.

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PKF Malta - Shipping