Malta has built up the largest maritime cluster in Europe thanks to its appealing regulatory framework and service culture. The island currently has the largest ship register in Europe and the 6th largest in the world and is fast gaining a reputation as a top location for the yacht and superyacht industry. Malta’s well-run international maritime register with high service and safety standards is today attracting clients from as far away as Asia and Latin America. A host of big hitters have registered their fleets in Malta, including CMA CGM, MSC, TUI and others, while maritime litigation and finance have been earmarked as growth areas for the future.
An International Superpower
Malta’s maritime industry contributes 12% to Malta’s GDP, whereby ship registration has become the number one activity of Malta’s maritime centre as global ship owners increasingly turn to the Malta flag. Malta currently has 3,000 merchant vessels, with over 78 million gross tonnes, on its register, a figure that has doubled over the last five years. Malta’s register ranges from LNG carriers to cruise ships, from bulk carriers to RORO ships and from oil tankers to superyachts. In particular, the number of high- end vessels on Malta’s register is constantly on the increase. In 2018, the superyacht sector witnessed a 10% increase compared to the previous year, and there are now more than 750 superyachts registered in Malta, which means the island hosts one of the world’s largest flag registries for yachts over 24 metres.
Of course, Malta’s ship register does not work in isolation, and the sector is supported by a large maritime community that caters for practically all maritime requirements. Malta boasts a wide network of maritime lawyers, agents, brokers and insurers. The only segment not being fully developed is ship management: Turkish company Palmali and Norwegian shipping company Wilhelmsen are among the few with a presence on the island. On the other hand, almost every shipping line and company today has ships on Malta’s register. The island also hosts the Regional Marine Pollution Emergency Response Centre for the Mediterranean Sea; the IMO International Maritime Law Institute and the International Ocean Institute.
Transport Malta, the regulator of the industry, goes to great lengths to emphasise that Malta is a flag of confidence and not one of convenience. The island’s status as an EU member state, its state-of-the-art maritime framework and the excellent safety records of Malta-flagged ships helped the island to be officially classified as a low-risk flag. Ship owners appreciate that Transport Malta is on call 24-hours a day to deal with problems from managers or ships’ staff. Registration costs and the fees of service providers have remained affordable, while the Maltese flag also offers an advantageous tonnage tax system, which has just been approved for a period of 10 years by the European Commission under EU state aid rules.
As one of only two open registers in the EU, registration is available to vessels owned by Maltese and non-Maltese persons, and, in practice, any kind of vessel may be registered, including one under construction. However, Transport Malta has put a premium on quality by introducing regulations which require ships aged 15 years and over to pass additional inspections, and ships over 25 years old are not accepted on the register. The island is also committed to supporting the maritime industry towards a greener and more sustainable future. In 2019, Malta has acceded to IMO’s treaty for safe and environmentally sound ship recycling – the Hong Kong Convention.
New VAT Rules
Malta’s regulatory framework is also attractive to yacht and superyacht owners. Yachts registered as commercial vessels can benefit by paying an annual tax on the tonnage, rather than an income tax on earnings. For yachts which are not commercially registered, Malta operates an attractive system for purchasing and leasing that is modelled on industry best practice and has been updated in 2019 to reflect the latest EU developments in the field. This system enables yacht owners to pay VAT on their yachts based on the actual percentage of the time that the vessel sails in EU waters. While previously Malta calculated the VAT due based on the size and type of yacht, under the new rules yacht owners are required to maintain adequate records, including logbooks and records of GPS coordinates, to prove the location of the yacht throughout the year, whereby VAT percentages can be changed retroactively depending on the actual time that the yacht had spent in or out of EU waters. The island has also adopted attractive VAT rules for short-term yacht charters commencing in Malta. While such charters will continue to be subject to a rate of 18% on the cost of the charter, this will only be applied proportionally, based on the amount of time the charter is in EU waters. Malta’s proximity to North African and Eastern Mediterranean destinations means that a superyacht charter could be undertaken where a significant portion of the time is spent beyond the realms of the EU and its tax rules.
Malta hosts one of the world’s largest flag registries for yachts over 24 metres.
While the international shipping community is still facing some headwinds with reduced trade volumes and freight rates near historically low levels, Malta’s shipping sector is expanding. The development of the international ship register has also encouraged owners and management companies to locate their operations in Malta and tap into the island’s professional services. Malta’s lawyers and corporate service providers are among the most experienced in international circles and can advise on all aspects of registration and operation of vessels. Specialist lawyers from the island today handle a wide selection of maritime disputes in both the so-called wet and dry sectors.
Maritime litigation is also a key growth area for the future. The Maltese government has announced its intention to set up a maritime court and to overhaul the maritime legal framework with a vice-admiralty court and a revamped International Arbitration Centre. Initiatives such as these are aimed at positioning Malta as a maritime hub providing all-embracing maritime legal and corporate services. With a growing international finance sector, the country is also destined to see future opportunities arising in banking and insurance, while Malta’s maritime community is convinced that it can compete with European ship management jurisdictions by developing and offering a greater level of sophisticated ship management activities.
Photo Credits (Maltese Falcon): Alex Turnbull