Pursuant to the Maltese tonnage tax model, income derived from shipping activities of a shipping organisation is exempt from income tax, provided separate accounts are kept and all registration fees and tonnage taxes are paid. ‘Shipping activities’ refers to the international carriage of goods and passengers by sea and related services. A ‘shipping organisation’ is a body corporate or other entity which:

– owns, operates (under charter or otherwise), administers and manages vessels registered under the Malta flag or under the flag of another State; or

– holds shares or other equity interests in entities, Maltese or otherwise, established to carry out any of the above operations; or

– raises capital through loans, issues guarantees or issues securities when the purpose is to finance the activities of the shipping organisation itself or of other shipping organisations within the same group.

Furthermore, no duty is payable in respect of:

– The registration of a vessel;

– The transfer of shares or similar interests;

– The transfer of a vessel;

– The registration of a mortgage; and

– The assignment of any rights and interests or the assumption of obligations in respect of any ship or part of a ship.

Other tax benefits available to shipping organisations include the following:

– Interest or other income in relation to any financing of the operations of a shipping organisation or the financing of tonnage tax ships is exempt from tax. In the case of Maltese residents such exemption shall be applicable to regulated entities such as banks and financial institutions.

– Non-resident officers or employees of the licensed shipping organisation, as well as the shipping organisation itself, are not subject to social security contributions.

– Licensed shipping organisations only deriving income that is exempt from tax need not submit an income tax return, provided that a declaration, by an accountant, auditor or advocate stating that the income of such organisation is exempt from tax, is submitted instead.

With effect from 1 January 2009, such Malta tax treatment has also been extended, provided certain conditions are fulfilled, to Ship Managers licenced as shipping organisations, which are responsible for either or both of the technical or crew management of tonnage tax ships.

Furthermore, the concept of a tonnage tax ship has been extended to cover foreign flagged vessels, in particular those registered in an EU/EEA state, in respect of which the Maltese tonnage tax has been paid.