Registering your Yacht under the Maltese Flag

When buying a yacht, one of the most vital factors is deciding on where you wish to register her. In this regard, the Maltese ship registry is considered to be one of the largest registries in Europe and is currently the sixth-largest registry in the world. This success has not materialised by chance, rather, it has been accomplished by means of constant efforts made towards the development, growth, and regulation of the yachting industry in Malta over the past decade.

The Maltese Flag is today considered a flag of excellence and one of the most prestigious flags a yacht may fly. This incredibly positive reputation boils down to the relevant authorities’ relentless efforts to foster the growth of this vital industry on the Maltese islands. The local industry’s success may be attributable to various factors which together have undoubtedly paved the way for the continued increase of yachts registering under the Malta flag. In this regard, a number of advantages of flying the Maltese flag are listed below:

1. Yachts may be registered on behalf of a company or another entity irrespective of nationality;
2. Low company formation, ship registration and tonnage tax costs;
3. Attractive tax incentives to yacht and superyacht owners;
4. No restrictions on the sale or mortgaging of Maltese registered yachts and superyachts;
5. Twenty-four-hour, seven days a week service from the Authority for Transport in Malta in response to urgent matters;
6. A good international reputation as a flag of choice and confidence;
7. Availability of a whole range of maritime services including very reputable and experienced legal and corporate services supporting registration, management, and administration;
8. A dynamic administration with one of the largest ship registers in the world and very active in European Union fora and international organisations;
9. A clear strategic vision supporting business and the marine industry;
10. A strategic geographical position.

Notably, there are two main types of yacht registrations under Maltese Law; one may either register their yacht as a pleasure yacht wherein the yacht shall be used for private use or for charters within Maltese territorial waters (once a CVC is obtained), or alternatively one may register their yacht as a commercial yacht wherein the yacht shall be used for commercial purposes including the option of sailing and chartering outside Malta's territorial waters.

Registration under the Malta flag shall firstly be a provisional one with further documentation to be provided within six (6) months from registration, for the purposes of permanently registering the yacht. Testament to Transport Malta’s efforts to maintain the Maltese jurisdiction’s high standards and efficiency in relation to yachting and shipping services offered, the process for registering a yacht under the Maltese flag is not too complex and CSB would assist from start to finish to ensure a smooth process. The estimated time frame for completion of the registration process depends highly on the time it takes the yacht owner/manager/resident agent to compile all the necessary documentation needed to be submitted to Transport Malta. Once all documentation is in order and duly submitted, the process may be concluded within a few days.

When a foreign individual/entity is looking to register a yacht under the Malta flag, whether new build or due to change in previous flag, the owner has two options at his/her disposal. The yacht may either be registered under the individual or entity’s name in which case a resident agent would need to be appointed in accordance with Maltese law, or alternatively, the owner may opt to incorporate a Maltese Shipping Company and transfer the yacht to the Maltese Shipping Company and have the yacht registered under the said shipping company. The latter option would give the individual or entity the opportunity to separate the asset. This latter option is highly advisable, especially if the intended use of the yacht is for commercial purposes.

In addition to the above, with regard to the incorporation/registration of a Maltese Shipping Company, subject to certain qualifications, one may be able to benefit from the low effective corporate income tax rate of 5%. Apart from certain exceptions, in order to benefit from such an effective tax rate of 5%, the Maltese Shipping Company would initially be required to pay tax at 35% on profits generated. The remaining 65% of profits would need to be distributed as a dividend to the shareholder, which shareholder would then be eligible to claim a 6/7ts tax refund on Malta tax paid, resulting in a net effective tax rate of 5% in Malta. Registering a company under the Merchant Shipping Act in Malta is quite straight forward. Corporate regulations have made it possible for companies in Malta to be incorporated with a single shareholder (unless the company would have a corporate director on its board), hence you could have a Maltese shipping company with one corporate/individual shareholder and an individual sole director. The minimum share capital requirement is EUR1,200.00 (or an equivalent of another currency) of which 20% as a minimum must be paid-up capital. Both the director and the shareholder may be non-resident and Maltese shipping companies that we would incorporate will typically have our address as their registered office address and we will also act as the company’s local special attorneys. Given corporate documentation and authorities may be attended to in Malta, being appointed as special attorneys would facilitate the necessary communication with the relevant Maltese authorities.

Naturally, if you have any questions or clarifications please do not hesitate to contact us on [email protected] and should you seek to engage us to assist you with the above, we would be able to guide and advise you further with a step-by-step procedure on what would be required in terms of due diligence, fees and the overall registration process. Furthermore, CSB Group will be able to assist you with the necessary ongoing administrative work concerning the regulatory, technical and administrative upkeep of Malta flagged vessels and their respective owning companies being either Maltese or international owners.

About the Authors

This article has been co-authored by Edward Meli, CSB Group Business and Corporate Advisor and Sacha J. Farrugia, CSB Group Senior Manager - Corporate Services.