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HomeTaxationThe Tonnage Tax Rules for the ship management companies

The Tonnage Tax Rules for the ship management companies

A long maritime history and membership of the European Union have, over the years, pushed the Republic of Malta to establish itself as a leading maritime hub in the Mediterranean and to become the flag of choice for a large number of shipowners, charterers and boat financiers, who are attracted by the experience and reliability offered by the Maltese Ship Registry, as well as by the existence of a solid legal framework.

Making the Malta flag a choice capable of attracting new operators is the implementation of the EU Tonnage Tax Rules, which came into force in December 2017 at the initiative of the European Commission to bring compliance with EU state aid rules and guidelines in the maritime sphere. The Brussels initiative became law in Malta through Legal Notices 127/2018 and 128/2018, through which the legislature introduced legal instruments to complement the rules of the previous local tonnage tax and further clarified the shipping activities that can benefit from this regime.

In addition to clarifying which maritime organizations qualify under the tonnage tax rules, the new rules sought to regulate ship management activities that are now equally eligible under the tax system, based on both the activities performed and the management of the crew.

Under the new Maltese scheme, a shipping company is taxed based on the net tonnage of the ship (i.e., based on volume) rather than the actual profits of the company. Specifically, tonnage taxation is imposed on a shipping company for:

the primary revenues of shipping activities, such as the transportation of cargo and passengers;
certain ancillary revenues closely related to shipping activities (which are, however, limited to no more than 50% of a vessel’s operating income); and
towage and dredging revenues subject to certain conditions.
If a shipping company wishes to benefit from the scheme, a significant portion of its fleet must fly the flag of a European Economic Area (EEA) member state. In addition, any new entrant to the scheme must have at least 25% of its tonnage tax fleet flying an EEA flag.

On the other hand, services provided when technical management is offered include ensuring compliance with international ship and port facility safety management codes, as well as flag state requirements. Other criteria involve ensuring the regular maintenance of the ship, logistics, crew selection and engagement, payroll, certification control, training and crew transportation arrangements.

The purpose of this legislation remains to encourage ship management companies to relocate their operations to Malta and further complement the wide range of maritime services offered.

To register a vessel in Malta rely on the advice of Malta Business Agency.

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