Shipping Organisations
What is a Shipping Organisation?
The Merchant Shipping Act provides that an organisation shall qualify as a shipping organisation if:
(a) its principal objects consist in one or more of the following activities (hereinafter referred to as the ‘Activities’):
(i) The ownership, operation, administration and management of Maltese ships and carrying on of all ancillary financial, security or commercial activities in connection therewith;
(ii) The ownership, operation, administration and management of foreign ships and carrying on of all financial, security or commercial activities in connection therewith;
(iii) The holding of shares/interests in entities established for any of the aforementioned purposes and the carrying out of all ancillary financial, security or commercial activities in connection therewith;
(iv) The raising of capital through loans, guarantees or securities when the purpose is to achieve any of the objects aforementioned for the shipping organisation itself or for other shipping organisations within the same group; and
(v) The carrying out of other activities within the maritime sector which the Minister may prescribe by Regulations.
AND
(b) It obtains and maintains a licence from the Registrar-General to enable it to carry on such activities.
Licensing of Shipping Organisation
Automatic Licensing in Certain Cases
A shipping organization carrying out the Activities indicated in (i) or (iv) above, which becomes a registered owner or registered bareboat charterer shall be deemed to have been granted a licence as a shipping organisation authorising it to carry out such Activities.
In all other cases, the standard procedure below applies.
Application
A shipping organisation may file an application to be licenced as such. The application for licensing as a shipping organisation shall be signed by an authorised officer, representative or attorney of the applicant giving such information, details and documents as may be required by the Registrar-General.
Granting of the Licence
If the Registrar-General is satisfied that the applicant qualifies as a shipping organisation and on payment of the prescribed fee, he shall issue a licence in favour of the applicant organisation, authorising it to carry on any one or more of the Activities.
Validity
The licence shall remain valid for a period of 5 years from the date of issue. The licence may be renewed for further periods of 5 years upon application and payment of the prescribed fee.
Amendment of Licence
A licenced shipping organisation may file an application requesting to be authorised to carry out further Activities on addition or instead of any Activities already authorised. If the Registrar-General is satisfied that the shipping organisation qualifies to have its licence so altered, he shall authorise that organisation to carry out the Activities.
What Form can a Shipping Organisation Take?
A shipping organisation can be in the form of (i) a partnership or (ii) a limited liability company, whether private or public, (iii) a trust, (iv) a foundation or (v) any foreign corporate body or other entity enjoying legal personality which has an established place of business in Malta.
Under the Merchant Shipping (Licensing of Shipping Organisations) Regulations, international owners are deemed to have an established place of business in Malta.
Shipping Company
Where the shipping organisation is to take the form of a shipping company, the directors shall elect whether the company shall be regulated by the Companies Act or by the Merchant Shipping (Shipping Organisations – Private Companies) Regulations.
This can be done upon incorporation or at any time by means of an appropriate declaration in the Memorandum of Association. The law provides that the directors are vested with the power to amend or vary the relative clause of the Memorandum of Association at their discretion without reference to the general meeting of the company. Such an election shall be binding on the company for at least one calendar year.
It is important to note that it is only private companies which may opt to be regulated under the latter. Should a private company registered under the Regulations change its status to a public company, it shall no longer be regulated by the Regulations and shall become subject to the Companies Act.
Benefits of a Shipping Company under the Merchant Shipping (Shipping Organisations – Private Companies) Regulations
– The Regulations allow for Shipping Companies to be constituted as Single Member Companies.
– The Single Member may also be the sole director of the Shipping Company.
– No Company Secretary is required under the Regulations.
Taxation and Other Matters Relating to Shipping Organisations
Taxation of Shipping Organisations
Taxation
Corporate Taxation
Shipping Organisations satisfying the conditions laid out in the Merchant Shipping (Taxation and Other Matters relating to Shipping Organisations) Regulations are exempt from:
(a) Any further tax payable on the income of the shipping organisation deriving from shipping activities.
(b) Any further tax payable on the profits or gains of the shipping organisation derived from the sale or other transfer of a tonnage tax ship.
(c) Any further tax payable on the profits or gains of the shipping organisation derived from the disposal of any rights to acquire a ship which when completed would qualify as a tonnage tax ship.
Dividend
The distribution of profits to shareholders derived from the activities specified above shall also be exempt from tax.
The Conditions
Payment of Tonnage Taxes
The tax exemption only applies if all relevant tonnage taxes are duly paid by the shipping organisation in accordance with the Regulations.
Separate Accounts
For the year in respect of which the exemption from tax is applied, separate accounts must be held clearly distinguishing the payments and receipts of the shipping organisation concerned in respect of shipping activities and the payments and receipts in respect of any other business.
Taxation of Ship Management Activities
What are Ship Management Activities?
Ship Management Activities are those activities carried out by a ship manager and consisting in, but not limited to:
(a) the provision of competent personnel to supervise the management and general efficiency of a ship; and/or
(b) the provision of other technical management services usually performed by a ship manages as defined in the BIMCO Standard Ship Management Agreement.
Who is a Ship Manager?
A Ship Manager is a shipping organisation established in the Union that satisfies all the following conditions:
(a) It has assumed responsibility for the technical or crew management of a ship;
(b) It complies with international standards and fulfils the requirements under EU Law;
(c) It satisfies the conditions prescribed by the Registrar-General;
(d) Its objects specifically include the activities specified in (a);
(e) It has registered with the Registrar-General.
Taxation
Corporate
Any income derived by a ship manager from ship management activities shall also be deemed to be income derived from shipping activities and thus, exempt from tax, if all the following conditions are met:
(i) Separate accounts are held distinguishing payments in respect of shipping activities and payments in respect of any other business.
(ii) The ship manager has paid the relative annual tonnage tax.
(iii) At least 2/3rds of the tonnage of the ships to which ship management activities are provided are managed from the territory of the Union.
(iv) The tonnage of the ships to which ship management activities are provided satisfies the flag-rink requirement.
Dividends
The distribution of profits to shareholders derived from the activities specified above shall also be exempt from tax.
Taxation of Qualifying Ancillary Activities
Taxation
Unconditional Exemptions
Any profits derived from the following ancillary activities may also benefit from tax exemptions:
(a) The embarkation and disembarkation of passengers on a tonnage tax ship operated by a shipping organisation.
(b) Sales and facilities which are normally provided to customers by seagoing passenger ships, including (i) the provision of food or drink for immediate consumption and (ii) entertainment for which no additional fee is charged, but not betting or gambling.
(c) Shipping activities carried on by the shipping organisation in relation to a tonnage tax ship operated by another qualifying shipping organisation in the same group.
(d) Other activities of a similar nature to the above.
(e) Activities approved by the European Commission as eligible for tonnage tax purposes.
The First Set of Conditional Exemptions
The provision of the following specified ancillary activities may also benefit from the tax exemptions provided that the revenues generated from such activities does not exceed 50% of the gross revenues generated from shipping activities:
(a) The carriage of passengers or cargo on non-tonnage tax ships operated by a licensed shipping organisation, where certain conditions are met.
(b) Sales and facilities which are normally provided to customers by seagoing passenger ships, including (i) the sale of alcohol, perfume and tobacco, (ii) currency exchange for personal expenditure, and (iii) health and spa services.
(c) Administrative and insurance services directly related to the carriage of passengers or cargo.
(d) The provision of holidays sold to the customer, where certain conditions are met.
(e) The loading and unloading or cargo on a tonnage tax ship.
(f) The consolidation or breaking of cargo carried on a tonnage tax ship.
(g) The temporary placement of cargo carried on a tonnage tax ship.
(h) The rental of containers for goods to be caried on a tonnage tax ship.
(i) The provision of excursions for passengers of a tonnage tax ship.
(j) Advertising and marketing corresponding to the sale of advertising space on board tonnage tax ships.
In order to benefit from the tax exemptions, such ancillary activities must relate to tonnage tax ships that have a substantial connection with the shipping organisation’s shipping activities, or with the shipping activities of another qualifying licensed shipping organisation within the same group. However, commercial activities which form part of the operation of a port carried on for profit are explicitly excluded.
The Second Set of Conditional Exemptions
The provision of the following specified ancillary activities may also benefit from the tax exemptions provided that the turnover from such activities amounts to less than 25% of the turnover of the first set of exempted ancillary activities:
(a) Betting or gambling facilities normally offered to customers by seagoing passenger ships for entertainment;
(b) The sale to passengers on seagoing ships of luxury goods of a kind normally offered to such passengers.
In order to benefit from the tax exemptions, such ancillary activities must relate to tonnage tax ship that have a substantial connection with the shipping organisation’s shipping activities, or with the shipping activities of another qualifying licensed shipping organisation within the same group.
However, commercial activities which form part of the operation of a port carried on for profit are explicitly excluded.
Limitation
Revenues derived from the sale of goods or services on board ships not customarily provided to passengers may not benefit from the tax exemption.
Taxation of Certain Maritime Services
Taxation of Ocean Towage
The provision of ocean towage services may benefit from the tax exemption if:
(a) The tug is a Union ship;
(b) More than 50% of the towage activity effectively carried out by the tug constitutes maritime transport.
Taxation of Dredging Services
The provision of dredging services may benefit from the tax exemption if:
(a) The ship providing the dredging services is self-propelled;
(b) The ship providing the dredging services is a Union ship; and
(c) The ship spends at least 50% of its yearly operational time in maritime transport.
However, the tax exemption shall only apply in respect of income derived from maritime transport services.
Tonnage Tax Ships
Application to be Registered as a Tonnage Tax Ship
As seen, many of the tax exemptions apply solely to tonnage tax ships. In order to qualify as a tonnage tax ship, the shipping organisation wishing to own, manage or operate a tonnage tax ship shall make an application to the Registrar-General.
What Ships may be Declared as Tonnage Tax Ships?
Union Ships
Any ship which is engaged in shipping activities may be declared as a tonnage tax ship.
Shipping activities are the following:
(a) The international carriage of goods or passengers by sea and other activities approved for tonnage tax purposes by the European Commission.
(b) Activities that are integral or directly linked to the business of operating tonnage tax ships when carried out in conjunction with (a);
(c) Ancillary activities when carried out in conjunction with (a).
Non-Union Ships
Non-Union ships that are owned, chartered, managed, administered or otherwise operated by a shipping organisation may also be declared as a tonnage tax ship if:
(a) the strategic and commercial management of all ships owned, managed or operated by the shipping organisation is actually carried out from the Union;
AND
(b) (i) the shipping organisation owns, manages and operates at least 60% of its total tonnage under a Union flag; or
(ii) a percentage of the tonnage is Union-flagged, and that the percentage operated by shipping organisations established in Malta has not decreased on average over a period of three years.
Disclaimer
The information provided in this text is intended for general informational purposes only. It is not, and should not be construed as, professional legal, tax, financial, or any other form of professional advice. While we strive to ensure that the information shared is accurate and up-to-date, it may not reflect the most current legal, regulatory, or tax developments. Additionally, laws and regulations can vary significantly across different jurisdictions, and their interpretation and application can change over time.