Over recent years, Malta has witnessed growth in its aviation industry, attracting universally renowned entities to set up operations in the archipelago. During the last decade, Malta has built a strong regulatory infrastructure to help to establish itself as an international aviation centre par excellence.
The aviation industry in Malta has more recently been encouraged following the revision of the Maltese aircraft legislation in 2010 relating to aircraft registration (the ‘Aircraft Registration Act’) and the implementation of the Cape Town Convention on International Interests in Mobile Equipment and its Aircraft Protocol (the ‘Cape Town Convention’), ratified in February 2011. Through the Aircraft Registration Act, Malta offers the possibility of registration of an aircraft on the National Aircraft Register, both for the provision of air services or private use.
With Malta being an EU Member State, a Maltese registered aircraft has freedom of movement within all other EU Member States. Enhanced by the benefits from its membership of the European Union and the Euro Zone, together with efficient tax planning opportunities, Malta has attracted a number of airlines, aircraft/aircraft engine owners and other aircraft operators to carry out and organise their aviation activities in Malta, including: aircraft financing, leasing and management of aircraft, insurance, brokerage, aircraft maintenance, classification and surveying.
As part of its economic development strategy, Malta is supporting various sectors in the aviation industry including: maintenance, repair and overhaul (MRO) operations, back-office setups, R&D and the production of aircraft components.
The Regulator in Malta
The Civil Aviation Directorate within Transport Malta regulates all aviation activities in Malta and ensures that the Maltese air transport industry continues to be developed in a safe and efficient manner.
Tax opportunities and incentives
- Accelerated depreciation: the applicable overall effective tax rate may be reduced further by virtue of accelerated depreciation rates under domestic law. Depending on the type of lease and who maintains the burden of wear and tear, a deduction for tax depreciation may be allowable. The absence of withholding tax on outbound payment of dividends and interest, additionally helps in minimising the tax burden;
- Chartering activities benefit from the Maltese tax regime;
- Tax refund system: All income derived from the ownership, lease and operation of an aircraft engine used for the international transport of goods or passengers to arise outside Malta; and tax refunds to shareholders on distribution of profits;
- Extensive network of double taxation treaties, under which income derived from the operation of aircraft in international traffic should generally be only taxable in the country where the effective management of the company is situated;
- No withholding tax on lease payments where the lessor is not a tax resident of Malta; and Private use is not a taxable fringe benefit.
- Private use is not a taxable fringe benefit.
Other benefits from Malta
- Facilitation of enforcement of mortgages and other security interests;
- Transparency of all rights and interests in aircraft;
- Competitive minimum depreciation periods for aircraft; and
- Applicability of the Cape Town Convention provides financiers with a higher degree of protection and more effective enforcement remedies whilst allowing lower borrowing costs.