Fiscal Benefits & Double Tax Treaties

Fiscal-Benefits-of-MaltaFiscal Benefits of Aviation in Malta

  • There is no import duty on the importation of civil aircraft into Malta;
  • Aircraft do not attract any stamp duty;
  • Income derived from the ownership, lease or operation of an aircraft or aircraft engine engaged in the international transport of passengers or goods is deemed to arise outside Malta, so is exempt from Maltese tax. This foreign source rule applies regardless of the country of registration of the aircraft, or whether the aircraft has called at, or is operated from a Maltese airport.
  • Competitive accelerated depreciation periods – As from the year of assessment 2010, the minimum period to claim wear and tear deductions for depreciation of aircrafts, engines and interiors has been shortened as indicated below:

–  Aircraft airframe, engine and overhaul:          6 years

–  Aircraft interiors and other parts:                     4 years

  • VAT – The VAT implications vary according to the manner in which the aircraft is used, that is, whether the aircraft is employed by an airline operator for reward chiefly for international transport of goods or passengers, or whether it is purely for private use.  VAT implications similar to those applicable in other EU Member States would be applicable in respect of importations, intra-community acquisitions, or supply of aircraft.
  • The private use of an aircraft by a non-resident individual who is an employee or officer of a company whose business includes the ownership, leasing or operation of aircraft engaged in the international transport of goods or passengers is deemed NOT to constitute a taxable fringe benefit.
  • Any person that carries on a trade or business consisting of the repair, overhaul or maintenance of aircraft, engines or equipment incorporated or used in such aircraft, may benefit from investment tax credits against the tax due on its chargeable income in Malta.
  • Malta has over 60 Double Taxation Treaties in force. Where there is no double tax treaty in place, Maltese legislation has rules in place to allow unilateral relief on income arising outside Malta.
  • Low minimum capital requirements
  • Companies can pay tax in any currency and receive tax rebates in any currency, thereby eliminating exchange risk.
  • Malta has fulfilled the criteria in the ASU 2011 for Cape Town Discount eligibility. Malta has thereby been approved as a suitable candidate for the Cape Town Discount and is currently going through the process which will enable Maltese registered aircraft to avail of the Discount.
  • Income tax implications of aircraft leases:

Benefits available to MALTESE LESSEES of aircraft where the Lessor is a Foreign Company and the lease payments are accruing to the foreign Lessor:
Benefits available to MALTESE LESSORS of aircraft where the Lessor is a Malta Company and lease payments are accruing to a Maltese Lessor:
(i)
No withholding tax applies on lease payments made to lessors of aircraft used for the international transport of goods or passengers.
(ii)
If the lease is an operating lease, lessees may generally claim full deduction for lease payments against their income. If the lease is an operating lease, then lessors are subject to tax on the full lease payment.
(iii)
Lessees may claim capital allowances if they suffer the burden of wear and tear. If the lessor suffers the burden of wear and tear, the lessor is entitled to claim capital allowances in respect of the aircraft.
(iv)
If the lease is a finance lease, lessees are entitled to a deduction in respect of: If the lease is a finance lease, then lessors are only chargeable to tax on the interest element of the finance lease, without any deduction for capital allowances.
  • Interest element of the finance lease;
  • Repairs and maintenance;
  • Insurance;
  • Capital allowances at the applicable rates.
(v)
Profits accruing to lessees are taxed at the standard rate of 35%. Lease income is taxed at the standard rate of 35%.
However, upon a dividend distribution of such taxed profits, shareholders may be entitled to a refund of 6/7ths of the Malta tax paid. However, upon a dividend distribution of such taxed profits, shareholders may be entitled to a refund of 6/7ths of the Malta tax paid.

 

Malta’s Double Tax Treaties

 

Albania

Anguilla

Aruba

Australia

Austria

Bahrain *

Barbados

Belgium

British Virgin Islands

Bulgaria

Canada

Cayman Islands

China

Croatia

Cyprus

Czech Republic

Denmark

Egypt

Estonia

Finland

France

Georgia

Germany

Greece

Hungary

Iceland

India

Ireland

Isle of Man

Italy

Jersey

Jordan

Korea

Kuwait

Latvia

Lebanon

Libya

Lithuania

Luxembourg

Malaysia

Montenegro

Montserrat

Morocco

Netherlands

Norway

Pakistan

Poland

Portugal

Qatar

Romania

San Marino

Serbia

Singapore

Slovakia

Slovenia

South Africa

Spain

Sweden

Syria

Tunisia

United Arab Emirates

United Kingdom

USA

* coming into force in January 2013

Treaties Signed But Not Yet in Force

Guernsey      Hong Kong      Israel      Saudi Arabia      Switzerland      Turkey      Uruguay

Treaties Being Negotiated

Azerbaijan      Bosnia and Herzegovina      Mexico      Oman      Russia      Thailand      Ukraine