Category: Ships

Shipping

Shipping Advantages in Cyprus, Madeira (Portugal) and Malta

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Dixcart can provide clients with a number of alternative ship registration solutions. This note provides a brief overview of the regimes in Cyprus, the Isle of Man, Madeira (Portugal) and Malta and the shipping advantages they offer. More detailed information is available on request regarding shipping in each of the jurisdictions considered in this Information Note.

Shipping Advantages by Jurisdiction:

Cyprus

Cyprus is a major ship management centre attracting foreign ship owners through the highly favourable tax provisions available for shipping companies on the island. It is recognised as one of the most accessible registries in the EU.

The Cyprus shipping registry has not only grown in size in the last two decades but has also made a considerable effort to increase the quality of its fleet and related services. As a result the Cyprus flag is now classified on the white list of the Paris and Tokyo MOUs*.

Key shipping advantages relating to the shipping sector in Cyprus include:

  • A competitive tax regime for shipping companies, with an EU approved Tonnage Tax System (TTS) that is based on the net tonnage of the vessel rather than the corporation tax on the actual profit. This allows for mixed activities within a group, shipping activities are subject to TT and other activities are subject to 12.5% corporation tax.
  • Competitive operating costs, ship registration costs and fees.
  • The income of officers and crew on Cypriot registered vessels is not subject to income tax.
  • There are no nationality restrictions for officers or crew.
  • Cyprus also offers a series of tax advantages which are applicable to ship and ship management companies: exemption from tax of dividend income (subject to limited conditions), exemption from tax on profits from foreign permanent establishments, and exemption from withholding tax on the repatriation of income (dividends, interest and nearly all royalties).
  • More than 60 Double Tax Treaties.
  • No estate duty on the inheritance of shares in a Cyprus shipping company and no stamp duty is payable on ship mortgage deeds.

Madeira (Portugal) Shipping Advantages

The International Shipping Register of Madeira (MAR) was established in 1989 as part of the Madeira International Business Centre (“MIBC”) “package” of taxation benefits. Vessels registered with MAR carry the Portuguese flag and are subject to the International Treaties and Conventions entered into by Portugal.

The key shipping advantages of ship registration in MAR are detailed below:

  • The register is of a high standard, has EU credibility, is not regarded as a flag of convenience and is included in the Paris MOU white list.          
  • There are no nationality requirements for ship-owners of vessels registered in MAR. They are not required to have their head office in Madeira. It is sufficient to have local legal representation with adequate powers.      
  • Only 30% of the safe manning must be “European”. This includes nationalities such as Polish, Russian and Ukrainian, as well as citizens of Portuguese-speaking countries. This requirement may also be derogated if duly justified. This allows for flexible manning.
  • Crew wages are exempt from income tax and from social security charges in Portugal.        
  • The existence of a flexible mortgage system allows the mortgagor and the mortgagee, by written agreement, to choose the legal system of a particular country that will govern the terms of the mortgage.   
  • Competitive registration fees, there are no annual tonnage taxes.   
  • Eight International Classification Societies are recognised in Portugal. MAR can delegate some of its functions to these societies. This can be simpler and more convenient for ship owners.          
  • Temporary registration is allowed by law (bareboat charter: “In” and “Out”).        
  • Shipping companies licensed to operate within MAR benefit from a corporate income tax rate of 5% until 2027. They also enjoy automatic VAT registration and have access to the Portuguese double taxation treaty network.

Malta Shipping Advantages

Malta provides a reputable flag and ensures compliance with international and European standards. Registration of vessels under the Maltese flag take place in two stages. A vessel is provisionally registered for a six month period. During this provisional registration period, the owner is required to submit additional documentation and the vessel is then permanently registered under the Maltese flag.

There are a number of attractive tax reasons and shipping advantages to consider ship registration in Malta:

•       The standard corporate tax rules do not apply to shipping activities in Malta, due to a specific exemption. No tax on profits from shipping activities is therefore due. Following recent amendments this exemption has also been extended to ship management companies.          

•       Shipping operations are subject to an annual tax comprising an annual registration fee and a tonnage tax based on the net tonnage of the vessel. The rates of tonnage tax are reduced according to the age of the vessel.

•       There is an exemption from stamp duty in Malta on the registration or sale of a ship, shares relating to a licensed shipping organisation and the registration of a mortgage relating to a ship.

•       Individuals not resident in Malta who are officers or employees of a licensed shipping organisation, and the organisation that they work for, are exempt from social security contributions.     

Dixcart Shipping Services and Additional Information

Dixcart can assist in all aspects of registering a ship in Cyprus, the Isle of Man, Madeira and Malta.  

Services include the incorporation of the owner entity, coordinating the appropriate corporate and tax compliance, and registration of the vessel.

If you would like additional information on this topic, please speak to your usual Dixcart contact or to:

*White List Paris and Tokyo MOUs: Flags securing the highest rating in relation to the Memorandum of Understandings on Port State Control.

Dixcart Management (IOM) Limited is licensed by the Isle of Man Financial Services Authority

Portugal Armed Guards

Portugal Armed Guards Allowed Onboard Portuguese Flagged Vessels, Where Piracy is Prevalent

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New Law

On 10 January 2019, the Portuguese Council of Ministers approved a law to allow armed guards to sail on Portuguese flagged vessels.

This measure is long-awaited by the International Shipping Registry of Madeira (MAR) and by ship owners registered within it. The increase in financial loss due to hijackings and ransom demands, and the risk to human lives, as a result of hostage taking has led shipowners to demand such a of measure. Ship owners prefer to pay for additional protection rather than being potential victims of piracy.

Measures to Address the Increasingly Frequent Problem of Piracy

Unfortunately, piracy now constitutes a major threat to the shipping industry and it is recognised that the use of armed guards on board vessels is crucial to the decrease the number of piracy incidents.

The regime to be established by this law enables shipowners of Portuguese flagged vessels to hire private security companies, employing armed personnel to be on board ships, in order to protect these vessels when operating in areas of high piracy risk. The law also provides for the option to hire security contractors headquartered within the EU or EEA to protect Portuguese vessels.

Portugal will be joining the increasing number of ‘Flag States’ that allow the use of armed guards on board. This step is therefore logical and consistent with the actions being taken by a number of other countries.

Portugal and Shipping

As recently as November 2018 the Portuguese tonnage tax and seafarer scheme was enacted. The objective is to encourage new shipping companies by offering tax advantages, not only to shipowners, but also to seafarers. For more information regarding the advantages of the new Portuguese tonnage tax, please refer to the Dixcart Article: IN538 The Portuguese Tonnage Tax Scheme For Ships – What Benefits Will It Offer?.

The Madeira Shipping Registry (MAR): Other Advantages

This new law is designed to enhance Portugal’s shipping registry and Portugal’s second shipping register, the Madeira Registry (MAR). It is part of a comprehensive plan to develop the country’s entire maritime industry. This includes companies and individuals owning ships, shipping related infrastructure, maritime suppliers and those working in the maritime industry.

The Madeira Registry is already the fourth largest international shipping register within the EU. Its registered gross tonnage is over 15.5 million and its fleet comprises vessels from the largest shipowners such as APM-Maersk, MSC  (Mediterranean Shipping Company), CMA, CGM Group and Cosco Shipping. Please see: IN518 Why the International Shipping Register of Madeira (MAR) is so Attractive.

How Can Dixcart Help?

Dixcart has extensive experience working with the owners and operators of commercial vessels as well as pleasure and commercial yachts, registered with the Portuguese Registry and/or MAR. We can assist with the permanent and/or bareboat registration of vessels, re-flagging, mortgages and the establishment of corporate owning and/or operational structures for the holding or management of vessels.

Additional Information

If you require additional information on this topic, please speak to your usual Dixcart contact, or to Catarina Sardinha at the Dixcart office in Madeira:

advice.portugal@dixcart.com.

Shipping

Maltese Shipping – The Tonnage Tax System and Advantages for Shipping Companies

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Mediterranean centre of maritime excellence. Currently Malta has the largest shipping register in Europe and the sixth largest in the world. In addition, Malta has become a world leader in terms of commercial yacht registration.

In order to avoid the risk of shipping companies relocating or flagging to low-tax countries outside the EU, the European Commission’s 2004 Guidelines on State Aid to Maritime Transport (commercial shipping activities) was introduced to allow Member States to implement financial benefits for shipping companies. One of the most important benefits was to replace traditional methods of taxation with a tonnage tax.

In December 2017, the European Commission approved the Maltese tonnage tax regime for a period of 10 years, following a review of its compatibility with EU State Aid Rules.

The Maltese Shipping Tonnage Tax System

Under the Malta Tonnage Tax System, tax is dependent on the tonnage of the vessel or fleet belonging to a particular ship-owner or ship-manager. Only companies that are active in maritime transport are eligible under the Maritime Guidelines.

Standard corporate tax rules do not apply to shipping activities in Malta. Instead shipping operations are subject to an annual tax consisting of a registration fee and annual tonnage tax. The rate of tonnage tax reduces according to the age of the vessel.

  • As an example, a trading ship measuring 80 metres, with 10,000 gross tonnage, built in the year 2000, will pay a fee of €6,524 on registration and €5,514 annual tax thereafter.

The smallest category of ship is up to a net tonnage of 2,500 and the largest, and most expensive, are ships over 50,000 net tonnage. Charges are reduced for ships in the 0-5 and 5-10 year old age categories respectively and are greatest for those 25-30 years old.

Taxation of Shipping Activities in Malta

As detailed above:

  • Income derived from shipping activities by a licensed shipping organisation is exempt from income tax.
  • Income derived from ship management activities by a ship manager is exempt from income tax.

In all other circumstances:

  • Shipping companies incorporated in Malta are taxed on their worldwide income and capital gains.
  • Shipping companies not incorporated in Malta, but where control and management are exercised in Malta, are taxed on local income and capital gains and on foreign source income remitted to Malta.
  • Shipping companies not incorporated in Malta and where management and control are not exercised in Malta, are taxed on income and capital gains arising in Malta.

Ship Management Activities

Following a European Commission ruling, Malta has amended its tonnage tax law.

Ship management activities are now included in the tonnage tax system. This means that ship managers are allowed to pay a tonnage tax which is equivalent to a percentage of the tonnage tax paid by the owners and/or charterers of the ships managed. Any income derived by a ship manager from ship management activities is deemed to be income derived from shipping activities and is therefore exempt from income tax.

Ship management organisations can benefit from the tonnage tax measures, provided that the following conditions are met:

  • must be a ship management organisation established in the European Union (EU) or the European Economic Area (EEA);
  • have assumed responsibility for either technical and/or crew management of a ship;
  • must comply with the international standards and requirements of the EU;
  • must specifically include shipping activities in their objects and must register with the Registrar General accordingly;
  • maintain separate accounts, clearly distinguishing the payments by and receipts of the ship manager with respect to ship management activities from those not connected to such activity;
  • the ship manager opts to pay an annual tonnage tax on all ships;
  • At least two-thirds of the tonnage of the ships that the ship manager is providing ship management activities for must be managed in the EU and EEA;
  • the tonnage that the ship manager provides ship management activities for must satisfy the flag-link requirement.

Maltese Tonnage Tax Eligibility

Tonnage tax is applied to the activities of a shipping company as follows:

  • core revenues from shipping activities;
  • certain ancillary revenues that are closely connected to shipping activities (capped at a maximum 50% of a ship’s operating revenue); and
  • revenues from towage and dredging (subject to certain conditions).

Maltese shipping organisations must register with the Finance Minister by submitting the name of the organisation, the registered office address and the name and tonnage of the ship it wishes to own or operate. The vessel must be declared a ‘Tonnage Tax Ship’ or a ‘Community Ship’, with a minimum net tonnage of 1,000 and be entirely owned, chartered, managed, administered or operated by a shipping organisation.

A shipping company can only benefit from the Maltese Tonnage Tax scheme if it has a significant part of its fleet flying the flag of a European Economic Area (EEA) Member State.

Additional Reasons to Consider Ship Registration in Malta

There are a number of additional reasons to consider ship registration in Malta:

  • The Malta registry is on the Paris MOU and Tokyo MOU white lists.
  • Vessels registered under the Malta Flag have no trading restrictions and are given preferential treatment in many ports.
  • Registration of vessels under the Maltese flag takes place in two stages. A vessel is provisionally registered for a six-month period. This is an easy and fast process. During this provisional registration period the owner is required to submit additional documentation and then the vessel is permanently registered under the Maltese flag.
  • There is an exemption from stamp duty in Malta on the registration and/or sale of a ship, shares relating to a licensed shipping organisation and the registration of a mortgage relating to a ship.

Additional Information

If you would like further information regarding the Malta Tonnage Tax System or the registration of a ship and/or yacht in Malta, please contact Jonathan Vassallo at the Dixcart office in Malta: advice.malta@dixcart.com or your usual Dixcart contact.