YACHT & ASSET PROTECTION STRUCTURES
Maltese law provides for the possibility of constituting different vehicles for asset protection including trusts, foundations, limited liability companies or partnerships. Each of these has different characteristics and may provide scaling levels of protection of assets. Undoubtedly, the most commonly used vehicle for asset segregation and protection is the limited liability company, generally classified as a holding company in that the company is set up for the purposes of owning assets rather than undertaking a trade. Essentially, holding companies are onshore flexible and tax-efficient entities set up to ring-fence assets from other trading or commercial risk and to provide ownership participation and enhanced asset control.
MARITIME COMMERCIAL AND TRADING STRUCTURES
Again for the purposes of undertaking trading activities through the commercial operation of yachts or for the provision of ancillary services thereto, various types of entities may be utilized under Maltese
law. Here again, the most popular vehicles are companies set up for trading purposes.
Malta Trading Companies
Companies registered in Malta are deemed to be resident and domiciled in Malta and are therefore subject to tax on their worldwide income less permitted deductions at the corporate income tax rate which currently stands at 35%. Shareholders of a Malta company in receipt of a dividend may elect to claim a refund of all or part of the Malta tax paid at the level of the company on such income. The amount of refund which may be claimed depends on the type and source of income received by the company. In the context of maritime trading activities, when dividends are paid to the shareholders, these shareholders become entitled to claim a refund of 6/7ths of the Malta tax paid by the company. This results in an effective rate of Malta tax of 5% in the hands of the shareholders.
An entity that undertakes shipping activities as stated in the Merchant Shipping Act is considered a shipping organisation. Shipping activities mainly refer to the international carriage of goods and passengers, in accordance with the EU Maritime State Aid Guidelines. Ancillary activities, which constitute less than half of the revenue generated from the main shipping activities also are considered as such. Once a company is recognised as a shipping organisation, it is exempt from tax based on fluctuating income subject to tonnage tax being paid based on the weight and age of vessels engaged in the shipping activity. The main fiscal advantages of the tonnage tax system for a shipping organisation covering shipping activities include:
- exemption from corporate tax under the Income Tax Act on shipping activities;
- exemption from tax under the Income Tax Act on any income, profits or gains derived from the sale or other transfer of ship tonnage tax ship which had been acquired or sold whilst under the regime or from the disposal of any rights to acquire a ship which when delivered would qualify as a tonnage tax ship; and
- exemption from tax on the distribution of profits derived from shipping activities to the shareholders.