What is a shipping organisation in terms of the Merchant Shipping Act (MSA)?
An organisation qualifies as a shipping organisation under the MSA when both the following conditions are met:
The principal objects are one or more of the following activities
The ownership, operation, administration and management of a ship as a registered under the Malta flag, or under the flag of another state, and carrying on of all ancillary financial, security and commercial activities therewith;
The holding of shares or other equity interests in entities, whether Maltese or otherwise and the carrying on of all ancillary financial, security and commercial activities in connection therewith;
The raising of capital through loans, the issue of guaranteed or the issue of securities by the company;
The carrying on of such other activities within the maritime sector which the Minister may, on the advice of the Authority, from time to time prescribe by regulations as qualifying for the above purpose.
It obtains and maintains a license from the Registrar General
A shipping organisation may be a Maltese company, or a foreign company which has established a place of business in Malta, meaning that if it is the registered owner or registered bareboat charterer of a Maltese vessel, it is deemed to have an established place of business in Malta. A shipping organisation CANNOT be an individual.
How can a shipping organisation obtain a license from the Registrar-General?
There are two ways in which a shipping organisation may obtain a license:
A shipping organisation is deemed to be licensed if it is the registered owner/registered bareboat charterer of a Maltese ship.
License by application
A shipping organisation may file an application to the Registrar-General to be licensed. However, such applications are not being granted to foreign companies by the Authority for Transport Malta for the time-being.
What are the advantages of being a shipping organisation?
Tonnage Tax Ships
A tonnage tax ship is a Community ship of 1000 net tonnage or more which is owned or operated by a shipping organisation, or a ship declared as a tonnage tax ship by the Minister responsible for finance. However, these declarations are not being issued for the time-being.
A licensed shipping organisation wishing to own or operate a tonnage tax ship must register with the Minister responsible for finance by submitting to him a letter containing the following details;
- the name of the shipping organisation;
- the address of the registered office of the organisation; and
- the name and tonnage of the ship which it wishes to own or operate as a tonnage tax ship.
The letter should also contain a declaration to the effect that all relative registration fees have been paid, that the ship is engaged in the carriage of goods or passengers and either the date on which the vessel has been permanently registered or that action has been taken towards obtaining the permanent registration of the ship.
The Merchant Shipping (Taxation and Other Matters relating to Shipping Organisations) Regulations (The Taxation Regulations) have introduced a number of important fiscal advantages applicable to a licensed shipping organisation owning/operating a tonnage tax ship. The most notable of these advantages are listed and described hereunder. These are subject to the satisfaction of the conditions laid out further below:
- A licensed shipping organisation which owns/operates a tonnage tax ship is exempted from its requirement to pay income tax under the Income Tax Act, to the extent that its income is derived from “shipping activities” (i.e. the international carriage of goods or passengers by sea or the provision of other services to or by a ship as may be ancillary thereto or associated therewith including the ownership, chartering or any other operation of a ship engaged in all or any of the above activities);
- A licensed shipping organisation which own/operates a tonnage tax ship shall be exempted from the payment of income tax under the Income Tax Act on any income, profits or gains which it derives from the sale or other transfer of such ship;
- No income tax shall be payable under the Income Tax Act on any gain arising on the liquidation, redemption, cancellation, or any other disposal of shares, securities or other interest, including goodwill, held in any licensed shipping organisation owning, operating, administering or managing a tonnage tax ship while she was a tonnage tax ship;
- The distribution of profits derived from “shipping activities” (as defined above) or from other transactions referred to in paragraphs 1), 2), or 3) above, shall be exempt from tax under the Income Tax Act in the hands of the shareholders; and
- A licensed shipping organisation which has no income, or which has only income from shipping activities, may submit a declaration in lieu of an income tax return in the from provided for the purpose by the Taxation Regulations.
What are the conditions which must be satisfied?
In order to avail itself of the above-mentioned fiscal advantages, a licensed shipping organisation must ensure that:
- The year in respect of which exemption from tax is applied, separate accounts must be kept clearly distinguishing the payments and receipts by the shipping organisation concerned in respect of shipping activities, including the ownership, operation, administration or management of a tonnage tax ship, and payments and receipts in respect of any other business; and that
- All relevant registration fees and tonnage taxes have been duly settled.
Further Advantages: related to tonnage tax ships
- Persons not resident in Malta who are officers or employees of a licensed shipping organisation, and the organisation in respect of such officers and employees, shall be entitled to be exempt from the Social Security Act;
- No duty is payable in terms of the Duty on Documents and Transfers Act in respect of any instrument connected with:
- the registration of a tonnage tax ship under the MSA;
- the issue or allotment of such security or interest of a licensed shipping organisation; the purchase, transfer, assignment or negotiation of any security or interest of a licensed shipping organisation;
- the sale or other transfer of a tonnage tax ship or any share thereof;
- the registration of any mortgage or other charge over or in relation to any ship or licensed shipping organisation, any transfer or discharge thereof, any receipt relative thereto, and any assignments granted in connection therewith; or
- the assignment of any rights and interests, or the assumptions of obligations in respect of any ship or share thereof.
Characteristics of shipping organisation in terms of the Merchant Shipping (Shipping Organisations – Private Companies) Regulations:
The Merchant Shipping (Shipping Organisations – Private Companies) Regulations apply to licensed shipping organisations which are private companies.
Upon registration of the company or at any time thereafter, the directors of the company shall elect whether the company shall be regulated by these Regulations or by the Companies Act, by means of the appropriate declaration in the memorandum of association.
A shipping company may elect to be governed by the Companies Act by filing a notice in terms of these Regulations.
- Companies regulated by the Regulations may have a single member without compliance with any formalities;
- The sole member may also be the sole director;
- All decisions taken by the single member are considered to be extraordinary resolutions;
- The memorandum of every such company shall state that it is a shipping company for the purposes of the Merchant Shipping Act;
- In the case of single-member companies there shall be an indication of the main activities of the company;
- Company may by extraordinary resolution amend its M&As, but may also authorise the directors to make certain changes.