Following its decision on the 19 December 2017, the European Commission conditionally endorsed the Maltese tonnage tax scheme under the EU’s State aid rules for a period of ten years. The stated goal is to have a tonnage tax scheme that “will ensure a level playing field between Maltese and other European shipping companies, and will encourage ship registration in Europe.”

In observance of the Commission’s decision of December 2017, Malta has by virtue of Legal Notices 127 and 128 of 2018 (effective 1 May 2018) revisited and amended its tonnage tax law. The new law published on the 13 of April 2018 is being regarded as a positive development by the EU, Malta and the industry. The said legal notices strive to ensure compatibility between the Maltese tonnage tax scheme and EU State Aid rules. This will serve to create certainty in the market and ensure the attractiveness of the Malta Flag to the shipping industry.

The revamped law on tonnage tax reasserts the principle that cargo carriers, tankers and other merchant vessels flying the Maltese flag and carrying cargo or passengers by sea will continue to qualify for the benefits and privileges contemplated under the law insofar as the vessels trade ‘internationally’. In order to qualify, a number of criteria will need to be fulfilled ensuring that the said benefits and privileges are only granted in the category of cases contemplated under the Commission’s 2004 Guidelines on State Aid to Maritime Transport which addresses “the risk of flagging out and relocating of shipping companies to low-tax countries outside of the EU, allowing Member States to adopt measures that improve the fiscal climate for shipping companies.”

In tandem with the Commission’s decision-making practice under the Maritime Guidelines, the new law further clarifies the “eligible” transport activities and “compatibility conditions” to ensure that the main objectives of the Maritime Guidelines are met.

The new law also contains a number of provisions dealing with ship management, specific cases were owners operate non-EU flagged vessels from within the EU, particular types of vessels such as dredgers and tug boats, activities that are ancillary to shipping and much more.

For further information on the detail of the law, please contact Dr Karl Grech Orr, Dr Jotham Scerri-Diacono, Dr Matthew Attard, Dr Jan Rossi or any member of the shipping team.