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Merchant Shipping Act (Cap. 234) Merchant Shipping (Taxation And Other Matters Relating To Shipping Organisations) (Amendment) Regulations, 2010 (L.N. 83 Of 2010 )

MERCHANT SHIPPING ACT (CAP. 234)Merchant Shipping (Taxation and Other Matters relating toShipping Organisations) (Amendment) Regulations, 2010

IN exercise of the powers conferred by Articles 84Z(9) and
374 of the Merchant Shipping Act, the Minister for Infrastructure, Transport and Communications with the concurrence of the Minister of Finance, the Economy and Investment has made the following regulations–
1. (1) The title of these regulations is the Merchant Shipping (Taxation and Other Matters relating to Shipping Organisations) (Amendment) Regulations, 2010 and they shall be read and construed as one with the Merchant Shipping (Taxation and Other Matters relating to Shipping Organisations) Regulations,
2004, hereinafter referred to as the “principal regulations”.
(2) These regulations shall be deemed to have come into force on the 1st January, 2009 and to the extent that they affect the imposition of any tax liability, they shall apply in respect of income which is brought to charge in the year of assessment 2010 and thereafter.

(a) paragraph (a) thereof, inserting article 85 of the
Act, shall be amended as follows:

Citation and scope.

L.N. 224 of 2004

Amends regulation

1 of the principal regulations.

Amends regulation

2 of the principal regulations.

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(i)  in the definition “tonnage tax ship” for the words “ship registered under Part II or IIA of the Act” there shall be substituted the words “Community ship”;

(ii)  in the definition “shipping activities” for the words “or as otherwise may be prescribed” there shall be substituted the words “including the ownership,

chartering or any other operation of a ship engaged in all or any of the above activities or as otherwise may be prescribed”;

(iii)  in the definition  “shipping organisation” for the words “of this Act.” there shall be substituted the words “of this Act;” and immediately thereafter there shall be added the following new definitions:

“Community” means a Member State of the European Union (including, for the avoidance of doubt, Malta) or of the European Economic Area;
“Community ship” means a ship registered under the laws of a Member State of the European Union (including, for the avoidance of doubt, Malta) or of the European Economic Area and the

terms “Community flag” and “Community-flagged” 

shall refer to a ship registered in any such State:
Provided that in the case of a ship registered in any Community jurisdiction other than Malta, the ship shall only qualify as a “Community ship” for the purpose of these regulations if an amount equivalent to the annual tonnage tax calculated by reference to rates stipulated in the First Schedule to the Act is paid to the Registrar-General, with relief being granted for any tonnage tax or registration fees or their equivalent imposed under the laws of a territory outside Malta in respect of the said tonnage tax ship subject to an amount of minimum

tonnage tax equivalent to twenty five per centum 

(25%) of the annual tonnage tax that would have
been payable had the ship been registered under
Part II or IIA of the Act;
“reference date” means the date on which the shipping organisation was established or the 17

January 2004, whichever is the later;
“ship manager” means a licensed shipping o r g a n i s a t i o n w h i c h i s e s t a b l i s h e d i n t h e Community, which has assumed responsibility for either or both of the technical or crew management of a ship or ships referred to in sub-paragraph (b) of paragraph (i) of sub-regulation (6) of regulation
3 of the Merchant Shipping (Taxation and Other M a t t e r s r e l a t i n g t o S h i p p i n g O rg a n i s a t i o n s ) R e g u l a t i o n s , 2 0 0 4 a n d w h i c h c o m p l i e s w i t h international standards and fulfils requirements established under the law of the European Union, satisfies such conditions as may be laid down by the Registrar-General who shall be guided in this respect by such guidelines, communications, circulars, clarifications, codes, decisions, directives, instruments, interpretations, manuals, notices, p u b l i c a t i o n s , r e c o m m e n d a t i o n s , r e g u l a t i o n s , resolutions, rules or any other similar medium of any competent institution of the European Union,  specifically   includes  such  activities among the objects contained in its Memorandum of Association, and registers with the Minister responsible for finance by submitting to him in writing the following particulars:
(a) the name of the organisation;

(b) the address of the registered office of 

the organisation;
(c) the name and tonnage of the ship or ships for which it has assumed responsibility as set out above:
Provided that the particular licensed shipping organisation shall notify the Minister in writing every time any alterations in such particulars occurs.
“ship management activities” means those a c t i v i t i e s c a r r i e d o u t b y a s h i p m a n a g e r a n d consisting in, but not limited to, the entire crewing of a ship referred to in sub-paragraph (b) of
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paragraph (i) of sub-regulation (6) of regulation
3 of the Merchant Shipping (Taxation and Other M a t t e r s r e l a t i n g t o S h i p p i n g O rg a n i s a t i o n s ) Regulations, 2004 and,or the provision of technical management thereto.”; and
(b) paragraph (b) thereof, inserting article 85A of the
Act, shall be substituted with the following:
“ (b) for article 85A of the Act there shall be substituted the following:

“Minister may declare a ship to be a tonnage tax ship.

8 5 A ( 1 ) . T h e M i n i s t e r m a y w i t h t h e concurrence of the Minister responsible for finance and subject to such conditions as he may deem appropriate, declare to be a tonnage tax ship, a ship of any net tonnage, irrespective of operations or trade in which engaged , which but for such
tonnage, operations or trade would otherwise satisfy all other requirements of a tonnage tax ship under article 85(1).
(2) The Minister shall declare a ship not being a Community ship that is owned, chartered, managed, administered or otherwise operated by a licensed shipping organisation to be a tonnage t a x s h i p w h e r e t h e s t r a t e g i c a n d c o m m e r c i a l management of all ships owned, managed or operated by the licensed shipping organisation is actually carried out from the Community and it is proved to the satisfaction of the Minister that:
(a) the licensed shipping organisation owns, manages or operates at least sixty per cent (60%) of its total tonnage under a Community flag; or
( b ) t h e p e r c e n t a g e o f t h e l i c e n s e d shipping organisation’s total tonnage which is Community-flagged immediately after the shipping organisation begins to operate the said ship is not less than the percentage of the shipping organisation’s total tonnage which was  Community-flagged  on  the  reference date; or

(c) the percentage of Community- flagged  tonnage  that  is  owned  entirely, c h a r t e r e d , m a n a g e d , a d m i n i s t e r e d o r otherwise operated by a shipping organisation that is in possession of a valid licence issued by the Registrar-General has not decreased
over a period of three years or, where the said licensed shipping organisation was in existence for a period of less than three years, for such lower period in which the licensed shipping organisation was in existence:
Provided that where the requirements of paragraph (b) or (c) hereof are not fulfilled, the provisions of the particular paragraph shall still be deemed to be satisfied where it is proven to the satisfaction of the Registrar-
G e n e r a l t h a t a c o m m i t m e n t e x i s t s t o increasing or at least maintaining under the flag of one of the Member States the share of tonnage that was being operated under such

flags on the reference date:

P r o v i d e d f u r t h e r t h a t a n a m o u n t e q u i v a l e n t t o t h e a n n u a l t o n n a g e t a x calculated by reference to rates stipulated in the First Schedule to the Act is paid to the Registrar-General in respect of such tonnage tax ship, with relief being granted for any tonnage tax or registration fees or their equivalent imposed under the laws of a territory outside Malta relative to the said tonnage tax ship, subject to an amount of minimum tonnage tax equivalent to twenty

five per centum (25%) of the annual tonnage 

tax that would have been payable had the said
tonnage tax ship been registered under Part II
or IIA of the Act.
(3) For the purposes of paragraph (b) of sub-article(2) hereof, the percentage of a licensed s h i p p i n g o rg a n i s a t i o n ’s t o t a l t o n n a g e w h i c h

is  Community-flagged  shall  be  determined  by 

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expressing as a percentage the sum obtained by dividing the aggregate net tonnage of Community- flagged tonnage tax ships at a particular date by the aggregate net tonnage of all ships of not less than
1000 net tonnage that are owned entirely, chartered, managed, administered or otherwise operated by the shipping organisation at such date.”.

Amends regulation

3 of the principal regulations.

(a) in subregulation (1) thereof -
(i) for the words “subregulation (3)”, there shall be substituted the words “subregulation (4)”;
(ii) for the words “including an amount”, there shall be substituted the words “including, in the case of a ship operated under charter as referred to in the relevant provisions of the Act, an amount”;
(iii) in paragraph (a) thereof for the words “organisation, or”, there shall be substituted the words “organisation, and”; and
(iv) paragraph (b) thereof shall be renumbered as paragraph (c) and immediately before paragraph (c) as renumbered, there shall be inserted the following new paragraph (b):
“(b) no further tax under that Act shall be charged or payable on any income, profits or gains of a licensed shipping organisation derived from the sale or other transfer of a tonnage tax ship or from the disposal of any rights to acquire a ship which when delivered or completed would qualify
as a tonnage tax ship, and”;
(b) immediately after subregulation (2) thereof there shall be added the following new subregulation:

“(3)  The  distribution  of  profits  derived  from shipping activities or from other transactions referred to in subregulation (1) of this regulation shall be exempt

from tax under the Income Tax Act in the hands of

the shareholders: Provided that where the person in receipt of such dividend is itself a company (hereinafter referred to as “the second company”), any dividend paid to the members of the second company shall, to the

extent that such dividend is paid out of profits derived 

from shipping activities or from other transactions
referred to in subregulation (1) of this regulation, not be charged to tax under that Act and where a member of the second company is again a company, the provisions of this proviso shall apply mutatis mutandis as though references to the licensed shipping organisation were references to the second company and as though references therein to the second company were references to that member, and the principle set out in this proviso shall continue to be applied for as

long as the profits derived from shipping activities are 

distributed by way of dividends.”;
(c) subregulation (3) thereof shall be renumbered as subregulation (4);
(d) subregulation (4) thereof shall be renumbered subregulation (5) and for the second proviso thereto there shall be substituted by the following:
“ P r o v i d e d f u r t h e r t h a t t h e p r o v i s i o n s o f t h i s p a r a g r a p h s h a l l , i n r e g a r d t o l i c e n s e d s h i p p i n g organisations, apply to declarations submitted before the lapse of three years from the date which may be prescribed by the Minister responsible for shipping.”;
(e) immediately after subregulation (5) as renumbered there shall be added the following new subregulation:
“(6)(i) Any income derived by a ship manager from ship management activities shall be deemed to be income derived from shipping activities and shall be exempt from tax under the Income Tax Act provided that:
(a) the condition contained in subregulation
(4) hereof is complied with; and
( b ) t h e s h i p m a n a g e r h a s p a i d t o t h e
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Registrar-General an annual tonnage tax to be determined as follows:
1. in respect of any tonnage tax ship registered under Part II or IIA of the Act, an amount equivalent to twenty five per centum (25%) of the annual tonnage tax payable in respect of the particular ship on the basis of the rates stipulated in the First Schedule to the
Act;
2. i n r e s p e c t o f a n y o t h e r s h i p n o t referred to in paragraph (1) above, an amount equivalent to twenty five per centum (25%) of the annual tonnage tax calculated by reference to the rates stipulated in the First Schedule to the Act which would have been payable had
the ship been registered under Part II or IIA
of the Act; and
(c) at least two-thirds of the tonnage of the ships to which the ship manager provides ship management activities is managed from the territory of the Community, and
(d) the tonnage of the ships in respect of which the ship manager provides ship management activities meets any of the following conditions:
1. at least 60% of the said tonnage is

registered under a Community flag, or

2. the percentage of the said tonnage which  is  Community-flagged  immediately after the ship manager begins to operate an additional ship is not less than the percentage of the ship manager ’s tonnage which was Community-flagged on the later of 11 June 
2009 or one year from the day on which the
ship manager began to operate; or
3. the percentage of the said tonnage w h i c h   i s   C o m m u n i t y - fl a g g e d   h a s   n o t decreased over a period of three years or such lesser period in which the ship manager was

in existence if the said ship manager was in existence for a period of less than three years:
Provided that where the requirements of paragraph (2) or (3) above are not fulfilled, the provisions of the particular paragraph shall still be deemed to be satisfied where it is proven to the satisfaction of the Registrar-
G e n e r a l t h a t a c o m m i t m e n t e x i s t s t o increasing or at least maintaining under the flag of one of the Member States the share 

of  tonnage  under  such  flags  in  respect  of 

which ship management activities were being
provided on the later of 11 June 2009 or one year from the day on which the ship manager began to operate.
(e) For the purposes of sub-paragraph (d) hereof, the percentage of a ship manager ’s total tonnage  which  is  Community-flagged  shall  be determined by expressing as a percentage the sum obtained by dividing the aggregate net tonnage of Community-flagged ships in respect of which the ship manager provides the ship management activities at a particular date by the aggregate net tonnage of all ships of not less than 1000 net tonnage in respect of which the ship manager provides the ship management activities at such
date.
(ii) The provisions of subregulations (3) and (5) hereof shall apply mutatatis mutandis to a ship manager providing ship management activities.
The provisions of the Act relating to the manner of payment and collection of fees and to penalties imposed in case of default shall also apply mutatis mutandis in respect of the annual tonnage tax payable by ship managers providing ship management activities in terms of these regulations.”;
(f) the form set out in the Schedule referred to in sub-regulation (5) thereof as renumbered shall be substituted by the form set out in the Schedule to these regulations.
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D e c l a r a t i o n i n l i e u o f Ta x R e t u r n i n r e s p e c t o f a L i c e n s e d S h i p p i n g
Organisation
Name of Licensed Shipping Organisation
Income Tax Registration Number

Name of Ship(s)       Official Number(s)

Declaration made by
Year of assessment
(1) I the undersigned do solemnly declare that I have ascertained to the best of my ability that the above mentioned licensed shipping organisation is the owner/ operator/manager/administrator (1) of the above mentioned tonnage tax ship(s) under the provisions of the Merchant Shipping (Taxation and Other Matters relating to Shipping Organisations) Regulations, 2004, and that the objects of the licensed shipping organisation limit its operations to shipping activities as listed in article
84Z (1) of the Merchant Shipping Act, and for this year of assessment the licensed shipping organisation qualifies for the concessions granted by the said regulations and has not had any income which would not be exempted under the said
regulations, and that the relative registration fees and tonnage taxes as applicable for this period have been paid.
(1) I the undersigned solemnly declare that the above mentioned licensed shipping organisation is not yet/no longer (1) an owner/operator/manager/ administrator (1) of a tonnage tax ship pursuant to the Merchant Shipping (Taxation and Other Matters relating to Shipping Organisations) Regulations, 2004 but the objects of the licensed shipping organisation limit its operations to the shipping activities mentioned in article 84Z(1) of the Merchant Shipping Act, and for this year of assessment the licensed shipping organisation qualifies for the concessions granted by the said regulations and has not had any income which would not be

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exempted under the said regulations, and that the relative registration fees and tonnage taxes for this period have been paid.

I  finally  declare  that  to  the  best  of  my  knowledge  the  licensed  shipping organisation does not stand to lose any of the concessions granted nor has it waived any of the said concessions under the regulations and the Act.

I  make  this  declaration  in  full  knowledge  of  the  consequence  of  false 

declarations under Maltese law.
Signature Identity No Status Date

(1) Delete as necessary.

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