With the enactment of the Aircraft Registration Act in 2010, Malta has strengthened its position and formalised its continued commitment towards being a successful base for aviation operations. The Act and Malta's accession to the Cape Town Convention are meant to go a long way into rendering Malta a more attractive jurisdiction for the registration of aircraft. Such is complemented by Malta's geographic location, its EU and Eurozone membership and its highly competitive licensing fees. All these elements, combined with a set of highly attractive fiscal incentives applicable to aircraft engine and aircraft operators as well as foreign investors, render the Malta flag a very viable and advantageous option under which to establish aviation ventures.
Registration of aircraft under the Malta flag provides:
- An accessible Aircraft Register which draws a clear distinction between commercial and private use of aircraft with the aim of attracting international airlines and other companies in this industry, as well as private aircraft;
- Broad and innovative possibilities of registering aircraft which include the option to register aircraft which are still under construction provided such aircraft are uniquely identifiable;
- Acknowledgement and regulation of trusts and fractional ownership by Maltese law;
- Effective security of lenders' and financiers' interests;
- Malta's ratification of the Cape Town Convention which by itself brings considerable benefits and provides a solid basis for future progress, commitment and investment to be made within the aviation industry;
- Tax incentives in relation to aircraft leasing, depreciation of aircraft and in the form of an exemption from fringe benefits;
- Value added tax exemptions for lessors and operators of aircraft;
- A full imputation tax system granting the option to shareholders to claim, upon distribution of a dividend, a refund of 6/7ths of the income tax paid by the company;
- An extensive network of double taxation treaties and other legislation to provide relief from double taxation.
Registration and Eligibility
To ensure accessibility to the aircraft register to as many owners and operators as possible, Maltese law endeavours to limit nationality and form requirements while ensuring that the register is not accessible to anyone and everyone. To this effect, persons who are qualified to register aircraft include:
- Citizens of member states of the EU, of an EEA State or Switzerland. Such individuals must have a place of residence or business in the aforementioned locations;
- A company or other undertaking formed and existing in accordance with the laws of Malta, a member state of the EU, the EEA or Switzerland. Such undertaking must also have its registered office, central administration and principal place of business within these jurisdictions.
A natural person who does not qualify as part of the abovementioned options, but is a citizen of, or a company or undertaking established in an approved jurisdiction is nonetheless qualified to register aircraft under construction or aircraft which are not used to provide an air service.
Maltese law also regulates the status and effects of international registrants, the provisions of which apply solely to registrants who are not engaged in the provision of air services. The international registrant should, at all times, have appointed a resident agent who is habitually resident in Malta.
On behalf of the international registrant, the resident agent shall:
- act as the channel of communication between the international registrant and the relevant authorities in Malta, namely the Director General of Aviation;
- sign and file with the Director General of Aviation all declarations and forms as required under Maltese law;
- act as a representative of the international registrant in judicial proceedings in Malta.
Trusts and Fractional Ownership
The Aircraft Registration Act has also introduced the notions of ownership through trustees and fractional ownership. This has been very well embraced in view of the modern trends relating to aircraft ownership. These options can be adopted in order to regulate the ownership or usage rights of a plurality of persons in relation to an aircraft. Through such, provision for the regulation and co-ordination of the beneficiaries' rights and interests will be made in the trust deed which can provide for various arrangements in line with the wishes and requirements of the persons involved.
The existence of the trustee allows the arrangement to operate in a streamlined manner whilst permitting the rights of the beneficiaries to be enforced against the trustee in case of default, thereby protecting the beneficiaries.
Security of Creditors' Interests
Under Maltese law, mortgages are used as a form of security for creditors' interest for the placing of an aircraft as a security for a loan or debt. Moreover, it is also lawful for a mortgage to be executed and registered in favour of a security trustee and, as such, the latter will be entitled to exercise all the rights in relation to that mortgage.
The role of a security trustee in such a scenario, particularly within the aviation industry, is fundamental due to the costs involved in aircraft financing. Maltese law now allows for a situation whereby a pool of financiers can appoint one of themselves as security trustee to expedite matters in relation to the administration of the loan facility.
The Cape Town Convention
Malta's ratification of the Cape Town Convention is intended to facilitate the process of acquiring and financing aircraft. Some of the Convention's objectives include:
- The creation of 'international interests' in aircraft which relate to rights competent to owners, lessors, lessees and financiers of aircraft which are recognised on an international level;
- The establishment of an electronic International Registry which is fully accessible online, one of the purposes of which is to give notice to third parties of such international interests;
- Providing creditors with a number of remedies for the enforcement of their rights or interests over aircraft, including options which render as expeditious as possible interim relief even without the need of judicial intervention;
- Ensuring that the particular requirements of the aircraft finance sector are met on a general level, one way of achieving such being providing financiers and creditors with greater confidence when granting credit within the aviation market.
Maltese law provides fiscal incentives for the aviation industry, thus being of particular interest and benefit to aircraft operators.