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Malta

Do tax authorities assess taxes, duties, or other impositions in connection with any of the following events and, if so, at what rates and under what circumstances?

Sales Tax

Income derived by non-Maltese residents from the ownership/lease/operation of aircraft or aircraft engines used for international transport is considered to arise outside Malta for tax purposes, irrespective of the aircraft’s country of registration or whether the aircraft calls at, or operates from, a Maltese airport. Thus, no Malta tax will apply.

An exemption from VAT exists on the supply of aircrafts destined to be used by airline operators for reward chiefly for international transport of passengers and/or goods. The same principle applies for intra-community acquisitions/importation of aircraft. There is no exemption in the case of aircraft acquired for non-business purposes.

Use

The private use of an aircraft by an individual who is not resident in Malta and who is an employee of an entity whose business activities include ownership, leasing or operation of aircraft/aircraft engines used for international transport of passengers/goods shall not be considered a fringe benefit in terms of Maltese Law and is therefore not taxable as a fringe benefit.

Carbon Emission Scheme – the Aviation Emission Directive applies to all aircrafts flying to and from the EU.

Finance (mortgage tax, promissory note tax, conditional sale tax, tax on loan payments, tax on interest)

Mortgage tax – No

Promissory note – No

Conditional Sales tax – No

Taxes of loan payments and taxes on interest – Malta does not levy any withholding taxes on the payment of interest to non-residents. Companies resident in Malta are subject to tax on their worldwide income and thus are subject to tax on any interest received at the corporate tax rate of 35%. However upon the payment of a dividend to the shareholders, income tax refunds at the level of the shareholders may apply reducing the overall effective tax rate in Malta to 5% or 10% depending on the profits out of which the dividend is distributed.

For companies resident outside Malta that give loans to Maltese companies (other than through a branch or agency – permanent establishment) withholding taxes may apply. Rates of withholding vary depending on jurisdiction and subject to the provisions of the applicable double taxation treaty.

Lease (Tax on payments other than income)

The leasing of aircraft/aircraft engines by non-residents to Maltese-resident lessees is not subject to Maltese income tax, whether by withholding or otherwise. This applies irrespective of the existence or otherwise of a double taxation treaty between the Malta and the country of residence of the lessor.

Foreign companies that are resident in Malta by way of management and control but do not have a Maltese domicile by way of the fact they the company is not incorporated in Malta, will be subject to tax in Malta only if the income is remitted to Malta.

Withholding taxes

Malta does not levy any withholding taxes on the lease payments to non-resident lessors irrespective of the country of residence of the lessor but provided that the lessor does not have a permanent establishment in Malta.

Malta does not levy any withholding taxes on the payment of interest to non-residents.

Import taxes

The importation of aircrafts by airline operators for reward, chiefly for international transport of passengers/goods, is exempt from VAT.

Export taxes

No export taxes apply in Malta.

Registration taxes

A registration fee is payable upon registering the aircraft in Malta. There are also applicable fees to obtain an Air Operator Certificate (AOC) as well as initial and annual fees for the air transport license.

Luxury taxes

No luxury taxes apply in Malta.

FOR FURTHER INFORMATION: Please contact us and we would be pleased to assist.

DISCLAIMER: The above information should not be relied upon by the reader for legal advice as it is intended merely to serve as preliminary guide to the laws and regulations governing the taxation of aviation and aircraft in the Malta. The information intends to provide summary-level information about certain tax issues affecting general aviation and aircraft finance. Since these materials are general in nature, readers are encouraged to obtain legal and tax advice from their own professional legal and tax counsel based on specific facts and circumstances regarding their acquisition and/or use of aviation and aircraft.