Shipping Organisations) Regulations, 2018

Suppliment tal-Gazzetta tal-Gvern ta’ Malta Nru. 19,977, 13 ta’ April, 2018 B 1217

L.N. 128 of 2018

MERCHANT SHIPPING ACT

(CAP. 234)

Merchant Shipping (Taxation And Other Matters Relating To

Shipping Organisations) Regulations, 2018

IN exercise of the powers conferred by articles 84Z(9) and 374 of

the Merchant Shipping Act, the Minister for Transport, Infrastructure

and Capital Projects, with the concurrence of the Minister of Finance,

has made the following regulations

(1) The title of these regulations is the Merchant Citation,

Shipping (Taxation And Other Matters Relating to Shipping commencement

and scope.

Organisations) Regulations, 2018.

(2)

These regulations shall come into force on the 1st May,

2018. (3) The purpose of these regulations is to provide for the

taxation and certain other matters relating to shipping organisations.

(Regulation 7)

Ancillary Activities

(1)

Ancillary activities for the purposes of regulation 7(1),

shall be determined in accordance with the following

paragraphs.

(2)

Ancillary activities shall mean activities related to a

tonnage tax ship as provided for in paragraphs (3) to (4) of

this Schedule, other than commercial activities which form

part of the operation of a port carried on for profit, that

have a substantial connection with the shipping

organisation’s shipping activities or, where the licensed

shipping organisation is a member of a group, the shipping

activities of another qualifying licensed shipping

organisation in that group.

(3)

The following ancillary activities benefit, provided that the

gross revenue from those activities is less than fifty per

cent (50%) compared to the gross revenue from the

licensed shipping organisation’s shipping activities, which

threshold shall be applied on a ship-by-ship basis

(a)

the carriage of passengers or cargo otherwise than on

board a tonnage tax ship operated by the licensed

shipping organisation, where -

(i)

there is a single contract with the customer for a

journey which includes a voyage on the

tonnage tax ship, and

(ii) the transport for the remainder of the journey is

purchased or obtained by the licensed shipping

organisation by provision which would have

been made as between independent enterprises;

(b)

sales and facilities which are normally provided to

customers by seagoing passenger ships, including -

(i) the sale of alcoholic beverages, perfume and

tobacco, but not luxury goods,

(ii) the exchange of amounts of different currencies

for personal expenditure;

(iii) health and beauty and spa and wellness services

(c)

administrative and insurance services which are

directly related to the carriage of passengers or cargo,

including under a contract described in paragraph

(a)(i);

(d)

the provision of holidays, sold to the customer under

a single contract, where -

(i)

part of the holiday is a voyage on a tonnage tax

ship operated by the licensed shipping

organisation, and the remaining part is land-

based (‘the land-based part’),

(ii) the land-based part is purchased or obtained by

the licensed shipping organisation by arm’s

length provision, and

(iii) the cost to the licensed shipping organisation of

the land-based part in accordance with sub-

paragraph (ii) is less than one half of the price

paid by the customer under the single contract;

(e)

the loading and unloading of cargo carried on a

tonnage tax ship operated by the licensed shipping

organisation, and the provision by the licensed

shipping organisation of facilities used exclusively

for those purposes;

(f)

the consolidation or breaking of cargo carried on a

tonnage tax ship operated by the licensed shipping

organisation, immediately before or after the voyage,

where the activity is not haulage-related;

(g)

the temporary placement of cargo carried on a

tonnage tax ship operated by the licensed shipping

organisation, on or at the dockside, where the activity

is not part of a long-term storage operation;

(h)

the rental or provision to customers of containers for

goods to be carried on a tonnage tax ship operated by

the licensed shipping organisation;

(i)

the provision of excursions for passengers of a

tonnage tax ship operated by the licensed shipping

organisation, where any cabin for the passenger

remains available for exclusive use;

(j)

advertising and marketing, if these correspond to the

sale of advertising space on board tonnage tax ships.

(4)

The following ancillary activities benefit at the permitted

levels as follows -

(i) betting or gambling facilities normally offered

to customers by seagoing passenger ships for

entertainment, and

(ii) the sale to passengers on seagoing ships of

luxury goods of a kind normally offered to such

passengers,

Provided that the turnover from such activities

amounts to less than twenty-five per cent (25%)

of the turnover from the licensed shipping

organisation’s shipping activities referred to in

paragraph 3 of this Schedule.

€0.72

By virtue of sub-article (9) of article 84Z of the Act, Deletes articles

85 and 85A of

articles 85 and 85A of the Act shall cease to have effect.

the Act.

(1) For the purposes of these regulations and unless the Interpretation.

context otherwise requires –

"Act" means the Merchant Shipping Act;

''dividend'' has the same meaning as is assigned to it by article Cap. 123

2 of the Income Tax Act;

"EU Maritime State Aid Guidelines" refers to the Community

Guidelines on State Aid to Maritime Transport as may be in force

from time to time;

"genuine shipping organisation" means a shipping organisation

which, has assumed risks and responsibilities related to the

operation of a tonnage tax ship or to the carrying out of shipping

activities;

"group" shall refer to

(a) two or more shipping organisations which are owned

and controlled, directly or indirectly, as to more than fifty per

cent by the same persons; or

(b) two or more shipping organisations which are

controlled directly or indirectly by the same parent;

''operation'' in respect of a tonnage tax ship includes the

operation of such ship in any shipping activities, whether under

charter or under any other commercial arrangement and "operator"

shall be construed accordingly

Provided that, for the purposes of these regulations, a

shipping organisation shall not qualify as the operator of a tonnage tax

ship where the ship has been chartered out by the said shipping

organisation on bareboat charter terms unless

(a) the ship is bareboat chartered to a shipping

organisation forming part of the same group as the

aforementioned shipping organisation; or

(b) the shipping organisation is a genuine shipping

organisation and demonstrates, to the satisfaction of the

Registrar-General, that the ship was bareboat chartered due to

short-term over-capacity and the term of the charter does not

exceed three (3) years.

Provided that, for the purposes of paragraph (b) above, the

percentage of net tonnage operated by the group on a bareboat charter

basis is below fifty per cent (50%) of the net tonnage operated by the

group.

Provided further that, for the purposes of paragraph (b)

above, the term ‘short-term over-capacity’ shall refer solely to ships

acquired (bought or chartered) by the shipping organisation for the

purposes of carrying out its own shipping activities and shall not

include any ships specifically acquired (bought or chartered) for the

purposes of chartering out on a bareboat basis,

"parent" shall refer to

(a)

a ‘parent organisation’ as defined hereunder; or

(b) an undertaking that meets all of the following

characteristics

-

power over the said shipping organisation,

based on the current ability to direct the relevant activities

which significantly affect returns;

-

exposure, or right, to variable returns from its

involvement with the said shipping organisation; and

-

the ability to use its power over the said

shipping organisation to affect the amount of the person’s

returns.

"parent organisation" shall refer to an organisation which -

(a) has a majority of the members’ voting rights in

another shipping organisation (a subsidiary organisation); or

(b) has the right to appoint or remove a majority of the

members of the board of directors or persons entrusted with the

administration of another shipping organisation (a subsidiary

organisation) and is at the same time a member of that shipping

organisation; or

(c) has the right to exercise a dominant influence on

matters relating to the strategic and/or commercial management

of a shipping organisation (a subsidiary organisation) of which it

is a member, pursuant to a contract entered into with that

shipping organisation or to a provision in that shipping

organisation’s memorandum or articles of association; or

(d) is a member of a shipping organisation and controls

alone pursuant to an agreement with other members of that

shipping organisation (a subsidiary organisation), a majority of

members’ voting rights in that shipping organisation; or

(e) holds a participating interest in another shipping

organisation and actually exercises a dominant influence over the

shipping organisation (a subsidiary organisation) or manages the

subsidiary organisation on a unified basis together with it;

"Registrar-General" shall have the same meaning as assigned

to it in the Act;

"ship" shall have the same meaning as is assigned to it in

article 2(1) of the Act and shall, to the extent that they are involved

in the international carriage of goods or passengers by sea in

accordance with the EU Maritime State Aid Guidelines and

provided that they satisfy the criteria set out in these regulations,

also include the vessels listed hereunder

(a)

cable laying ships;

(b)

pipe laying ships;

(c)

crane vessels;

(d)

research vessels; and

(e)

multi-purpose, break-bulk and other types of support

vessels

Provided that the following ships are excluded for the

purposes of these regulations

(a)

fishing and fish factory ships;

(b) private yachts and ships used primarily for sport or

recreation;

(c)

fixed offshore installations and floating storage units;

(d)

non-ocean going tug boats and dredgers;

(e) ships whose main purpose is to provide goods or

services normally provided on land;

(f) stationary ships employed for hotel and or catering

operations (floating hotels or restaurants);

(g) ships employed mainly as gambling and/or casinos

(floating or cruising casinos);

(h)

non-propelled barges;

(i) any other description of ship which may be

determined, from time to time, by the Registrar-General, as not

being engaged in the international carriage of goods or

passengers by sea.

''shipping activities'' means

(a) the international carriage of goods or passengers by

sea in terms of the EU Maritime State Aid Guidelines and such

other activities that have been approved or considered as eligible

for tonnage tax purposes by the European Commission;

(b) such activities as are integral or directly linked to the

business of operating tonnage tax ships, when carried out in

conjunction with activities described in paragraph (a) above;

(c) ancillary activities qualifying in terms of regulation 7

hereof, when carried out in conjunction with activities described

in paragraph (a) above;

''shipping organisation'' shall have the same meaning assigned

to it in article 84Z(1) of the Act

Provided that for the purposes of these regulations, such

shipping organisation shall be an organisation duly organised and

existing under the laws of a Union State;

''ship manager'' means a shipping organisation which is

established in the Union that

(a) has assumed responsibility for either or both of the

technical or crew management of a ship or ships referred to in

regulation 6(1)(b) hereof; and

(b) complies with international standards and fulfils

requirements established under the law of the European Union;

(c) satisfies such conditions as may be laid down by the

Registrar-General; and

(d) specifically includes such activities among the

objects contained in its Memorandum of Association; and

(e) registers with the Registrar-General by submitting

to him in writing the following particulars

(i) the name of the organisation and a unique

identification number;

(ii) the address of the registered office of the

organisation;

(iii) the name, unique identification number and

tonnage of the ship or ships for which it has assumed

responsibility as set out above;

(iv) any other documentation that may be required

for the purposes of satisfying compliance with the

respective requirements of these regulations

Provided that the particular shipping

organisation shall notify the Registrar-General in writing

every time any alterations in such particulars occurs;

''ship management activities'' means those activities carried out

by a ship manager and consisting in, but not limited to, the provision

of competent personnel to supervise the management and general

efficiency of a ship referred to in regulation 6(1)(b) hereof, and/or

the provision of other technical management services usually

performed by the ship manager as defined by the Baltic and

International Maritime Council (BIMCO) Standard Ship

Management Agreement, in its up-to-date version;

''tonnage tax ship'' means a ship that is declared to be a tonnage

tax ship by the Minister in terms of regulation 4 hereof;

''Union State'' means a Member State of the European Union

(including, for the avoidance of doubt, Malta) or of the European

Economic Area;

''Union ship'' means a ship registered under the laws of a Union

State and the terms ''Union flag'' and ''Union-flagged'' shall refer to a

ship registered in any such State

Provided that in the case of a ship registered in any Union

State other than Malta, the ship shall only qualify as a ‘Union ship’

for the purpose of these regulations, if an amount equivalent to the

Malta tonnage tax is paid to the Registrar-General;

Provided further that relief shall be granted for any tonnage

tax imposed under the laws of such Union State in respect of the said

tonnage tax ship operated by the said shipping organisation subject to

an amount of minimum tonnage tax equivalent to twenty-five per cent

(25%) of the annual tonnage tax that would have been payable had the

ship been registered under Part II or IIA of the Act.

(1) The Minister shall, with the concurrence of the

Minister responsible for finance, and subject to such conditions

deemed appropriate in line with these regulations, declare to be a

tonnage tax ship, a ship of any net tonnage, which is engaged in

shipping activities.

(2) The Minister shall declare a ship not being a Union ship

that is owned, chartered, managed, administered or otherwise

operated by a shipping organisation to be a tonnage tax ship where

the strategic and commercial management of all ships owned,

managed or operated by the shipping organisation is actually carried

out from the Union and it is proved to the satisfaction of the

Minister that

(a) the shipping organisation owns, manages or operates

at least sixty per cent (60%) of its total tonnage under a Union

flag; or

(b) a percentage of the tonnage owned, managed or

operated by the shipping organisation is Union-flagged and that

the percentage of Union-flagged tonnage that is owned,

managed, administered or otherwise operated by shipping

organisations established in Malta has not decreased on average

over a period of three years

Provided that, when a shipping organisation submits an

application in terms of sub-regulation (4), the Registrar-General may,

accept applications where the said applicable threshold is not less than

twenty-five per cent (25%)

Provided further that 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 by the

respective shipping organisation in respect of such tonnage tax ship,

with relief being granted for any tonnage tax imposed under the

laws of a territory outside Malta relative to the said tonnage tax ship

operated by the said shipping organisation, subject to an amount of

minimum tonnage tax equivalent to twenty-five per cent (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 sub-regulation (2), the percentage of

a shipping organisation’s total tonnage which is Union-flagged shall

be determined by expressing as a percentage the sum obtained by

dividing the aggregate net tonnage of Union-flagged tonnage tax

ships owned entirely, chartered, managed, administered or otherwise

operated by the shipping organisation at a particular date by the

aggregate net tonnage of all ships that are owned entirely, chartered,

managed, administered or otherwise operated by the shipping

organisation at such date.

(4) For a declaration pursuant to sub-regulation (1) or sub-

regulation (2), the shipping organisation wishing to own, manage or

operate a tonnage tax ship shall apply to the Registrar-General in the

manner as he may determine, from time to time.

(5) The Registrar-General shall, when and as often as he

deems necessary, give notice in writing to any person to furnish him,

within a reasonable time, information as may be deemed fit, for the

purposes of these regulations. Without prejudice to the generality of

the foregoing, such information may also include the requirement to

submit on an annual basis, such information relative to the vessels

operated by the shipping organisation as may be deemed necessary

in order to ensure that the particular vessels qualify as tonnage tax

ships.

(1) Notwithstanding anything contained in the Income

Tax Act, or in any enactment replacing that Act, if the condition

contained in sub-regulation (3) hereof is complied with, and provided

that all relevant tonnage taxes are duly paid by the shipping

organisation as may be prescribed by regulations under the Act,

including, in the case of a ship operated under charter as referred to in

the relevant provisions of the Act, an amount paid to the Registrar by

the shipping organisation equal to the annual tonnage tax for that year

in addition to that paid by the owner

(a) no further tax under the Income Tax Act shall be

charged or payable on the income of that shipping organisation,

to the extent that such income is derived from shipping activities,

and

(b) no further tax under the Income Tax Act shall be

charged or payable on any income, profits or gains of a shipping

organisation derived from the sale or other transfer of a tonnage

tax ship which had been acquired and sold whilst under the

tonnage tax system or from the disposal of any rights to acquire a

ship which when delivered or completed would qualify as a

tonnage tax ship

Provided that the activities and objects of the

organisation, where applicable, are restricted to such shipping

activities and related activities.

(2) The distribution of profits derived from shipping activities

or from other transactions referred to in sub-regulation (1) 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 sub-regulation (1),

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,

mutatis mutandis, apply as though references to the 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.

(3) The condition referred to in sub-regulation (1)is that for the

year in respect of which exemption from tax is applied, separate

accounts were 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.

Furthermore, for the avoidance of doubt, it is hereby

clarified that in determining the chargeable income of any person, the

provisions of the Income Tax Act shall, mutatis mutandis, apply to

any income not falling within paragraph (a) of sub-article (1)

including, but not limited to, that all outgoings and expenses incurred

by such person during the year preceding the year of assessment shall

be deductable only to the extent to which such outgoings and expenses

were wholly and exclusively incurred in the production of the income

in terms of article 14 of that Act.

(4) In the case of a shipping organisation whose activities fall

under these regulations, which has no income whatsoever, or which

has no income other than income from shipping activities, a return

shall be submitted to the Commissioner for Revenue and the Registrar-

General in such form set out in the relevant Merchant Shipping Notice,

by a person holding the warrant of a certified public accountant and

auditor under the Accountancy Profession Act, or by a person holding Cap. 281.

the warrant of advocate in terms of the Code of Organization and Civil Cap.12.

Procedure in lieu of a tax return required in terms of the Income Tax Cap.372.

Management Act, and the relative provisions of the Income Tax

Management Act shall, for the purpose of these regulations, be

construed accordingly

Provided that where such person has income which is not

income from shipping activities, the provisions of this sub-regulation

shall not apply.

(1) Any income derived by a ship manager from ship Ship

management activities shall be deemed to be income derived from management

activities.

shipping activities and shall be exempt from tax under the Income Tax

Act provided that

(a) the condition contained in sub-regulation 5(3) is

complied with; and

(b) the ship manager has paid to the Registrar-General an

annual tonnage tax to be determined as follows

(i) in respect of any tonnage tax ship registered

under Part II or IIA of the Act, an amount equivalent to

twenty-five per cent (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; and

(ii) in respect of any other ship not referred to in

paragraph (i) above, an amount equivalent to twenty-five

per cent (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;

(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 Union;

(d) the tonnage in respect of which the ship manager

provides ship management activities satisfies the flag-link

requirement as set out in regulation 4(2) above; and

(e) for the purposes of paragraph (d), the percentage of a

ship manager’s total tonnage which is Union-flagged shall be

determined by expressing as a percentage the sum obtained by

dividing the aggregate net tonnage of Union-flagged ships in

respect of which the ship manager provides the ship management

activities as at a particular date by the aggregate net tonnage of

all ships in respect of which the ship manager provides the ship

management activities at such date.

(2) The provisions of sub-regulations 5(2) and 5(4) hereof

shall, mutatis mutandis, apply 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.

(1)

The provision of ancillary activities linked to

maritime transport, may benefit under these regulations, as provided in

the Schedule to these regulations

Provided that revenues generated from such activities is up

to fifty per cent (50%) of the gross revenues generated from shipping

activities, which threshold shall be applied on a ship-by-ship basis.

(2) Notwithstanding the provisions of sub-regulation (1), any

profits generated from, the following ancillary activities may also

benefit under these regulations -

(a) the embarkation and disembarkation of passengers on

a tonnage tax ship operated by the shipping organisation;

(b) sales and facilities which are normally provided to

customers by seagoing passenger ships, including -

(i) the provision of food or drink for immediate

consumption,

(ii) entertainment for which no additional fee is

charged, but not betting or gambling;

(c) activities carried on by the shipping organisation in

relation to a tonnage tax ship operated by another qualifying

shipping organisation in the same group, which would be

shipping activities of the first-mentioned shipping organisation if

carried on in relation to a tonnage tax ship operated by that

shipping organisation;

(d) such other activities that in substance are similar in

nature to those listed above or have been approved or considered

as eligible for tonnage tax purposes by the European

Commission.

(3) Revenues derived from the sale of goods or services on

board ships not customarily provided to passengers may not benefit in

terms of these regulations.

(1) The provision of ocean towage services may benefit Qualifying

towage and

from the provisions of these regulations provided that

dredging

activities.

(a)

the tug is a Union ship;

(b) more than fifty per cent (50%) of the towage activity

effectively carried out by the tug constitutes maritime transport.

In this respect, towage activities which are carried out inter alia

in ports, or which consist in assisting a self-propelled vessel to

reach port do not constitute maritime transport for the purposes

of this provision

Provided further that any waiting time shall be

proportionally assimilated to that part of total activity effectively

carried out by a tug which constitutes maritime transport.

(2) The provision of dredging services may benefit from the

provisions of these regulations provided that

(a)

the ship providing such services is self propelled and

is a Union ship;

(b) the ship spends at least fifty per cent (50%) of its

yearly operational time in maritime transport which includes

time spent for travelling to the dredging site located at sea and

for carriage of the dredged goods to the place of discharge; and

(c) sub-regulation 5(1) above shall only apply in respect

of income derived from maritime transport services.

The provisions of the External Transactions Act, or any

other enactment replacing that Act, shall not apply to any shipping

organisation, in relation to any transaction connected with the

ownership, operation, administration, management, purchase or

financing of a tonnage tax ship, or any other shipping activity, or

transaction ancillary thereto.

The concessions, exemptions, privileges and other benefits

granted or allowed by these regulations are so granted at the option of

the shipping organisation benefiting therefrom and any such shipping

organisation may, by notice in writing to the Registrar-General, opt not

to be entitled to any such concession, privilege or benefit, which shall

be thereby irrevocably waived.

For the avoidance of doubt it is hereby clarified that no

person shall receive any benefit from these regulations that exceeds

those allowed in terms of the Community Guidelines on State Aid to

maritime transport, including but not limited to Section 11 of the said

Guidelines.

The Merchant Shipping (Taxation and other matters

relating to Shipping Organisations) Regulations are hereby repealed.