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13 June 2007
In 2006 an interesting development in Maltese shipping law took place with the creation of the Commercial Yacht Code. The code regulates the use of yachts for commercial purposes. It allows the Malta Maritime Authority to accept registrations of yachts as commercial vessels under the Merchant Shipping Act - such yachts benefit from being able to pay tonnage tax rather than income tax on the earnings of the owner company.
Under Article 85 of the Merchant Shipping Act, only vessels of more than 1,000 net tonnes engaged in the carriage of goods or passengers could qualify as an 'exempted ship'. The attraction of having a ship declared as exempted lies in the fact that the tax normally payable under the Income Tax Act is not charged and is not payable on the company's income in respect of gains derived from the ownership or operation of an exempted ship.
The fact that no vessel under 1,000 tonnes could be considered as an exempted ship meant that shipping companies in the business of owning yachts for charter could benefit from this provision. However, Section 85A states that:
"The minister may with the concurrence of the minister responsible for finance and subject to such conditions as he may deem appropriate declare to be an exempted 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 an exempted ship under Article 85(1)."
Thus, although technically the minister concerned was and is permitted to grant the same exemption to yachts of less than 1,000 tonnes, the Malta Maritime Authority was always reluctant to recommend that this section be used to exempt such yachts without the correct regulatory framework in place.
This regulatory framework has now been established by the Commercial Yacht Code. The code is a substantial document that caters for vessels which do not carry cargo and carry no more than 12 passengers, and which essentially fall into one of three categories:
The code provides various standards relating to:
A vessel that complies with these standards is entitled to be issued with the relevant certification enabling its registration under the Maltese flag as an exempted ship. The new Maltese regulations have proven to be extremely popular throughout Europe, with a marked increase of yachts used for commercial purposes registered under the Maltese flag in the first year of operation of the code.
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