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Malta offers great diving, deep harbors

Malta offers great diving, deep harbors

 

 

Malta is a southern European island country comprising an archipelago in the Mediterranean Sea. It lies 50 miles (80 km) south of Italy, 176 miles (284 km) east of Tunisia, and 207 miles (333 km) north of Libya. The country covers just over 122 square miles (316 square kilometers) and has a population of just under 450,000, making it one of the world’s most densely populated countries.

The capital is Valletta, which, at 0.8 square kilometers, is the smallest national capital in the European Union.

Malta’s location has historically given it great strategic importance as a naval base, and a succession of powers, including the Phoenicians, Romans, Moors, Normans, Sicilians, Spanish, Knights of St. John, French and British. Malta was admitted to the United Nations in 1964 and to the European Union in 2004. In 2008, it became part of the Eurozone.

Malta is a popular tourist destination with its warm climate, numerous recreational areas, and architectural and historical monuments, including three Unesco World Heritage Sites, and seven Megalithic temples, which are some of the oldest free-standing structures in the world. If old churches are of interest, Malta has 365 of the most exquisite churches, one for each day of the year.

Malta has three large natural harbors on its main island:

  • The Grand Harbor at the eastern side of the capital city of Valletta, has been a harbor since Roman times. It has several extensive docks and wharves, a cruise liner terminal, as well as a number of marinas. Grand Harbor Marina accommodates the largest yachts. It also has a terminal that serves ferries that connect Malta to Pozzallo and Catania in Sicily.
  • Marsamxett Harbor on the western side of Valletta has a number of yacht marinas, Manoel Island Yacht Marina being the largest, able to accommodate yachts to 80m. It is centrally located in Gzira so chandlery shops, shopping malls, supermarkets and tourist services are all accessible within a short walking distance. In the vicinity, one also find numerous restaurants, bars and convenience shops.
  • Marsaxlokk Harbor (Malta Freeport) at Birżebbuġa on the southeastern side of Malta, is the island’s main cargo terminal. Malta Freeport is the 11th busiest container port in Europe and 46th busiest in the world.

There are also two manmade harbors that serve a passenger and car ferry service that connects Ċirkewwa Harbor on Malta and Mġarr Harbor on Gozo. There is a marina in Mgarr that accommodates smaller yachts to about 22m.

Depths are not an issue in and around Malta. Anchoring is difficult, though, as depths reach 40m and more just 4.5m from shore.

Malta is a huge dive destination for Europeans. There are many artificial reefs made by sunken ships and numerous cave dive sites. Although the waters are extremely clear, do not expect as much coral and sea life as one would see in the Caribbean. Many seaside resorts in crystal clear water-bays surround the islands.

The food generally has an Italian influence and in most places, one can order in Italian language, as it is the third unofficial language, after the official languages of Maltese and English.

Fishing is not one of the islands’ advantages, as we found out on our research. Most fresh fish is from multiple floating farms strategically placed around the islands. Beware of them as they are moved around and may cause navigation hazards.

There are plenty of other things to do and one should tour all three major Islands, as each has different things to offer.

Visitors total about 1.5 million a year, so traffic can be unpleasant. Local transportation, on the other hand, is organized and affordable.

Malta in Top 5 -Best Residency and Citizenship by Investment Programmes

Malta is one of the countries to offer a citizenship by investment programme. However, what is it about this little island, that sustains its position, and is amongst the top 5 countries voted as having ‘Best Residency and Citizenship by Investment Programmes’?

Without a doubt, Malta continues to be a popular tourist destination. However, its remarkable resilience and growing economy, has increased its popularity among high net worth individuals and in turn helped make its Malta Individual Investor Programme one of the leading and most advanced citizenship programmes available.

The Malta Individual Investor Programme, commonly known as MIIP, was the first EU Approved citizenship programme and designed to facilitate Maltese Citizenship by investment to non-Maltese nationals and their dependents. It grants a Certificate of Naturalisation of Malta to any reputable foreign individuals and their families who contribute to the national economic and social development fund, and who meet the eligibility and qualification requirements of the programme.

If successful, applicants can benefit from visa-free travel to over 160 countries, the right of work and establishment in all 28 EU countries, potential tax planning benefits, not to mention a good quality of life, excellent healthcare and great educational opportunities for their children, all amid an economically and politically stable jurisdiction.

Whilst those who apply for the programme are primarily looking to live and/or work in the EU and take advantage of the benefits identified above, many have also come to acknowledge the property investment opportunities, which happen to also form part of the MIIP qualification requirements.

Under the MIIP, an applicant must hold a property in Malta with a minimum purchase value of €350,000 or a minimum rental value of €16,000 per annum for at least five years as well as remaining resident on the island for a minimum of 12 months – as such, many applicants are looking to take advantage of Malta’s property market with a more long-term property investment as part of their application.

Whilst at face value this may seem like quite a commitment, Malta’s property market has become ever more attractive to those interested in property investment, in particular, those also looking to acquire a dual passport and citizenship in an EU member state. But why is this?

Firstly, Maltese property has been appreciating at well above the EU average for a number of years, resulting in rising property prices (an increase of 8.86%), a strong rental market and a continued demand for property.

The purchase process in Malta is easy and painless and with modern computerised Land Registry records, title disputes and post-purchase planning problems are much rarer than many other southern European locations.

Maltese property has attractive tax arrangements. Malta has no real estate taxes such as council tax or rates, nor does it have any wealth taxes. Having no succession taxes is an attractive benefit for HNWIs who are planning to leave their wealth to their families when they die. Malta does have an acquisition tax, albeit just 5%, however for a high-value property this can still be significant relative to the cost of acquiring and holding the property via a trust. The use of a property trust in Malta can also have other non-tax advantages, such as avoiding altogether the succession rules on the basis that the property doesn’t form part of the individual’s personal estate.

Malta tax is only payable on the final sale of a property. As above there is an acquisition tax but there is a Capital Gains Tax exemption worthy of note, which is available on the sale of the main residence.

For rental properties (residential or commercial), Malta also offers an optional special 15% tax rate for rental income.

Malta’s property market has not suffered the instability other European markets have; as such its stability together with its low-interest rates has made for a cost-effective way for investors to acquire a high-value portfolio.

So whilst investing in Maltese property may make good business sense, why consider combining this with acquiring residence and citizenship there? Besides an average of more than 8 hours of sunshine a day, crystal blue waters and a typical Mediterranean climate, Malta is a safe and resilient jurisdiction, home to a stable political environment and a growing economy. It has grown into a regional hub and centre of excellence across many business sectors and is one of Europe’s leading financial centres.

Its’ business-friendly and the economical stable environment remains focussed on doing business.With close proximity to nearby markets in Europe, North Africa and the Middle East, it also offers foreign investors a number of opportunities and benefits.

To this end, not only does it make great financial sense as an investment opportunity – it’s an opportunity for applicants and their families to enjoy a home from home in a safe and stable jurisdiction near difficult to beat by others offering similar citizenship by investment programmes.

 

 

The aspiring yacht owner – Tips to avoid pitfalls

Yacht Ownership

In an ideal world, the aspiring yacht owner would walk down to his nearest marina, hand over his cash and take possession of his shiny new vessel. Cruising the waves as much or as little as he liked with little additional costs. Unfortunately, when it comes to purchasing and owning a yacht, life is not so simple!

Yachts come in various shapes and sizes, from a 30ft sailboat, up to extensive luxury motor vessels capable of accommodating and entertaining large groups of people for long periods at sea. Obviously, the latter category will come with a considerably higher price tag and ongoing running costs. Buying a yacht of any type or size is a major acquisition, and just like the purchase of any other major asset, should be well thought through and planned out to avoid a number of potentially expensive pitfalls.

Financing

Perhaps the first question to answer is how to pay for your yacht in the first place. The first decision to be taken is whether you wish to buy your vessel outright or whether a structured funding solution could bring substantial additional benefits. Loans are widely available from banks, many of which now have dedicated marine finance teams or from a specialist marine finance company. Structured solutions can be arranged via trust companies and special purpose vehicles, which tend to be the domain of fiduciary and corporate services specialists.

One of the most common ways of financing a yacht purchase is by taking out a mortgage on the vessel. Yacht mortgages come in various flavours to suit an individual’s particular needs. As with a house, a plain repayment mortgage would enable the buyer to pay off the principal and the interest at the same time over a defined period. The disadvantage, of course, is that interest rates can rise as well as fall so that there is no certainty as to what future monthly repayments may be. However, some lenders offer time-limited interest-only yacht mortgages. Here payments will cover the cost of interest for a certain period – for example, 12 months – with the facility then reverting to capital and interest repayments for the remaining term.

A more creative solution could lie in using a trust, a company which owns the yacht, the asset can be made to work through a chartering programme, for example. A special purpose vehicle will be established to hold a deposit for the yacht which is held as a security against future loan repayments. These funds can be held on deposit and so will grow with interest. At the same time, revenues from chartering feed into the ownership company which then funds the purchase of the yacht. Revenue from chartering could substantially pay off the yacht costs within two to three years on this model. As a result, the owner would achieve a far more effective and profitable outcome.

It is also important to ensure that all the appropriate legal requirements are followed once you have made an offer. Rules vary from country to country of course.

It is also important to make clear within this contract that the vessel will be sold subject to finance approval, and if the boat is second-hand, subject to a satisfactory survey and valuation.

Insurance

You will also be required to have insurance in place before the loan can be approved and issued. Just like insuring against any other risk, marine insurance policies come in many shapes and sizes depending on the level of cover required, and evidently, this will be reflected in the level of the premium.

Running Costs and Other Considerations

Overall running costs are likely to equate to around 10% of the value of the vessel each year. There will be a range of costs to consider, the most obvious of which are maintenance and repair costs. You will also have to pay an initial and ongoing annual fee to have your vessel registered in the jurisdiction of your choice. Fees may vary depending on the vessel’s size and its intended use (whether it will be used for leisure or commercial purposes for example). Fees also vary from jurisdiction to jurisdiction.

Furthermore, there may be significant other costs to bear depending on the size of your vessel and how you intend to use it. The chances are that the larger the vessel, the less likely it is that you will be sailing it yourself, so you will need to hire a skipper. The more substantial and luxurious motorised yachts might also require a crew, so this brings employment law and employee rights into the equation, as well as extra costs.

The ongoing responsibilities of owning a yacht are, then, manifold, and could overwhelm even the most diligent yacht owner, particularly if the vessel is moored in one jurisdiction and registered in another. At this point, it is worth considering contracting the services of a yacht management company, or a corporate service provider specialising in marine services. These companies are present in most of the popular yachting locations as well as in jurisdictions with yacht registries. They will assume many of these responsibilities, such as completing the necessary paperwork to register your vessel, ensuring that is maintained, and taking over the hiring and paying of the crew. Using a management company also allows yacht owners to utilize alternative ownership structures which may mitigate the initial and ongoing costs associated with buying and running a yacht, some of which are described next.

When you eventually sell your yacht,  costs associated such as VAT payable depends upon where the sale is executed.

Corporate Ownership

While it is perfectly possible in most cases to register a yacht in one’s own name as an individual, there are many disadvantages to doing so; indeed, it is certainly the case that the vast majority of owners choose to transfer their ownership to some form of corporate entity or special purpose vehicle. For example, by using an offshore company to own, run or charter a yacht, it may be possible to take advantage of low rates of corporate tax and reduced rates of VAT on offer in certain jurisdictions. Furthermore, using a company form has certain other benefits in terms of protecting the owner; confidentiality being one of them and limiting the liabilities that may arise in connection with ownership of the vessel being another. If confidentiality is a high priority for the owner, an additional option is the use of a trust company.  The owner (settlor) would transfer the asset to the effective ownership of a trustee, who then manages it for the benefit of the beneficiary.

Fractional Ownership

One of the major pitfalls of ownership is that yachts are a depreciating asset which might only be used a few weeks of the year by their owners. Fractional ownership can mitigate some of these cost factors by effectively dividing the costs of ownership among a limited group of people, each of whom owns a ‘fraction’ of the yacht. Fractional ownership entitles you to use the vessel for a set amount of time each year, and fractional schemes are usually run by yacht management companies. In return for a fee, the management company will take on the day-to-day responsibilities of maintaining the yacht as described above. The disadvantage is that the yacht cannot be said to be truly ‘yours’, and you might not be able to use it when you want.

Chartering

Another way to offset the costs of yacht ownership is to charter your boat to other users, usually through a yacht management or charter company. This enables you to earn income from your yacht while you are not using it by renting it out to others for certain periods of time. How much income you ultimately earn from chartering your yacht will depend on the type of agreement you have with the chartering company. Under some agreements, the income is split equally between the yacht owner and the charter firm. However the owner typically still pays ongoing running costs. Alternatively, it is possible to agree to receive a guaranteed income every month, regardless of how often your boat is chartered out. This reduces risk, but owners may be restricted to a certain number of weeks each year when they can use their boat. And while chartering may be an attractive way to defray the costs associated with yacht ownership, there could well be tax implications in your country of residence on the income you receive.

Leasing

By using a leasing arrangement, the bank or finance company buys the yacht from the seller and then leases it to the buyer. With this type of financing deal, the buyer does not actually legally own the asset but is instead granted possessory interest. The advantage, though, of using this type of arrangement is that one is not locked-in to ownership, and is able to walk away at the end of the lease term without having to worry about maintenance or selling on a depreciating asset. On the downside, monthly lease payments tend to be higher to take account of depreciation, and the lease owner has to front the risks associated with owning and operating a yacht such as liability for loss in the event of damage.

In Summary

While buying a yacht may appear on the surface to be a simple transaction, there are in fact many things to take into consideration before taking that plunge. Which route to ownership is ultimately taken will, of course, depend heavily on a person’s circumstances, such as their own financial standing, where they live, and how they intend to use their boat, among other things. Thankfully, there is a growing community of professionals in this field which can steer yacht owners onto the right course and take much of the hassle out of the ownership experience.

 

Contact us to find out more :

Tax Guide to Leasing of Yachts

Your Guide to Leasing of Yachts

Where leasing arrangements of yachts do not fall within the scope of Legal Notice 369 of 2005 and where the aforesaid lease is deemed by the Commissioner of VAT to be in accordance with guidelines issued by the VAT department from time to time, the Inland Revenue Department has decided that in such special case, the following tax treatment is to be adopted for each year for the duration of the lease:

  1. the lessor is charged to tax only on the annual finance charge, namely the difference between the total lease payments less the capital element divided by the number of years of the lease;
  2. the lessee is allowed a deduction in respect of the (i) the finance charge; (ii) maintenance; (iii) repairs; and (iv) insurance;
  3. the lessee is allowed capital allowances in respect of the yacht and the parties may not opt to shift the burden of wear and tear onto the lessor;
  4. where the lessee exercises an option to purchase the yacht on the termination of the lease, the purchase price received by the lessor shall be considered to be of a capital nature and no tax thereon shall be payable by the lessor.

Malta owes much of its maritime history to its strategic location in the centre of the Mediterranean, its natural harbours and its extensive range of maritime services including excellent yachting berthing, repair and servicing facilities. Malta offers interesting tax planning opportunities for operators and owners of commercial yachts and owners of pleasure yachts.

Commercial yachts
It is possible to register eligible yachts in the Maltese Commercial Yacht Register. Registration in this type of register allows the operation of the yacht on a commercial basis in international waters including chartering. Registration under the Commercial Register may lead to an exemption from income tax on profits from commercial yacht operations, an exemption from capital gains tax on the transfer of shares in a commercial yacht-owning company and VAT exemptions on:
• importation and acquisition /sale of yachts used for commercial purposes; and
• hiring, leasing and chartering
• repairs, refits, maintenance and related services

VAT reduction on Yacht Finance Leasing
Where a yacht is not registered in the Commercial Register, either because the owner does not wish to register an eligible vessel commercially or because the vessel is not eligible for such registration, the acquisition of importation of a yacht into the EU will, in general, be subject to VAT in the member state of importation or acquisition.
Maltese VAT legislation contains special rules based on the EU VAT Directive dealing with finance leasing of yachts. These rules are attractive for yacht owners who use Malta as a base for the importation or purchase/acquisition of a new yacht into or within the EU. Finance leasing is a contract which provides for the lease of a yacht by the lessor to the lessee in return for a fee and also provides for an option by the lessee to purchase the yacht at the end of the lease period at a price which is calculated as a percentage of the value of the vessel.
A yacht under a finance leasing transaction is treated as used partly in EU waters (including Maltese waters) and partly outside EU waters and consequently, only the portion of lease payments that is attributable to the use of the yacht in EU waters is subject to Maltese (EU) VAT. In view of the difficulty in calculating the exact time spent in EU and non-EU waters, the rules provide for a simplified deemed percentage of the lease that is attributable to the use of the yacht in EU waters. These percentages are based on the length of the yacht and propulsion method.

Conditions

In order to qualify for the above reductions in VAT, the rules prescribe a number of conditions, mainly :
• the lessor must be a Maltese limited liability company and registered for VAT in Malta
• the Lease agreement must be for a period not exceeding 3 years
• the contract must provide for an option of the lessee to purchase the yacht at the end of the lease
at a percentage of the value of the yacht – the price payable upon the exercise of the option to
purchase the yacht is taxable at the standard rate of 18%
• the finance lease agreement and the value of the yacht must be approved by the VAT Department prior to the commencement of the finance lease.
This opportunity is of interest to owners or prospective buyers of yachts on which no EU has been paid and is open to new and second-hand yachts.

How can we be of help?
We can assist yacht owners or operators by –
• identifying an optimum VAT structure for the intended acquisition or operation of the yacht in
question (commercial yacht or private yacht)
• obtaining the required VAT clearances
• assistance in the corporate set-up and registration of the yacht under the Maltese flag (where
required )
• providing ongoing and annual yacht registration maintenance services and support
• handling of VAT payments and back-office support