Aircraft Registration & Aircraft Finance
From the early time of flight, Malta’s strategic position was very important for operators, and this concept continued be further developed after the second world war, with Malta being seen as the gateway to flights to Africa and the Eastern Mediterranean. With the onset of jet aviation, Malta lost a bit of its interest to long-haul operators but this was adequately made up for with Malta establishing itself as a tourist destination in the Mediterranean. By time, this resulted in an influx of diverse airline operators and this was further complemented with an overall increase in interest in travel overall.
The Aircraft Registration Act, 2010 was drafted with a view to establish an adequate legal framework that would help create and effectively support a successful aviation register in Malta, consolidating the laws on the registration of aircraft into a single act. The Act provides for modern trends in the ownership for both business aircraft and private jets, such as fractional ownership and ownership through trust structures.
Furthermore, the Act introduces a number of innovative concepts which make the Maltese Aviation Register competitive with the world’s leading aviation registers. It does this by limiting nationality and form requirements as much as possible in order to make the register accessible to as many owners and operators as possible, while ensuring that the register requirements comply with European Legislation.
Malta has ratified the Cape Town Convention and this brings Malta in line with the International aviation finance and leasing standards, facilitation of asset-based financing and ensures a continuous investment into the aviation sector on the Island.
An aircraft may be registered by: In terms of the Act, qualified persons are established to be:
- an owner operating his aircraft.
- an owner of an aircraft under construction/temporary inoperative.
- an operator under temporary title (lease).
- a buyer under a conditional sale or title reservation agreement authorised to operate the aircraft.
- a trustee for the benefit of qualified persons.
- the Government of Malta.
- any citizen/residents of Malta/EU/EEA States/Switzerland.
- any undertakings formed in accordance with the law and having their registered office or principal place of business in Malta/EU/EEA States/Switzerland.
- any foreign undertaking from an approved jurisdiction, insofar as the aircraft is not engaged in air service, and provided it satisfies a number of requirements.
By virtue of the Act, the following are considered registrable:
- an aircraft as defined in the Aircraft Registration Act is “any machine that can derive support in the atmosphere from the reactions of the air other than the reactions from of the air against the earth’s surface as may be illustrated or amplified by the Minister by regulations but shall exclude aircraft used in military, customs or police services of any state.”
- an aircraft under construction as soon as it is uniquely identifiable by the MSN number.
- the ownership of aircraft in various separate fractions as is becoming of custom in international aviation business.
- aircraft engines.
The Act also includes provisions that are relevant to international registrants applicable to registrants not engaged in commercial air services (private aircraft):
- Reduced qualification criteria — anyone can register subject to the Director’s discretion.
- An international registrant must appoint a resident agent who is habitually resident in Malta. An international registrant is to ensure that a validly appointed resident agent is present at all times.
- The resident agent, on behalf of the international registrant, acts as the channel of communication between the international registrant and the Director General of Aviation in Malta.
- The resident agent is to sign and file with the Director General of Aviation in Malta all declarations and forms as required under Maltese Law, and shall act as the representative of the international registrant for judicial proceeding in Malta.
The Act also outlines the securities that are available in Malta. These are:
- Aircraft Mortgages:
- Domestic: registered at the Directorate General of Civil Aviation and governed by the Aircraft Registration Act.
- International: registered in Dublin and governed by the Cape Town Convention and the Aircraft Protocol.
- Pledges of receivables or rights (including leases).
- Special privileges over the aircraft:
- Competitive list of privileges arising by operation of law.
Finally, Malta has instituted a number of tax incentives for operators in this field. These are:
- New Foreign Source Rule in the Income Tax Act – in terms of which any income deriving from the ownership, lease, or operation of an aircraft or aircraft engine employed in the international transport of passengers or goods shall be deemed to have arisen out of Malta regardless of whether the aircraft may have called at, or operated from any airport in Malta and irrespective of the country of registration of the aircraft or the aircraft engine.
- Corporate Tax Incentives – where shareholders of aircraft, lessors and operators operating through entities set up in Malta shall benefit from a 6/7ths tax refund upon distribution of dividends of said Maltese entity.
- Accelerated Depreciation – where the minimum period to claim wear and tear deductions for depreciation of aircrafts, engines and interiors has been shortened to 6 years for the aircraft airframe, engine and overhaul and 4 years for aircraft interiors and other parts.
- Exemption from Fringe Benefits – introduced into Maltese Law and applicable to non-residents and to certain entities whose business activities include the ownership, leasing or operation of one or more aircraft or aircraft engines used for or employed in the international transport of passengers or goods.