Aircraft Registration in Malta

The ultimate aim of the Government of Malta is to develop the Aviation Industry, thus emulating the success attained by the Shipping Industry in Malta.  Recent legislation,  namely the Aircraft Registration Act together with new procedures being implemented in various Government Departments are proving Malta to be on the EU’s best regulated and most tax efficient jurisdiction for aviation business in general.


Following Malta’s ratification of the Cape Town Convention, the current Maltese Aviation Legal System adopts all known legal mechanisms required to establish itself as an effective and competitive aviation jurisdiction.  It provides for:

  • A civil law jurisdiction;
  • Fractional ownership of aircraft;
  • Registration of aircraft under construction;
  • Registration of aircraft by non EU interests  provided that a resident agent is appointed;
  • Registration of aircraft via operators based in Malta or within the EU;
  • Irrevocable de-registration and export powers of attorney are recognized and may be entered into the register;
  • Recognition of Special powers of attorney granted as security to financiers, which may be entered into the register;
  • Aircrafts are considered to be separate and distinct assets within the estate of their owners and in case of bankruptcy of the owner, all actions and claims to which the aircraft may be subject to, shall have preference over all other debts of the owner;
  • Preservation of special privileges or reservation of title of aircraft on accessories of the aircraft;
  • Registration of aircraft mortgages;


Income Tax benefits

Income derived from the ownership, lease or operation of an aircraft of aircraft engine used for international transport is considered to arise outside of Malta for tax purpose.  The foreign source nature of this income applies regardless of whether the aircraft’s country of registration is Malta or whether the aircraft calls or operates from Malta.

The implications of this foreign source rule:

No withholding tax obligation on Maltese lessees operating aircraft  or aircraft engines in international transport of passengers or goods or  when making lease payment to foreign lessors. This applies irrespective of the existence or otherwise of a double taxation treaty between Malta and the country of residence of the lessor.   By way of example a company registered in the Cayman Islands leases an aircraft to a company registered in Malta.  Lease payments are not taxable in Malta but in the Cayman Islands.

Encourages the use of Malta as a jurisdiction for aircraft owners and finance lessors.    By way of example a company registered in the Cayman Islands moves to Malta and is managed and controlled in Malta and effectively  becomes a tax resident of Malta.  Malta would have exclusive jurisdiction to tax the income being the country of effective management of the company.  The company would need to remit some income to Malta and be subject to Maltese Tax. The  company would benefit from access to Malta’s Double Taxation Treaties network. If a tax treaty applies, the profits derived from the operation of an aircraft in international transport are taxable only in the Contracting State in which the effective place of management of the enterprise is situated.

It provides for a level playing field with Malta’s competitors in  this industry especially Ireland;

It also provides for some interesting tax planning opportunities. 

Taxation of Malta entities – tax refund on distributed profits

Aircraft lessors and operators setting up in Malta  are taxable at the corporate rate of 35%.  However on distribution of profits, the imputation system applies with qualifying shareholders entitled to a refund of 6/7 of the tax paid on the distributed profits.  Consequently the overall effective tax paid in Malta after payment of refunds amounts to 5%.

Companies incorporated in Malta are permitted to denominate their share capital in any convertible currency.   That currency is used for the payment of taxed dues and for any tax refunds that may be due.

Value Added Tax benefits – Importation of Aircraft into Malta

The supply of aircraft for international transport of passengers and goods is exempt from VAT. The same principle  applies for intra-community acquisition/ importation of aircraft.  There is no exemption in the case of aircraft acquired for non-business purposes.  

Also exempt with credit are supplies of equipment to constructors, owners or operators of such aircraft but NOT supplies to lessors which purchase aircraft from  manufacturer and supplies of services consisting of modification, maintenance, chartering and hiring of such aircraft. 


Aircraft are not chargeable assets for Maltese stamp duty or import duty purposes.

Accelerated depreciation periods

As from year of assessment 2010 the minimum period to claim wear and tear deductions for depreciation of aircrafts, engines and interiors has been shortened to 6 years in the case of aircraft airframe, engine and overhaul and 4 years in the case of aircraft interiors and other parts. This is considerable more advantageous when compared to other competing jurisdictions such as Ireland which opts for a 12.5% rate per annum.

Investment Tax Credits for the Aviation Industry

Malta grants tax incentives in line with the EU Framework on Regional Aid, to companies which are involved in the repair, overhaul or maintenance of aircraft, engines or equipment incorporated or used in such aircraft in the form of a tax credit. Investment tax credits are calculated either as a percentage of a qualifying expenditure or wage costs for jobs directly created by the project.  Investment tax credits are credited against the tax due in Malta.  Any unutilized investment tax credits may be carried forward against tax due in subsequent years.

Fringe benefit rules

The private use of an aircraft by a non-resident individual who is an employee or officer of a company whose business includes the ownership, leasing or operation of aircraft engaged in international transport of passengers or goods is  deemed not to constitute a benefit from employment or office.

Aircraft Finance – Different tax implication for Finance and Operating Leases.

A Finance Lease arises where:

(a)    The Lessee has the option to purchase the aircraft at the end of the lease term at a price lower than its fair value;

(b)   The Lease term is for the major part of the economic life of the aircraft;

(c)    At inception of the lease, the present value of the minimum lease payments amounts to at least all of the fair value of the leased aircraft.

The Finance Lessor is not regarded as the Owner of the aircraft but as providing financing to the lessee for the acquisition of the aircraft.

What is chargeable to tax is the annual finance charge, that is  the difference between the total lease payments less the capital element as divided by the number of years of lease.

Where the Lessee exercises the option to purchase the aircraft on termination of the finance lease, the purchase price received by the Lessor is consider to be of a capital nature and not subject to  Maltese Tax.

The Finance Lessee is regarded as the owner of the aircraft (even if the Lessee has no legal title).

The Finance Lessee may claim, capital allowances on aircraft and deductions for finance charges (interest), maintenance, repairs and insurance.      

An Aircraft Operating Lease arises where the Lessor is regarded as the owner of the aircraft and is subject to tax on the full lease amount.

The Lessor can claim capital allowances if it maintains the wear and tear burden.

The Lessee may claim a deduction for all lease payments against its income.

The Lessee cannot claim capital expenses.

Non-Maltese Lessors would not be subject to any Maltese withholding taxes on any interest received.

Lessees subject to tax in Malta would benefit from shorter wear and tear periods for the aircraft.

Capital Allowances– are of no use to tax exempt companies or companies which are subject to tax in Malta only on amounts remitted to Malta.   There is optimum structuring where capital allowances are taken by the person who has tax capacity to use them.  Structures may exploit different treatment of capital allowances in different jurisdictions. This is tantamount to the classic double dip where a country allows capital allowances to the legal owner of the asset rather than the economic owner.


Mortgages registered against Maltese registered aircraft provide effective security by creating a privileged charge over the aircraft.  Such a charge will not be affected in the eventuality of the bankruptcy of the mortgagor occurring after the date when mortgage was created. 

Some advantages of registering a mortgage over a Maltese aircraft:

  • A mortgagee may prohibit the creation of subsequent mortgages;
  • The mortgagee’s written consent is required for the voluntary transfer of a Maltese aircraft or for its cancellation of the Maltese registry;
  • The mortgagee may complete and take over any outstanding registration formalities; 
  • Mortgages are executive titles   and may be enforced immediately without the need for lengthy court proceedings;
  • The mortgagee may also take possession of the mortgaged aircraft and /or sell the mortgaged aircraft.  The procedure for aircraft repossession is relatively straight forward;
  • The mortgagee may demand an order by a competent court prohibiting any voluntary sale of or voluntary creation of a registered encumbrance over the mortgaged aircraft.  The mortgage instrument may also expressly prohibit the voluntary transfer of the mortgaged aircraft in the absence of mortgagee’s prior written consent.
  • The mortgage attaches to any insurance proceeds;
  • If an aircraft to which a mortgage attaches is sold pursuant to an order or with the approval of a competent court, the mortgagee’s interest in the aircraft passes to the proceeds of the sale;
  • The mortgagee is entitled to benefit from fiscal benefits- no tax is payable on the interest or other income due to him by a Maltese aircraft owning or aircraft operating company in respect of a debt contracted or undertaken by the Maltese company with regard to a Maltese registered aircraft.