Aircraft Registration in Malta
The Act regulates the registration of aircraft and aircraft mortgages in Malta and is a key element of the reform which seeks to encourage growth of aviation business in Malta, beyond the traditional aircraft registration incentives. There has already been considerable interest by non-Maltese operators to register their aircraft in Malta and consequential growth of the register is expected. Furthermore, several major aircraft maintenance companies have already invested, and are successfully operating from Malta-based state of the art facilities.
Three months following the coming into force of the Act and the deposit of its instrument of ratification, Malta will also become a Cape Town Convention State as the Act implemented the Cape Town Convention on International Interests in Mobile Equipment and the Aircraft Protocol thereto (the "Convention") which is recognized as facilitating asset-based financing by providing increased protection for secured creditors. Malta's decision to accede to the Convention further enhances Malta's reputation as a lender-friendly jurisdiction whilst at the same time facilitating the acquisition of aircraft and offering prospective investors of aircraft a reduction in cost on their borrowings.
Some of the major features of the Act, other than the major introduction of the Convention's implementing law with all the effects that created on security interests over Maltese aircraft, could be summarized as follows:
- The eligibility and capacity rules for applicants to register their aircraft (particularly private aircraft) have been widened,
aircraft under construction may now be registered,
- Recognition of the fractional ownership concept and of security interests over particular fractional interests in the aircraft,
- A more informative national register now allowing for recordation of more details in relation to the persons holding an interest or title in the relevant aircraft and/or its engines;
- More extensive powers to mortgagees in respect of the cancellation of the register of an aircraft;
clarification that replacement engines can be granted as security by a debtor in favour of a creditor as long as the engines are in the ownership of the debtor/mortgagor;
- The registration of any power of attorney granted in favour of a creditor granted by way of security for the de-registration and export of the aircraft;
- The registration of a mortgage or security interest to secure future rights and to secure the rights of a conditional seller under a title reservation agreement or the rights of a lessor under a leasing agreement;
- Tarrowing down of special privileges to achieve broad consistency with the laws of other Cape Town Convention States.
Some amendments to fiscal rules have also been made, independently of the Act, which could be summarized as follows:
- The introduction of a general source rule establishing that income derived from the ownership, leasing or operation of an aircraft or aircraft engine engaged in the international transport of passengers or goods is deemed to arise outside Malta. Thus non-Maltese companies linked to Malta simply by registration of the aircraft in Malta or the fact that the aircraft calls at a Maltese airport are not taxable in Malta. This rule offers interesting tax structuring opportunities in respect of companies which are resident in Malta on the basis that they are effectively managed herein;
- Capital allowances in respect of aircraft (including aircraft engine, interiors, parts and aircraft overhaul) may now be claimed over a shorter period;
- Finance leasing rules have been introduced offering advantages to lessors and lessees alike;
- Clarification to Fringe Benefit Rules.
The Act and the ancillary legislative amendments have created an exciting opportunity for Malta to establish a relevant presence in the aviation sector. Maltese aviation is well on-course to witness its most significant growth in recent times.