Aviation is a fast-growing sector of the Maltese economy. Having established itself as a jurisdiction for the registration of both corporate and private jets, Malta is presently expanding its modest yet sturdy aircraft registry, totalling to 242 registrations as at 2nd March 2017. The number of operators registering for a Maltese AOC (Aircraft Operator’s Certificate) is also rising, currently circling around the 30 figure.
PKF Malta supports the aviation industry through a comprehensive range of specialised consultancy services and is actively involved in assisting its clientele in the fast growing aviation industry, namely through the following services:
- Tax compliance & advisory
- Setting up aircraft leasing VAT structures
- Applications processing for Highly Qualified Persons (employee post holders) under the relevant rules
- Applications processing for Malta Air Operating License (AOL) and Malta Air Operator’s Certificate (AOC)
- EORI registrations
- Aircraft registrations
- Licensed fiduciary/trustee services
- Set up of trusts for aircraft registration purposes
- Statutory audit
- Internal audit
- Annual accounts
- Risk assessment
- Financial due diligence
- Mergers and Acquisitions
- Employer/e and Resident registrations
Having a Global Presence
The global reach of PKF enables us to efficiently provide professionals prepared to address the business challenges of our clients. We integrate the appropriate blend of sector specific knowledge with functional expertise from across our international network to provide seamless solutions to our clients.
We pay special attention when assessing the implications of local laws, taxation, licensing, and regulatory issues. In addition, we work closely with many leading aviation consultants including lawyers, engineers, and aircraft appraisers and obtain their services whenever necessary.
PKF Malta is a leader in the provision of tax, corporate re/structuring, audit and advisory services, in the aviation sector. It is honoured to have assisted internationally renowned names in the aviation sector, to land themselves on our aviation register.
Fiscal Incentives for the Aviation Industry
Apart from potentially benefiting from one of the 4 types of tax refunds which may be claimed by both resident and non-resident shareholders under the Maltese corporate tax regime, or claiming one of the 3 types of double tax relief in respect of foreign sourced income, accelerated depreciation can reduce costs during a company’s start-up years and allow companies to defer a portion of their tax liability. The minimum period to claim wear and tear deductions for the depreciation of aircraft, engines and interiors has been shortened as follows (from a previous period of 12 years):
- Aircraft airframe, engine and overhaul – 6 years, equal to a rate of 16.7% per year;
- Aircraft interiors and other parts – 4 years, equal to a rate of 25% per year.
Moreover, a person that carries on a trade or business consisting of the repair, overhaul or maintenance of aircraft, engines or equipment incorporated or used in such aircraft may benefit from investment tax credits. Unutilised investment tax credits may be carried forward against tax due in subsequent years.
- Small Size of Undertaking – 50% of qualifying expenditure or wage costs
- Medium Size of Undertaking – 40% of qualifying expenditure or wage costs
- Large Size of Undertaking – 30% of qualifying expenditure or wage costs
Highly Qualified Persons Rules
The aviation industry has been further fuelled by the extension of the application of the Highly Qualified Persons Rules from the financial services and gaming industries to also include the aviation industry. The eligible offices within the aviation industry amount to 37 and include the posts of Chief Executive Officer, Chief Operations Officer, Chief Financial Officer, Chief Risk Officer, Training Manager, Continuing Airworthiness Manager, Compliance Manager, Aeronautical engineer and Key Aviation Specialist. Holders of such offices with qualifying aviation undertakings will be eligible for the 15% reduced rate of tax on their employment income. Benefits are available for a period of five consecutive years for EEA and Swiss nationals and for a period of four consecutive years for third country nationals.
The most salient feature of the Qualifying Employment in Aviation (Personal Tax) Rules of 24th May 2016 is the lowering of the minimum qualifying contract creation to €45,000 per year (from former €75,000) thereby widening considerably the eligibility ambit. An amendment to the aforementioned Rules introduced by LN 1 of 2017 also allows the beneficiary to apply for a one-time extension of the benefit period for a further 5 or 4 years as applicable, as long as the benefit (15% rate) is not availed of in excess of ten years:
“a one-time extension of five years or four years respectively to his qualifying period, subject to the continued adherence to the other provisions of these rules: Provided that the eligibility under the said rules shall not exceed a consecutive period of ten years commencing from the year preceding the first year of assessment in which that person is first liable to tax under the provisions of the Act”.
VAT Treatment of Aircraft Leasing
To further boost this sector, in 2016 a very similar VAT scheme as that envisaged in the sphere of yachting was introduced for the Aviation industry by means of Guidelines published by VAT Department. The scheme comes into play when there is in place an aircraft leasing agreement, that is, an agreement whereby the lessor (the owner of the aircraft) contracts the use of the aircraft to a lessee (the person who leases the aircraft) for a consideration. At par with the yachting scheme, the lessee may opt to purchase the aircraft at a percentage of the original cost at the end of the lease period.
It is very difficult to identify beforehand the movement of an aircraft in order to determine the period that the aircraft is used within the airspace of the EU and the time that it is used outside of the EU. In this regard, the estimated percentage portion of the lease based on the time that the aircraft is used in the airspace of the EU is calculated on the basis of an expert technical study. The standard rate of VAT of 18% is applied on the established percentage of the lease, deemed to be related to the use of the aircraft in EU airspace. The established percentage portions according to the type of aircraft are outline below:
|Aircraft type by Range (KM)||% of lease taking place in the EU||Computation of VAT|
|0 – 2,999||60%||60% of consideration X 18%|
|3,000 – 4,999||50%||50% of consideration X 18%|
|5,000 – 6,999||40%||40% of consideration X 18%|
|7,000 – upwards||30%||30% of consideration X 18%|
Please contact us for further details. All the services can be tailored to meet your requirements. Take a look at our extensive Doing Business in Malta Brochure. Our team can be contacted by email email@example.com.