MALTA Law and Practice Contributed by: Joseph Ghio, Fenech & Fenech Advocates
• accompanied by a certified translation if it is not in English. A deregistration certificate or formal notification by the civil aviation authority of the state in which the aircraft was previously registered (if the aircraft was previously so registered) in its original format and showing the registered encumbrances, if any. 2.4 Lessor’s Liabilities 2.4.1 Tax Requirements for a Foreign Lessor A foreign lessor is not liable to pay any taxes under Maltese law simply by virtue of the fact that they lease an aircraft or engine to a Maltese lessee. 2.4.2 Effects of Leasing on the Residence of a Foreign Lessor The ITA provides that where a person owns, leases or operates any one or more aircraft(s) or aircraft engine(s) (irrespective of the country of registration of said aircraft or aircraft engine) that is used for, or employed in, the international transport of passengers or goods, any income of such person that is derived or otherwise arises from the ownership, leasing or opera - tion of such aircraft or aircraft engine is deemed to have arisen outside Malta regardless of whether the aircraft may have called at, or operated from, any air - port in Malta. Where the lessor is deriving income that does not fall under the above provision, the determination as to whether such income would be considered to arise in Malta would depend on a number of factors, including the terms of the lease (wet lease or dry lease), where the aircraft is based, the tax residence of the lessee/ lessor and the provisions of any applicable double tax treaties. Where there is indeed a charge to tax, tax will be with - held at source by the resident payer upon payment to a non-resident payee unless authorisation is obtained from the Commissioner for Inland Revenue (CIR) to withhold tax at a lower rate or to refrain from withhold - ing tax altogether. 2.4.3 Engine Maintenance and Operations Liabilities in respect of aircraft or engine maintenance and operations can be imposed on a foreign lessor if
and as stipulated in the lease agreement, which will be enforceable in accordance with its terms. 2.4.4 Damage or Loss Caused by an Asset The doctrine of strict liability applies very limitedly in Malta since its non-contractual liability regime (tort law) is largely fault-based. 2.4.5 Attachment by Creditors The aircraft cannot legally be attached by creditors of the lessee since it is not owned by the lessee. The lessee only has a right of possession and use of the aircraft during the lease period. In the case of mali - cious demand made to the Maltese Court to arrest an aircraft which is not owned by the debtor defendant, the person suing out such a warrant would be liable to a penalty of not less than the commercial value of the lease which the aircraft or engine may attract during the period when the aircraft or engine was maliciously arrested. 2.4.6 Priority of Third Parties’ Rights A lessor is not given any priority unless their interest is registered as an international interest in the Interna - tional Registry or constitutes a foreign security inter - est that is recognised under the Act. However, certain privileges will take priority over a registered interna - tional interest. If not so registered or recognised, the lessor will rank pari passu with other unprivileged creditors of the lessee as stipulated by the Act. 2.5 Insurance and Reinsurance 2.5.1 Requirement to Engage Domestic Insurance Companies It is not mandatory for all or part of the insurances to be placed with Maltese insurance companies. 2.5.2 Mandatory Insurance Coverage Requirements Mandatory insurance coverage requirements are those prescribed by EU Regulation 785 of 2004 on insurance requirements for air carriers and aircraft operators as well as the Civil Aviation (Insurance Requirements for Air Carriers and Aircraft Operators) Order (Subsidiary Legislation 499.41).
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