MALTA Law and Practice Contributed by: Ann Fenech, Adrian Attard, Lara Saguna Axiaq and Martina Farrugia, Fenech & Fenech Advocates
7. Ship-Owners’ Income Tax Relief 7.1 Exemptions or Tax Reliefs on the Income of Ship-Owners’ Companies Maltese companies (as well as those established under the laws of any EU state) which own, oper - ate, administer or manage a tonnage tax ship are exempt from: • income tax which would otherwise be paya - ble on income arising from shipping activities; • any income, profits or gains derived from the sale or other transfer of a tonnage tax ship which had been acquired and sold while under the tonnage tax system, or from the disposal of any rights to acquire a ship which, when delivered or completed, would qualify as a tonnage tax ship; and • the distribution of profits derived from ship - ping activities or from other transactions previously referred to. A tonnage tax ship is a ship of any net ton - nage engaged in shipping activities. “Shipping activities” comprise the international carriage of goods or passengers by sea, or the provision of other services to or by a ship as may be ancil - lary thereto or associated therewith, including the ownership, chartering or any other operation of a ship, as well as ship-management activities of a ship manager. A company which benefits from the tonnage tax system will be required to pay an annual fixed tonnage tax to the Registrar of Ships, which is calculated in accordance with the net tonnage and age of the vessel.
8. Implications of Non- Performance, the IMO 2020, Trade Sanctions and the War in Ukraine 8.1 Force Majeure and Frustration Force Majeure is generally considered a defence for the non-performance or the delay of a con - tractual obligation under the Civil Code, Chapter 12 of the Laws of Malta if certain criteria can be satisfied. Under Maltese law, a debtor will gener - ally be exempt from liability for damages where they prove that the non-performance or late delivery, non-arrival, etc, was due to an extra - neous cause not imputable to them. Moreover, a debtor will also not be liable for damages if they were prevented from fulfilling their obligation/s in consequence of an irresistible force or a for - tuitous event. Malta has also incorporated the Convention on the Contract for International Carriage of Goods by Road (CMR) which makes similar provision for force majeure under Article 17(2). Maltese courts interpret force majeure provi - sions strictly in order to ensure that they are not used unscrupulously by a party in order to evade responsibility. Recent case law has seen the COVID-19 pandemic recognised as a force majeure event qualifying under the definition of “epidemics” in the terms and conditions gov - erning the parties. Nonetheless, the existence of COVID-19 or other such pandemic does not in itself create an automatic force majeure event, and therefore parties will not necessarily be able to claim protection or relief should their con - tracts be disrupted due to a similar pandemic. According to Maltese jurisprudence on the sub - ject, force majeure has been described as an irresistible force; one that could not be avoided by the exercise of due diligence. Furthermore, Maltese courts have consistently held that force
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