MALTA Trends and Developments Contributed by: Ann Fenech, Adrian Attard, Martina Farrugia and Daniel-Luc Farrugia, Fenech & Fenech Advocates
the second reading of the Merchant Shipping (Amendment) Bill, the government and the oppo - sition both pledged their support to push these legislative changes through swiftly, to continue to bolster the standards adopted by the Maltese Ship Registry. The Bill also seeks to implement certain additional protections to seafarers in line with international standards and practices adopted at the International Labour Organiza - tion (ILO). However, most notably it shall also introduce novel provisions to further protect the interests of shipping financiers, including the possibility to better register mortgages over ships under construction and the inclusion of a new security interest under Maltese law – that of the finance lessor. Maltese law currently provides a high degree of protection to mortgages registered over Malta- flagged vessels. In particular, the mortgage is deemed to be an executive title akin to a judg - ment; therefore, upon giving the mortgagor a notice of default, the mortgagee can render its mortgage enforceable without the need for any judicial proceedings. The mortgagee must sim - ply notify the mortgagor by means of an official letter served through the court process, calling upon the debtor to pay all outstanding dues within two days from service. If the debtor fails to effect payment, the vessel may be sold by judi - cial sale. Moreover, the mortgagee is afforded several self-help remedies, such as the right to take possession of the vessel and to sell it pri - vately (though in such cases, the transfer does not give the new purchaser clean title as in the case of a judicial sale). There has been an exponential increase in ship sale and leaseback transactions involving Mal - ta-flagged vessels, as these have become an increasingly prevalent mode of ship financing. The basic structure of the sale and leaseback
transaction involves an existing vessel-owner selling the vessel it owns to a third party (leas - ing house), which then leases it back pursu - ant to a bareboat charterparty agreement. The agreement will generally provide for an option or obligation to purchase the leased vessel at the end of the lease period; and in certain instances, the agreement may also cater for early buyback options. In recent years, several amendments to Mal - tese law have already been enacted to better protect the interests of finance lessors. When enacted, the Merchant Shipping (Amendment) Bill will further protect the finance lessor’s rights by allowing it to register a security interest over the respective vessel. The authors expect that this new law will be enacted later in 2025, and it is expected to gen - erate significant interest from finance lessors looking for a flag jurisdiction which serves to best protect their interests in a ship lease finance transaction. Malta Incentivises Using the Island as a Hub for Yacht Charters From a fiscal perspective, the most notable local development in the realm of superyachts is undoubtedly the introduction of a special 12% VAT rate on charters commencing in Malta. This was introduced by the Malta tax authori - ties by virtue of Legal Notice 231 of 2023, titled the Value Added Tax Act (Amendment of Eight Schedule) Regulations, 2023, with effect from 1 January 2024. Subject to a number of con - ditions, charters will be able to benefit from a special 12% rate that is therefore lower than the standard 18% Malta VAT rate. These were also followed by the publication of a Port Notice by Transport Malta, which clarifies
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