AVIATION IN MALTA

Following recent regulatory developments, Malta’s aviation sector has experienced substantial growth over the past decade. Thanks to the Maltese government’s implementation of forward-looking strategies, including favourable legislation and fiscal incentives, Malta has positioned itself as a leading aviation hub, attracting major international players to establish a presence on the island. Today, the Maltese aircraft register boasts over 900 aircraft, over 50 Air Operator Certificate (AOC) holders. This expansion of the aviation sector has been driven in large part by the Malta Aircraft Registration Act, alongside Malta’s adoption of the Cape Town Convention on International Interests in Mobile Equipment and the Aircraft Protocol. These legal instruments, rooted in commercial law, have laid a strong foundation for growth and are key developments that continue to be highly regarded by aviation financiers and stakeholders. Complementing this are Malta’s well-established Maintenance, Repair and Overhaul (MRO) services, reputable flight training organisations, and a growing presence of aviation software developers and Unmanned Aerial Vehicle (UAV) initiatives, all contributing to a comprehensive and attractive aviation ecosystem. Malta’s strategic location, EU membership, and a highly skilled, English-speaking professional workforce—including experts in law, accounting, VAT, and audit—further enhance its appeal to aviation stakeholders by providing a well-rounded, business-friendly environment tailored to the industry’s needs. A Robust Aircraft Registration Act The Malta Aircraft Registration Act established a framework to simplify the registration of aircraft while creating a creditor-friendly legal environment under Malta law. This law enables aircraft owners to grant mortgages, register international interests over aircraft and engines (which take precedence over mortgages registered in Malta), and file Irrevocable De-Registration and Export Request Authorisations (IDERAs). It also allows the registration of owner and lessor interests in the National Aircraft Register. The ARA incorporates the provisions of 'Alternative A' to the Cape Town Convention. Key features of the ARA include: the recognition of fractional ownership interests in aircraft; the ability to register commercial aircraft, private aircraft, aircraft under construction, or aircraft temporarily not in operation or management; and public visibility of parties holding rights and interests in aircraft upon request. Tax Benefits Tax incentives are available to both businesses and individuals. Besides the effective corporate tax rate of 5%, all aircraft components can be depreciated for tax purposes over a fast-tracked period of four years. There is no withholding tax on dividends, interest, royalties, or lease payments, regardless of the lessor’s country of residence. A special source rule treats income from international air transport as originating outside Malta, allowing specific entities to avoid taxation on this income. On the personal side, a reduced 15% tax rate applies to certain individuals working in the aviation sector. Corporate Structuring Possibility to structure SPVs through limited liability companies or Aviation Cell Companies which allow the possibility to place ownership of aircraft, engines, airframes or other interests under the ownership of a cell. Although cells do not have a separate legal personality, their patrimony is separate and distinct from that of the company and other cells. This gives flexibility in the structuring process based on the shareholders' governance and financing intentions, which is particularly relevant under transport law.

Our Aviation Desk, part of a reputable Malta Law Firm, offers comprehensive legal support in all aspects of aircraft registration in Malta. We also assist clients with Air Operator Certificate and Operating Licence applications submitted to the Civil Aviation Directorate, ensuring compliance with Malta Law. Malta’s National Aircraft Register serves as an Operator Register, enabling aircraft registration under the Aircraft Registration Act. Moreover, Malta is a signatory to the Cape Town Convention on International Interests in Mobile Equipment and its Aircraft Protocol, which provides solid legal protections for international financiers and lessors. The benefits of the Malta Register include: recognition of fractional ownership interests in aircraft; registration of commercial aircraft, private aircraft, and those under construction or temporarily not operated or managed; registration of Irrevocable De-Registration and Export Power of Attorney; and an extensive tax treaty network with over 70 jurisdictions. Additionally, there is no withholding tax on lease payments when the lessor is not a tax resident of Malta, along with competitive direct and indirect tax opportunities for aircraft leasing structures, such as tax depreciation and partial shareholder tax refunds. The register also ensures full visibility of persons holding rights and interests in an aircraft and provides an exemption from Fringe Benefits Rules for the private use of aircraft, subject to certain conditions, alongside competitive Social Security rates. This aligns with our expertise in Transport Law, making us a trusted partner in navigating the complexities of commercial aviation.

Our Malta law firm specializes in the registration of both pleasure and commercial aircrafts, ensuring compliance with commercial law. We assist in establishing and enforcing security interests over Malta registered aircraft, handling AOC applications, and managing customs importation. Additionally, we provide guidance with sale and purchase transactions, VAT regularisation, and the transfer of ownership, deletion, and re-flagging of aircrafts. Our team liaises with Maltese authorities, including Transport Malta, to facilitate registration paperwork, approvals, and licenses. We also ensure adherence to international conventions and regulatory requirements while expertly drafting and reviewing contracts related to sale/purchase and leasing, all under the umbrella of transport law.