A hub for international commerce and travel throughout history, and arguably the most important strategic aviation base in WWII, Malta is no stranger to the world of flight. Right in the middle of the Mediterranean Sea, serving as a crossroad between Europe, the Middle East and North Africa, Malta’s potential in the aviation sector, however, goes far beyond its location. With a booming economy and the establishment of a sound legal and fiscal system, Malta is considered the natural choice for established aviation experts and start-ups alike.
The Challenges Ahead: Malta - Brexit Relations
The ripple effect of Brexit is likely to hit the aviation industry, with approximately 35 million people travelling between the EU and the UK each year. If no agreement is reached, UK-based airlines would lose the right to roam freely within the European Union. This will result in the loss of access to 44 countries, which amount to 85% of international traffic from Britain. Commercial airlines, MROs, and other related industry service providers are relocating to other EU Member states in order to continue enjoying the full rights of EU membership, including free circulation of flight, people, goods and capital within the union.
The advent of cheap short-haul flights across Europe in the early 1990s, revolutionised both the way people travel as well as the airline industry itself. It owes a large part of its success to the liberalisation of air transport across the EU and the single aviation market, or European Common Aviation Area (ECAA). This created a number of ‘freedoms’ for EU registered airlines which have allowed them to have a base in one Member State and operate on a ‘cabotage’ basis across other Member States.
Aviation in Malta - Brexit changes
Maltese legislators have constantly strived to foster an environment that offers stability and economic prosperity. Malta’s Aircraft Registration Act removes unnecessary red tape and regulatory burdens. The law allows for the registration of aircrafts under construction and recognises fractional ownership, while providing increased protection for secured creditors involved in aircraft financing. The Act also implements the provisions from all major conventions in the aviation industry, such as the Cape Town Convention. Basing operations in Malta brings about various benefits, inter alia;
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Participation in numerous international aviation agreements as well as conventions, including the Chicago Convention;
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Mutual recognition of the Air Operator’s Certificate (AOC), flight crew licenses and engineer’s licenses;
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Reputable Flag EASA certified state with FAA Category 1 rating;
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Part of the Open Skies Agreement;
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Adequate laws assisting parties to seek remedies in various forms including mortgages;
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Equipped with state-of-the-art infrastructure and facilities for MROs and OEMs;
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Competitive tax system and access to over 70 double taxation treaties worldwide.
Moreover, Malta’s strategic location can be of great importance to ensure keeping costs low in a time-sensitive industry. With an international airport connected to most European and regional cities, a CMA-CGM operated freeport which is the 3rd largest in the Mediterranean, and a natural deep-water harbour, the Maltese islands are very accessible. Also, fast, efficient and regular mail and courier services to and from EU major cities, as well as important industrial and financial centres elsewhere, are essential for Malta’s commercial interest.
In addition to the current aviation environment which Malta offers, Malta strives further to continue expanding its facilities and services, to additionally cater for such industries. An example of this is the Research and Innovation Strategy for Malta 2020 Plan issued by The Malta Council for Science and Technology (MCST). This strategy document includes thematic areas identified through the Smart Specialisation process which is at the core of the EU’s Horizon 2020 strategy. The strategy identifies eight (8) thematic areas of Smart Specialisation, with research and innovation in Aviation and Aerospace, as well as Tourism, ranking highest.
The Maltese Government, through the Ministry responsible for Aviation, has already manifestly demonstrated its commitment to Aerospace research and innovation through the setting up of a National Aerospace Centre. This initiative will further enhance the opportunity to attract foreign direct investment in the aerospace manufacturing and components industry.
The British Connection
Malta enjoyed British rule as a Crown colony for almost 200 years until 1964 when Malta achieved independence. It then became a Commonwealth member, however much British influence is still prevalent till today in business, laws and education. Malta is a bi-lingual country with Maltese and English both official languages. Therefore, all laws are drafted in both languages.
Further legacy of British rule is found woven within the Maltese legal system. A number of Maltese acts and laws are modelled on the UK equivalent, including our financing and mortgaging system.
Planning Ahead: Malta-Brexit and the UK Aviation Industry
With a few weeks to go, the British Government is failing to agree with the current Brexit deal on offer. Prospects of a ‘soft-Brexit’ are becoming unlikely, therefore it is a ripe time to consider the effects of a ‘hard-Brexit’. For an ever-evolving industry, which redefines boundaries and is at the forefront of globalisation, it is vital to have stability and certainty on the horizon.
Malta is proving to be the natural option for businesses which are currently based in the UK. A substantial number of well-established aviation companies are basing their operations from Malta.
Our Aviation Team
Furthermore, Chetcuti Cauchi specialises in the use of Malta companies in local and international aircraft ownership and management structures for the purpose of VAT and tax planning maximisation. Our Aviation Team’s work includes high profile matters, such as corporate structuring and tax planning. The services offered by our Aviation Team are complemented by services from our tax advisers and accountants, who provide corporate structuring and tax planning
Chetcuti Cauchi Advocates has set up webinar recordings to guide businesses on how to cope with new rules and policies resulting from a post-Brexit enviroment.