A Snapshot of the Salient Features of the Malta Commercial Yacht Code

What constitutes a commercial yacht?

A yacht qualifies as a “commercial” yacht when it is more than 15 metres in length and does not carry cargo or passengers exceeding 12 in number. Moreover, a commercial yacht is operated by its owner (whether an individual or corporate entity) for commercial activities, such as, chartering to third parties.

Why register a commercial yacht in Malta?

Simply put, yachts registered under the Malta flag for commercial (rather than pleasure) use, benefit from the tonnage tax regime which, prior to the launch of the Commercial Yacht Code in 2006, could be availed of only by vessels weighing-in at over 1,000 net tonnes which were engaged in the carriage of goods or passengers and which would, as such, qualify as an “exempted vessel”. This essentially means that owners of commercially operated yachts are exempt from having to pay income tax on the profits generated by the use of the yacht and,in lieu, settle an annual tonnage tax which is a fee calculated on the basis of the tonnage of the yacht.

owners of commercially operated yachts are exempt from having to pay income tax on the profits generated by the use of the yacht and, in lieu, settle an annual tonnage tax

Surveys and Certification

Prior to registering a yacht commercially under the Malta flag, it must necessarily undergo a survey by a government appointed surveyor (or a Recognised Organisation) whose task would be to draw up a record of compliance with the appropriate standards set out in the Commercial Yacht Code. Such standards relate to, inter alia, rigging on sailing yachts, machinery, electronic installation, stability, life-saving equipment, fire-safetyequipment, accommodation, protection of personnel, radio installation and marine pollution prevention. Any ‘grey areas’ are discussed between the surveyor and the Merchant Shipping Directorate in order for the desirable standards to be achieved. As soon as these standards have been recorded by the surveyor, to the satisfaction of the Merchant Shipping Directorate, a Certificate of Compliance is issued enabling the yacht to operate commercially.

In order to ensure that these standards are maintained for the duration of the yacht’s operations, surveys must be carried out on an annual basis. With a view to making this procedure less cumbersome, the Commercial Yacht Code grants the option for the annual survey of yachts below 24 metres to be carried out by the crew (usually the master of the yacht). However, yachts over 24 metres must necessarily be surveyed by a government appointed surveyor or a Recognised Organisation authorised to issue statutory certificates on behalf of the Government of Malta, such as Amercian Bureau of Shipping (ABS), Bureau Veritas (BV), Det Norske Veritas (DNV), Germanischer Lloyd (GL), Lloyd’s Register (LR) and RegistroItalianoNavale (RINA).

Manning Requirements

A Minimum Safe Manning Certificate is issued in respect of commercial yachts which are more than 24 metres in length. In this regard, Malta has its advantages in that essentially no restrictions are imposed on the nationality of crew and it recognises training and certificates from most training establishments and countries.

When determining the minimum manning levels on board, the following factors will be taken in consideration:

1. Gross tonnage;
2. Main propulsion machinery power installed on board;
3. Length and nature of voyages with passengers on board;
4. Frequency of Port Calls;
5. Nature of areas of operation including the environmental conditions and time of year;
6. Size, age, type of yacht, type of rig (in case of sailing yachts), equipment, automation and layout;
7. Type of construction and type of equipment on board;
8. STCW requirements;
9. Yacht’s operational requirements and the minimum number of crew required to maintaina safe operational level for the crew and to handle emergency situations and muster anddisembark the passengers;
10. Maintain a safe engineering watch and operate the ship’s machinery in a safe manner.

It is noteworthy that during lay up or wintering periods of yachts operating at sea, the number of crew may be reduced as long as the number of crew on board during these periods is adequate to handle any emergencies. Furthermore, the number of crew required on board is to be to the satisfaction of local port Authorities or marinas rules and regulations and must satisfy the requirements of the yacht’s insurance requirements and conditions.

Crew Certification

As a minimum on yachts less than 24 metres in hull:

• the Master should hold an approved Basic Sea Survival Certificate;
• one crew member should hold an approved Fire Fighting Certificate.

As a minimum on yachts more than 24 metres in length but below 500 GT:

• the Master should hold an approved Basic Sea Survival course Certificate and a Fire Fighting course Certificate;
• one crew member should hold an approved Basic Sea Survival course Certificate;
• one crew member should hold an approved Fire Fighting course Certificate.

As a minimum on yachts over 500 GT and above but less than 3000 GT:

• all officers are to hold an approved Basic Sea Survival course Certificate;
• the Master should hold an approved First Aid at Sea course Certificate and Fire Fightingcourse Certificate;
• one crew member is to hold an approved First Aid at Sea course Certificate;
• A minimum of four crew members are to hold an approved Fire Fighting course Certificate.

Advantages for Maltese Yacht-Owning Companies

The various standards incumbent upon commercial yacht operators in virtue of the Commercial Yacht Code may, a prima facie, appear somewhat overwhelming. However, in practice, the guidance provided by the Code itself, coupled with the technical expertise afforded by the surveyors and step-by-step assistance provided by the Maltese administration, do make the procedure less cumbersome.

the resources required in order to comply with the required standards, is justified by the advantages of operating a commercial yacht, especially if the said yacht is owned by a company registered in Malta

Accordingly, the widely-held view among industry players and practitioners alike, is that the resources required in order to comply with the required standards, is justified by the advantages of operating a commercial yacht, especially if the said yacht is owned by a company registered in Malta, chief among which are (i) the exemption from payment of VAT both on the purchase of the yacht as well as on chartering activities, provided that the said yacht is used for navigation on the high seas and carries passengers for reward or is used for commercial purposes; and (ii) the exemption from the payment of income tax on profits generated by the operations of the commercial yacht.

This Article was first published on The Times of Malta, 2014.