The presence of global names in the Maltese aircraft maintenance industry provide the necessary assurance to potential investors that Malta is well geared for servicing this sector and offers an attractive incentives package to foreign investors wishing to set up in this industry.

Witnessed growth in the Aircraft Maintenance Industry

Lufthansa Technik Malta, founded in 2003 as a joint venture between Lufthansa Technik AG and Air Malta plc, today employs close to 500 employees and has 150 trainees (out of a private sector employment pool of about 110,000) offering a wide range of aircraft maintenance, repair and overhaul (MRO) services to a global customer list.

The 61,000 square meter facility made available to this joint venture and equipped with the latest state-of-the art technologies, sits on the perimeter of the Malta International Airport. It can accommodate two wide-bodied aircraft and three narrow-bodied aircraft simultaneously. It is currently performing base and heavy maintenance on various models such as the Airbus A330, Airbus A340, Airbus A320 & the Boeing 737 (CL & NG).

More recently another leading global aircraft maintenance service provider concluded an agreement to establish a similar facility in Malta. Commencing its operations in 2010, Swiss firm SR Technics now offers a variety of maintenance services on Airbus A320 aircrafts from its current facilities and attracted Easyjet as their first base load cornerstone customer in Malta. With the completion of the construction of a four-bay hangar in early 2012 it is expected that its capabilities will expand to offer base and heavy maintenance to Boeing 737 Aircraft.

EU approved tax system and Incentives

Incentives

In terms of domestic legislation, various incentives of a fiscal and non fiscal-nature may be granted to companies operating in Malta. Such incentives include inter alia soft loans, interest rate subsidy, or loan guarantees.

Companies established in Malta which are engaged in aircraft maintenance are also entitled to investment tax credits which are calculated as a percentage (30%, 40% or 50% in case of large, medium-sized or small companies respectively) of:

  • The amount invested in qualifying tangible and intangible expenditure; or
  • The wage cost for jobs created.

which are deducted from the tax charge.

Unutilised tax credits are carried forward to be deducted from the tax payable in future years.

Training Incentives - unique opportunities to invest in human resources

The Training Aid Framework, which is managed by the Employment and Training Corporation (ETC), is co-financed through the European Social Fund and provides a unique opportunity where Malta based companies can invest in their human resources. Through this scheme, the ETC gives financial assistance to those companies that invest in the training of their workforce. It is available for companies in the private sector and the subsidy will vary according to the type of training and the size of the enterprise up to a maximum of €250,000 per calendar year.

Tax refunds

Through the operation of the tax refund system, Malta offers the lowest effective tax in the European Union. Malta operates a full imputation system that eliminates the economic double taxation of company profits. Maltese resident companies are subject to tax in Malta at the corporate tax rate of 35%, however, upon the distribution of dividends the shareholders are entitled to refund of the Malta tax charge (generally 6/7ths of 35% = 30%).

The combination of the tax incentives together with the tax refund system will generally result in effective tax of between 0% to a maximum of 5%.

Tax Incentives coupled with tax refunds

Malta has no net worth tax or similar taxes on capital.

No controlled foreign company (CFC) legislation.

No thin capitalization legislation.

There is no transfer pricing legislation in Malta.

No withholding taxes on interest, royalties, dividends and proceeds from liquidation.

English is the business language and all documentation is in English; UK based Company Law.

Share capital, financials, tax returns, tax payments and tax refunds can be made in any convertible currency - usually the accounting / functional currency.

Participation exemption: Dividends and gains derived from qualifying participations are exempt.

63 signed Double Taxation Agreements.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.