Paradise Papers firm Appleby had considered setting up a branch in Malta, a country it viewed as a “modified offshore specialist”, leaked documents show.
Appleby, a legal firm which operates in offshore jurisdictions, met up with Malta Financial Services Authority chairman Joe Bannister as well as numerous local law firms to discuss the move.
A 2012 study about Malta drawn up by Appleby identified the island’s tax benefits for super yacht registration.
Malta’s corporate tax rebate system for foreign-owned companies also caught Appleby’s eye, as well as the possibility to hide company owners behind nominees.
The European Commission has set its sights on both Malta and the UK’s application of VAT rules on yacht and plane registration.
European Taxation Commissioner Pierre Moscovici said there was reason to believe the rules as applied by Malta and the Isle of Man were “suspect”.
Appleby acknowledged in its study that Malta was offering the most attractive tax planning opportunity for super yacht registration.
“The planning is around the charging of VAT and whilst other registers have tried to compete, if you are looking for your yacht to sail into European waters the Maltese solution is currently the most efficient and well recognised,” the Appleby document reads.
Prof. Bannister mentioned his ability to access the top echelons of power
The document quotes Prof. Bannister as saying he was aware of the need to ensure Malta did not gain the reputation of a place where it was easy to set up structures to avoid international standards and responsibilities for such things as money laundering and terrorist financing.
Just five years on from the 2012 study, Malta is facing those very suspicions after EU countries used the Panama Papers scandal to place a spotlight on the country’s tax regime, as well as question its willingness to combat dirty money flows.
The European Parliament is on Tuesday set to debate the rule of in Malta.
One of the concerns highlighted by MEPs is the low rate of money laundering convictions, as well as the “highly politicised” institutions charged with fighting financial crime.
According to the study, Prof. Bannister mentioned his ability to access the “top echelons” of power.
“Professor Bannister is particularly proud of the fact that he was able to speak to the top echelons, both in terms of civil servants and politicians, in the various EU countries and is well placed to ask them particularly if there were regulatory or policy-making issues that were causing them any concern,” the document says.
Prof. Bannister “positively encouraged” the offshore services to set up in Malta, preferably through a merger with a “non-family” law firm.
Apart from being Malta’s financial regulator chief, Prof. Bannister doubles up as deputy chairman of Finance Malta, an entity tasked with encouraging investment.
This dual role as both a promoter and regulator of the financial industry has been criticised by influential German MEP Sven Geigold.
The Paradise Papers also revealed Prof. Bannister’s links to a company based in the British Virgin Islands, which invested in a Russian mining venture suspected of siphoning off public funds.
The Paradise Papers were leaked to Süddeutsche Zeitung and shared with the ICIJ as well as its media partners across the globe, including The Sunday Times of Malta.
How to reduce your VAT burden on a €65 million yacht
Malta is a handy port of call if you want to significantly reduce your VAT burden on a multi-million euro yacht, leaked documents show.
In an e-mail about a €65 million yacht, local law firm Fenech & Fenech Advocates told the offshore services firm Appleby that the normal 18 per cent VAT rate could be reduced to just 5.4 per cent for a privately-owned yacht over 24 metres.
In the case of a commercial yacht, the owner would pay an annual tax calculated on the basis of the tonnage of the yacht and would not pay tax on the income derived from its operations.
Rate cards circulated to Appleby show how the VAT payment on a yacht varies according to its size.
Sailing boats between 20.1 metres and 24 metres pay an effective VAT rate of 7.2 per cent, while a sailing boat between 10.1 metres and 20 metres could have its VAT rate reduced to nine per cent.
The structure used involves the setting up of a Maltese company, which would then lease out the yacht to another company.
Fellow ICIJ partners from the Organised Crime and Corruption Reporting Project (OCCRP) found that former Ukrainian MP Anton Prygodskyy saved €3 million in taxes on a 37-metre luxury yacht through the use of Maltese companies.
The scheme involved Mr Prygodskyy leasing his own yacht to himself through the use of two Maltese companies.
The government was this week quick to defend Malta’s applications of these VAT rules.
A spokesman for the Prime Minister’s office pointed out that nothing had changed in the arrangement regarding Malta’s VAT treatment of leasing of large yachts, as reported to the European Commission back in 2009.
FAQ: The Paradise Papers
How does Malta feature in this leak?
The Paradise Papers leak is actually made up of multiple leaks. Data from Malta’s corporate registry forms part of it, along with data from 18 other registries around the world.
So how does Appleby come into it?
Apart from the registry data, the German newspaper Süddeutsche Zeitung received data from two corporate service providers, the Bermuda-based Appleby and Singapore-based Asiaciti Trust.
Did these two companies deal with Malta?
Yes, leaked e-mails show both companies had dealings with local law and accountancy firms.
How is this leak different from the Panama Papers?
Mossack Fonseca, the firm at the centre of last year’s Panama Papers leak, showed evidence of criminal behaviour.
Panama’s Attorney General accused the firm of acting like a “criminal organisation”, dedicated to hiding money from suspicious origins.
The leak exposed the secret dealings of the Prime Minister’s chief of staff Keith Schembri, and Tourism Minister Konrad Mizzi. Both men were found to have opened secret Panama companies sheltered by trusts in New Zealand.
In contrast, the Paradise Papers is much more nuanced. It has shown the great lengths the rich and famous will go to in order to reduce their tax bills.
The registry data passed on from Malta has revealed the country to be a popular destination for those seeking to reduce their tax bills, as well as the growing business links with countries like Azerbaijan.
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