The European Union and Malta: a detailed overview of Aviation Regulation

Aviation Regulation in the EU and Malta

Aviation is an industry that bridges continents and cultures, and its regulation demands a balance of safety, innovation, and international cooperation. 

The European Union, a global leader in aviation regulation, provides a harmonised framework to ensure the safety, efficiency, and environmental sustainability of air travel across its member states. Malta, an EU member, not only adheres to these standards but also enhances them with its own robust legal framework and business-friendly policies, making it a premier jurisdiction for aviation operations and aircraft registration.

This article analyses the legislative framework of the EU and Malta for aviation, providing insights into the major laws governing the sector and why Malta stands out as an aviation hub.

 

1. The European Union's Aviation Framework

The EU has developed a unified regulatory framework for aviation, led by the European Union Aviation Safety Agency (‘EASA’). EASA’s regulations are crafted to ensure a consistent approach to aviation safety and environmental standards, fostering mutual recognition and cooperation among EU member states.
 
  • The Underlying Framework – The Basic Regulation
The cornerstone of EU aviation law is Regulation (EU) 2018/1139) ‘the Basic Regulation’ which establishes the scope and authority of EASA. This regulation ensures that all aspects of civil aviation, from aircraft certification and maintenance to pilot licensing and drone operations, adhere to the highest safety standards by laying down the rigorous safety standards which aircraft need to meet before being allowed to operate. Rules relating to pilot licensing, such as harmonised training, certification, and medical requirements across the EU are also found within the Basic Regulation.

The Basic Regulation also integrates environmental considerations, imposing stringent standards to minimize noise and emissions from aircraft, and aligning aviation growth with sustainability goals. The Basic Regulation’s comprehensive scope provides a unified approach, ensuring seamless collaboration among member states and creating a level playing field for operators.

 
  • Regulating Air Operations – The Air Operations Regulation 
Complementing the Basic Regulation is Regulation (EU) No 965/2012 (the ‘Air Operations Regulation’), which establishes detailed requirements for both commercial and private aviation. In relation to Commercial Air Transport (‘CAT’), the Air Operations Regulation establishes standards for passenger and cargo operations, including crew training, maintenance protocols, and emergency procedures. On the other hand, it mandates a simplified version of the rules for non-commercial operations without compromising on the safety elements. The Air Operations Regulation also addresses specialized operations such as aerial firefighting, aerial photography and agricultural aviation, ensuring safety in these niche sectors. 

These regulations are enforced uniformly across the EU, facilitating mutual recognition of certifications and operational approvals.

 
  • The Single European Sky Initiative

Another pillar of the EU’s aviation framework is the Single European Sky (‘SES’) initiative. This program aims to optimize the use of European airspace by integrating fragmented air traffic management systems. By reducing flight delays and enabling more direct flight paths, SES improves safety, reduces fuel consumption and emissions, and lowers operational costs. It exemplifies the EU’s commitment to balancing safety and efficiency with environmental sustainability.
 
  • Occurrence Reporting 
Safety reporting is another critical component of EU aviation regulation, governed by Regulation (EU) 376/2014. This legislation mandates the reporting of incidents, near-misses, and accidents, fostering a proactive approach to risk management. By encouraging open communication under a “just culture” framework, the regulation protects reporters from punitive actions, ensuring a steady flow of data to improve safety standards across the industry.

 

2. Malta’s Aviation Framework 

Within this regulatory landscape, Malta has carved out a niche as a premier jurisdiction for aviation operations. Malta has aligned its legal framework with EU standards while introducing business-friendly policies to attract a wide array of aviation-related activities and additional measures that cater to the needs of aircraft operators, lessors, and financiers. 
 
  • Registration of aircraft and engines 
Central to Malta’s aviation sector is the Aircraft Registration Act (Chapter 503, LoM), which governs the registration of aircraft and engines. This legislation is remarkably flexible, allowing registration by owners, lessors, lessees, and financiers. It even permits the separate registration of aircraft engines, a feature that is particularly advantageous for leasing companies. 

 
  • Protected Cell Companies (PCCs) 
PCCs have become an invaluable tool in the aviation sector in Malta, providing a unique, versatile and efficient structure for managing risks and assets. A PCC operates as a single legal entity but is divided into distinct cells, each with its own assets, liabilities, and operations. This segregation ensures that the assets and liabilities of one cell are legally protected from those of other cells and the company’s core. In the aviation industry, PCCs are particularly beneficial for activities such as aircraft leasing - for example, a single PCC can house multiple cells, each dedicated to a specific aircraft or leasing arrangement, isolating financial risks and liabilities associated with each transaction. This structure provides significant cost savings by consolidating management and administrative functions while maintaining the legal and financial separation required for security and compliance.

 
  • Compliance with the Cape Town Convention 
Malta has consistently achieved high rankings in compliance with the Convention on International Interests in Mobile Equipment (commonly the "Cape Town Convention"). This influential international treaty establishes a unified legal framework designed to safeguard the rights of financiers and lessors of high-value mobile equipment, including aircraft, space assets, and railway stock. Through the Convention, Malta provides access to streamlined remedies in the event of default or insolvency, ensuring swift and predictable enforcement of creditors' rights. Additionally, the Convention enables the registration of international security interests in a centralized, globally recognized registry, enhancing transparency and reducing risks for stakeholders in aircraft financing and leasing. This alignment underscores Malta's commitment to fostering a secure and efficient legal environment for aviation transactions.
 
  • Civil Aviation Directorate 
Malta’s Civil Aviation Act (Chapter 232, LoM) further strengthens its regulatory framework. This act establishes the Malta Civil Aviation Directorate (‘CAD’) as the national aviation authority, responsible for certifying operators, monitoring compliance, and overseeing maintenance and training standards. The CAD is known for its efficient and collaborative approach, streamlining processes for obtaining air operator certificates (‘AOC’) and other regulatory approvals. 

 

3. Why register an aircraft in Malta?

Malta’s appeal as an aviation hub is multifaceted, rooted in its legal framework, geographic location, and economic incentives. Situated at the crossroads of Europe, Africa, and the Middle East, Malta offers unparalleled connectivity. Its central location makes it an ideal base for operators serving these regions.

Furthermore, as detailed above, Malta’s legislation allows flexibility in ownership of aircraft and establishes the use of PCCs as vehicles for such ownership. The legislation also fully aligns with EASA regulations, ensuring that aircraft registered in Malta can enjoy mutual recognition across the EU, thus streamlining operations for those with cross-border activities. Additionally, Malta’s adherence to the Cape Town Convention makes it easier for financiers to secure their investments.

Malta’s government actively supports aviation through efficient and streamlined regulatory processes, with the CAD being known for its efficient and cooperative approach, making it easier for businesses to navigate compliance requirements. This efficiency, coupled with Malta’s adherence to EU standards, makes Malta an ideal base for operators with cross-border activities. Malta has also embraced emerging aviation technologies, such as drones and green aviation, ensuring its framework remains future-ready.

Malta’s tax regime is particularly attractive for aviation businesses and offers a range of financial incentives, for example: 
  • VAT Exemptions: Revenue from the operations of aircraft used in international operations is exempt from VAT, reducing costs for operators;
  • Double Taxation Treaties: A vast network of treaties minimizes the risk of double taxation on income generated in Malta;
  • Flexible Leasing Structures: Tax-efficient frameworks for aircraft leasing enhance Malta’s appeal as a registration jurisdiction. 
VAT exemptions, favorable corporate tax rates, and access to double taxation treaties reduce operational costs and enhance profitability.  

Malta also boasts a highly skilled workforce specializing in aviation services. The country has developed expertise in maintenance, repair, and overhaul (‘MRO’), as well as in training and operational support, further cementing its status as a centre of excellence.
 

How BDO Can Help

BDO Malta offers a wide array of services tailored to the aviation sector, addressing the unique challenges of this dynamic industry with precision and expertise:
  • Aircraft Registration in Malta
We provide end-to-end support for aircraft registration in Malta, ensuring compliance with Maltese and EU laws, managing tax-efficient registration structures, and adhering to international conventions to protect stakeholders' interests.

 
  • Purchase and Sale of Aircraft
We offer advisory and transactional services to ensure seamless acquisitions and sales of aircraft. Our expertise includes negotiation, contract drafting, financing, and regulatory compliance, safeguarding the interests of buyers, sellers, and financiers alike.

 
  • Compliance with International Aviation Laws
We help businesses comply with international aviation laws, including EASA standards, while providing guidance on cross-border operations and maintaining international safety requirements.

 
  • Corporate Finance Advisory
We deliver strategic advice on fundraising options, supports the preparation of business plans and financial models, and executes fundraising transactions, aiding aviation businesses in securing necessary capital.

 
  • Aircraft Financing and Leasing Structures
We specialise in developing aircraft financing and leasing structures that are tax-efficient, designed to optimize financial operations, and aimed at reducing risks.

 
  • Accounting and Assurance Services
We offer specialised accounting and assurance services designed to meet the stringent financial reporting requirements of aviation businesses and ensuring compliance with international standards.

 
  • Tax Advisory
Our tax advisory services provide strategic tax planning and compliance, focusing on VAT exemptions, double taxation treaties, and the tax implications of leasing and owning aircraft.

 
  • Management of liability and passenger claims
We can assist operators and insurers in navigating claims arising from incidents, offering guidance on risk assessment, defence strategies, and settlement negotiations. When handling passenger claims, we can provide advice about passenger rights under international conventions and EU regulations when managing compensation disputes for delays, cancellations, or injuries.

 
  • Cybersecurity Risk Management
In today’s digitally connected environment, we offer cybersecurity risk management solutions to assess and mitigate cybersecurity threats, ensuring data security and operational resilience for aviation businesses.


BDO’s global network, combined with its specialised aviation knowledge, positions it as a trusted advisor for businesses in this fast-paced industry. From registering aircraft in Malta to navigating international compliance, BDO ensures every client receives tailored, high-quality solutions.
 
Conclusion
The EU’s harmonised aviation regulations provide a robust foundation for safe and efficient operations across member states, with Malta building upon this framework to offer unique advantages. Through its flexible registration options, strong legal protections, and attractive financial incentives, Malta has positioned itself as a prime jurisdiction for aviation businesses. Its commitment to aligning with EU standards while addressing the specific needs of the aviation industry ensures its continued relevance and success. As the aviation industry evolves, Malta’s proactive approach and strategic advantages will undoubtedly keep it at the forefront of global aviation. 

For businesses considering Malta as a base for aviation operations, consulting with legal and financial experts is essential to fully leverage the opportunities this jurisdiction provides. BDO is your trusted partner, offering expert guidance every step of the way. Contact us on legal@bdo.com.mt or fill in the contact form.

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