Making Waves: The Advantages of EU Resident Seafarers Paying National Insurance in Malta
Contributed by Mifsud & Mifsud Advocates
14 November, 2019
Malta is renowned for her exciting and impressive maritime heritage. Undoubtedly, the historical charm of this little island, attracts the admiration of millions of tourists each year - however, does Malta really have anything more to offer to the maritime world a nice legacy? The short answer is - absolutely.
The accession of Malta into European Union in 2004 marked a swift establishment of the nation as a reliable jurisdiction that could offer and enforce an effective and well-regulated legal framework. Accompanied by a talented pool of professionals with the determination and diligence to get the job done, Malta is truly a force to be reckoned with. Modern day Malta carries its proud maritime inheritance in her stride and boasts one of the leading Ship Registries in the world. Malta's industrial maritime success correlates to a well-balanced structure of legal services and fiscal incentives, coupled with the Government's desire to promote the industry by providing attractive benefits to ship owners. Today the Maltese ship registry includes all types of ships from oil rigs to pleasure yachts and passenger cruise ships amongst others thanks the liberal nature of the Registry which has limited restrictions.
Maltese employment law offers an array of work, occupational and health and safety regulations to ensure good working relationships amongst all employers and employees. As well as the European Union regulatory framework, the employment sector in Malta is also regulated by the Employment and Industrial Relations Act, the Employment Commission Act and the Employment and Training Services Act. These guarantee an appropriate and adequate working environment, in which employment contracts act in favour of the employees rather than placing them in a vulnerable position. Employees under the Maltese flag can be confident that safeguards such as to their rights to leave, gender equality and minimum wage are protected by law and will be actively enforced. Both employers and employees alike can be confident in the fact that non-adherence to these policies would give rise to detrimental implications but also a serious risk of legal liability and reputational damages to the firm in question.
Great Yachts, Great Responsibility
It goes without saying that if you are the owner or captain of a great yacht, you also possess a great responsibility for the welfare of your crew members. A key component of the Maritime Labour Convention 2006 is that all seafarer employees will be subject to periodic inspections to ensure compliance. Accordingly, it is imperative that the employment of crew takes place in a manner that is fully MLC compliant and in line with legal requirements.
Regarding registration for Social Security in an EU/EEA State, EU regulation - EC/883/2004 - commands the social security contributions for mariners employed on EU flagged yachts, requiring that seafarers who are residents of the EU/EEA/Switzerland whatever their citizenship, working on an EU/EEA/Swiss flag ship must be affiliated for social security in the flag state.
*The only exception lies in the case where employer and employee reside in the same Member State; the seafarer must be affiliated in that State for social security.
This regulation basically lays down common rules to protect social security rights. It covers the traditional branches of social security that you would expect such as sickness, maternity and paternity, old age pensions, pre-retirements, invalidity pensions, survivors' benefits and death grants, unemployment, family benefits, accidents at work and occupational illness.
It is worth noting that crewmembers who are neither residents nor citizens of the EU/EEA/Switzerland, (citizens residing in a third country) - working under the Maltese flag, must be insured according to the law of their country of residence. Therefore, the citizenship of a crewmember does not matter. What matters is the place of residence of the crewmember. For example, if a crewmember resides in the EU/EEA/Switzerland, and the employer is registered in a different Country, then the crewmember must be registered with social security in Malta if employment takes place on a Maltese flag ship.
Persons insured in Malta may benefit from a European Health Insurance Card (EHIC) and from an S1 form if they reside in an EU Member State other than Malta (on presentation of the salary slips showing the contributions); they can also obtain the U1 form in order to claim unemployment benefits in their country of residence.
This legislation is applicable for those who move within the EU as well as Iceland, Liechtenstein, Norway and Switzerland. Take note that is it each individual EU country that decides themselves the aspects of how social security funds are allocated - such as the eligibility conditions in order to qualify as a beneficiary - this legislation does not replace national systems with a single European system.
Who are MMPS Ltd?
"We handle all the financial headaches so you can focus on sailing"
Based in Valletta, MMPS have been providing cost-effective crew employment and payroll services since 2017. In order to address crew employment issues, we have implemented the most practical and cost-effective solution, now used by several of the world most prestigious sailing yachts, both private and commercial that fly the Malta Flag.
At MMPS we pride ourselves in delivering:
1) Cost effective settlement of EU social security.
2) Attractive all-inclusive set up and administration fee.
3) Crew contracts of employment are fully compliant with maritime employment legislation.
4) Timely and efficient payment of salaries.
5) Efficient administration carried out by our experienced and professional team who are available 24/7.
We provide our clients with legal advice on several employment law issues compliant with the EU regulation EC/883/2004. This is including advice on the drafting of employment contracts or engagement letters, drafting the appropriate policies to be enforced by employers including policies relating to data protection, human resources and health and safety. We also offer support for the interpretation of contractual terms and conditions; Advice relating to employment conditions including wages and salaries, promotions and benefits, working hours, sick leave, maternity and paternity leave and redundancy.
Registering Crew Members in Malta
At MMPS we register crew members in Malta. Our team will compose each crew member a tailored, individual Seafarer Employment Agreement (SEA) and cover any SEA addendums that may arise if needed with the double advantage of being Maritime Labour Convention (MLC 2006) & EU/Maltese law compliant. Upon creation of the SEA, we would be in a position to register the employer (i.e. the person, company or individual, who pays the salaries), with Inland Revenue Department (IRD) for an income tax number (on an inactive status) and apply for a PE (permission to employ) number with a start date according to the SEAs. In addition, we can affiliate the crewmembers with Maltese social security - if this is not already the case.
Affiliation with Maltese Social Security allows us to obtain, on the employee's behalf, their Social Security number and Income Tax number - in order to carry out the monthly declaration (returns). As your local representative in Malta, we will ensure that A1 forms, S1 forms, U1 forms (when applicable), European Health Insurance Cards (EHIC), are issued by Malta, and that social security contributions - together with the initial FS4 forms, the monthly FS5 forms and the yearly FS7 forms are duly filed with the Maltese Inland Revenue Department (IRD). It may be worth consideration that our team can also proceed with annual income tax returns social security contributions which can be paid on a backdate to a maximum of 5 years.
It is an obligation, according to the Laws of Malta, for the employer to provide its employees with proper salary slips showing the social security contributions and to provide them with an FS3 every year or when employment is terminated. The FS3 is recognition of the fact that social security contributions are already being paid in Malta as is compulsory according to EU Regulation EC/883/2004.
All Hands On Deck
A practical example of the everyday legal issues we resolve is how, in order to justify the payment of social security contributions in Malta, we are told that the country 'X' authorities are requesting the production of an FS3 form. Failing that, crewmember 'Y' must pay social security contributions in country 'X'. This amounts to financial prejudice against crewmember 'Y'. Our team at MMPS take proceedings with the Maltese Administration in order to rectify the issue. Payroll and crew services under the terms of Maltese obligations is something we do day-in day-out at MMPS and we are confident in dealing with the full range of social security matters and employment issues in Malta.
MMPS can further offer advice in relation to employee registration and employee-data retention; including the assistance of non-EU nationals wishing to work in Malta to apply for work permits and VISA compliance for residency purposes related to their work in Malta. Our team would then be able to provide payroll services, i.e. collecting social security contributions (SSC's), preparing and filling SSC forms, monthly and annually, carrying out SSC payments (only following prior collection from the employer), preparing and issuing salary slips, and also, if requested organising salary payments to the employees.
Social Security - Crunch Time
Social Security Contributions in Malta are calculated based on a percentage of the weekly salary up to a certain threshold (EUR 455.79); if the weekly salary is over that threshold, a fixed sum is upheld. Roughly speaking, social security contributions amount to a total of around EUR 400 per month. The approximate EUR 400 figure comes from the following: there is a EUR 455.79 weekly salary threshold after which the contributions for SSC are capped as follows: the weekly SSC is now: EUR 45.58 each (Total EUR 91.16) and the Maternity fund contribution is EUR 1.37. So, whatever the salary, if it is over EUR 455.79 weekly, the SSC are capped to a total of EUR 92.53 per week. The number of weeks per month is calculated based on the number of Mondays in a month (4 or 5).
Register a Vessel in Malta
In terms of registering a vessel in Malta, our parent company, Mifsud & Mifsud is extremely capable in assisting clients in all the stages of registration. The team at Mifsud & Mifsud will continue to be available to assist in all matters subsequent to registration and can also offer advisory services in all areas related to ship registration including leasing regimes and taxation structures. Our lawyers have vast experience in the field of ship registration under the Maltese flag as well as with registering ships owned by companies that are managed or administered in Malta. Mifsud & Mifsud can guarantee the effective formation of a Maltese company in a timely and diligent manner.
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