Social Security in Yachting: An additional reason to opt for the Maltese Flag!

Malta has a centuries old Maritime tradition. The strategic location of the Maltese Islands at heart of the Mediterranean Sea, its natural harbours coupled with the maritime skills of its people have since time immemorial conspired with its history and millennial culture to transform this European sovereign state into an international maritime service centre.

Malta’s long tradition and consolidation as a maritime services provider has led to the establishment of the Maltese flag as a reputable flag of choice and quality. The advantages of the Maltese flag are far-encompassing and even extend to the issue relating to the social security insurability of seafarers, a consideration often overlooked by yacht owners and professionals alike.

The insurability of seafarers under the Maltese social security system is governed by (i) EU rules, which with regard to seafarers are found primarily in Article 11 (4) of Regulation (EC) No 883/2004 and (ii) the Maltese Social Security Act.

Article 11 (4) of Regulation (EC) No 883/2004 provides that an activity of a seafarer employed on board a vessel at sea flying the flag of a Member State is deemed to be an activity pursued in the said Member State, unless the seafarer is remunerated for such activity by an undertaking whose registered office or place of business is in another Member State where he or she resides, in which case the seafarer shall be subject to the legislation of the latter Member State. The underlying principle is therefore that liability to insure seafarers lies on the flag state (unless employed and remunerated by a registered office in the member state of residence). This legislation also extends to nationals of the EEA and Switzerland.

With regard to seafarers not covered by Regulation (EC) No 883/2004, such as in the case of third country nationals not legally residing in the EU, determination of social insurance is dealt with in accordance with domestic law. The Maltese social security legislation does not exempt Non-EU seafarers from paying social security contributions in Malta in the case of Maltese-flagged vessels/ships, yet requires that they should be legally residing in Malta and employed by a company registered in Malta.  Both requisites have to be satisfied, failing which seafarers would be entitled to opt for the social security system of their respective country of residence.

Subscribing to the Maltese social security system brings with it many advantages. Below are just a few:

Certainty – a basic tenet of the EU Regulation is that a person pursuing an employment activity in a Member State is subject to the legislation of a single Member State only. This is also evident in relation to the recent development brought about by the French Decree No 2017-307, which is set enter in force on 1 July 2017 and which necessitates that any crewmembers, irrespective of their nationality, residing in France in a stable and regular manner and working on board foreign vessels is to be affiliated to French seafarers social security body ENIM. For the purposes of that legislation, a crew member is considered residing in France if the crew member is French resident through his or her own establishment in France or if the vessel on which the crew member works, operates for more than 181 days in French waters in a calendar year. The French decree however is not effective in instances where EU legislation or an international social security agreement applies, consistent with the general principle governing social security affiliation between EU Member States.

Straightforward Process – subscribers to the Maltese social security scheme benefit from a straightforward and pay-as-you-go system. Social Security Contributions by Employed persons are referred to as Class 1 Contributions and are paid by direct deductions from the same employees’ wages or salary. In a normal case scenario, an equivalent rate paid or deducted from the employee’s wage or salary, is also paid by the employer. The Social Security Contribution rate due is based on earning derived from the Basic Weekly Wage which does not include allowances, bonuses, and/or overtime earned in a particular week.

Low Capping – under Maltese Law seafarers fall within the category of employed persons and are liable to pay Class 1 Social Security Contributions at the rates set out in Part I of the Tenth Schedule of the Social Security Act.  The contribution rates are capped, whereby in ordinary circumstances a seafarer is liable to pay an annual social security contribution of just under Eur 2,400. A similar obligation arises on the part of the employer.

Evidence of Affiliation – the Maltese authorities promptly issue an A1 form to certify that the Maltese social security legislation applies to the holder of the form. As a person is only subject to the legislation of one country at any one time, the A1 serves to confirm that the seafarer is affiliated to its system, and may not be subjected to the legislation of any other country he or she may be connected with. The A1 remains valid until the date of expiry, indicated at the form or until it is withdrawn by the issuing institution.

Part of an EU-wide setup – one of the founding principles within the EU is the right to freedom of movement enjoyed by workers, pensioners and their families.   As such the EU has regulations aimed at coordinating social security systems in all member states, not just Malta. These regulations therefore safeguard social security rights of EU citizens when moving from one member state to another, not by harmonizing social security systems, but by coordinating them.

 Access to Benefits – EU citizens moving from one member state to another do not lose any of their social security rights earned when staying in one member state. The benefits essentially comprise (i) Old Age (retirement) and Widows’ Benefits, (ii) Invalidity Benefits, (iii) Sickness Benefit, (iv) Industrial Injury Benefit, (v) Unemployment Benefits, and (vi) Child Benefits. EU rules require each member state to take into account the insurance history in other EU countries if this is necessary for one to meet the minimum number of years required to obtain access to a particular benefit.

The issue relating to the insurability of seafarers can no longer be overlooked, and yacht owners and professionals should be aware of the advantages conferred by the Maltese flag in that regard. The coordination of the various EU Member States’ social security systems, including that of Malta, provided by EU Regulations (EC) No. 883/2004 which came into force on the 1 May 2010, was arguably ineffective in attracting compliance. The imminent entry into force of the French Decree No 2017-307 as of the 1 July 2017 could however cascade an array of consequences and should serve as a forewarning for yacht owners to reconsider the social security obligations imposed upon them.

For further information contact Dr. John Bugeja, Advocate, on or by phone at (+356) 2540 7990.

Disclaimer: While every effort has been made to ensure the accuracy of the information contained herein, this article is not intended to impart advice; readers are advised to seek confirmation of statements made herein before acting or otherwise relying upon them; specialist advice should be sought on specific issues.