Updated Guidelines on Treatment of Aircraft Leasing


The European Union’s regulations allow for member states to introduce measures that prevent double taxation, non-taxation as well as the distortion of competition. This can be done by determining the percentage of time spent when a specific service is being used in the Community and outside the Community.

The Maltese guidelines issued in October 2012 adopt a set of criteria in order to determine this percentage and Malta adopted these with regards to the leasing of aircraft and yachts.

The treatment of the lease in terms of the Aircraft Leasing Regulations have different effective VAT rates and this is based and determined on the current Malta standard rate of 18% and  are applicable to different kilometre ranges. VAT is only charged on the time frame within which an aircraft is considered as being used within the Community. The new guidelines aim to simplify the computation of the effective VAT rate charged on long-term leasing of business aircraft for non-business customers.

As per the new guidelines adopted last April, which were published by the Malta VAT Office, only one criterion remains relevant to determining the percentage of time that a relevant service is used within the Community – the range in kilometres.

In addition to the new guidelines, certain conditions will affect VAT treatment. These would be the following:

  • The lease agreement is not to exceed 60 months and is to be paid in monthly instalments;
  • The lease agreement shall be made between a lessor and a lessee who are both based in Malta. The lessee should not be able to claim input tax with regards to the lease;
  • The Commissioner for Revenue must pre-approve the lease in writing as certain other conditions brought forward by the Commissioner can be imposed on the lease.