The yachting industry has been an ever growing industry in Malta for these past years. The first quarter of 2019 has seen the publication of the new Guidelines issued by the Commissioner for Revenue in relation to the place of supply of the leasing of pleasure yachts and the overall VAT incurred on the leasing of such yacht which may be reduced substantially depending on the use and enjoyment of the yacht when a yacht is supplied by a Lessor to a Lessee in Malta. The new Guidelines, although still based on Article 59A of the VAT Directive, establish the manner in which the use and enjoyment of such leased pleasure yachts is to be treated for VAT purposes.
VAT Treatment of Pleasure Yachts in Malta
Article 59A of the VAT Directive allows Member States to tax the use and enjoyment of services, which would therefore include the lease of a pleasure yacht, for the time that the service is effectively used and enjoyed within European territorial waters.
In terms of the 2019 Guidelines, on a lease of a pleasure yacht taking place in Malta, Maltese VAT will be charged on the portion of the lease covering effective use and enjoyment of the pleasure yacht within EU territorial waters. No VAT will be chargeable on the portion of the lease which covers the use and enjoyment of the pleasure yacht within non-EU territorial waters or international waters.
It is important to note that during the lease period, the Lessor must maintain adequate records, including documentary evidence and technological data, to determine the actual effective use and enjoyment of the pleasure yacht by the Lessee within and outside EU territorial waters.
In order to benefit from the 2019 Guidelines, such Guidelines must be applied within the context of setting up of operating leases.
The 2019 Guidelines, issued by the Commissioner for Revenue, provides the Commissioner with the discretion to approve that the Lessor applies Value Added Tax only on the portion of the lease which covers the effective use and enjoyment of the pleasure yacht within EU territorial waters. The 2019 Guidelines may be accessed through the Commissioner for Revenue website.
