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Malta VAT Yacht Leasing
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.
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. In fact a methodology is to be used, as issued within the Guidelines, to arrive at the ratio of effective use and enjoyment within EU territorial 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.
General Conditions of Yacht Leasing in Malta
In order to benefit from the Yacht Leasing Guidelines the following conditions must be satisfied:
- Lessor must be a Malta shipping company established in Malta for VAT purposes and holding a Malta VAT number;
- The Lessee, must be a non-taxable person, that is, a person who does not lease the yacht for business purposes. The Lessee may be established outside of Malta;
- Lessor and lessee must enter into a long-term yacht leasing agreement, which agreement must be presented to the VAT Department for approval;
- Yacht must be placed at the disposal of the Lessee in Malta;
- Prior approval must be sought from the VAT Department in writing for the Lessor to apply Maltese VAT on the basis of effective use and enjoyment;
- Lessor must maintain adequate and appropriate records to demonstrate effective use and enjoyment of the yacht in and out of EU territorial waters
- The Lessor must firstly levy provisional VAT on the lease and thereafter use the adjusting mechanisms provided for the VAT charged to ultimately reflect the actual use of the yacht in EU territorial waters; and
- An annual declaration must be filed with the Commissioner for Revenue within the prescribed timeframe and VAT returns must be properly submitted.
Benefits of Yacht Leasing in Malta
There are various benefits when one sets up a yacht leasing structure in Malta, and these may be outlines as follows:
- Malta VAT will only be applicable solely on use of the yacht within EU territorial waters;
- The applicable VAT rate may go down as low as 8%, depending on the effective use and enjoyment of the yacht, which would thus mean that it is amongst the lowest VAT rates within EU Member States;
- Malta has adjustment mechanisms in place for VAT to be paid on actual use and enjoyment of the yacht within EU territorial waters; and
- The Guidelines issued on the subject matter reflect EU developments and practices.
We have used CSB Group's Yachting Services in Malta and we would like to highlight the team's professionalism and reliability throughout the registration process of our vessel. We were very pleased and very appreciative of the great availability of the staff to help us and answer our questions.
Tikiaora Inc Limited of Tikiaora | Stephanie Butikofer