malta yacht vat

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Navigating malta’s beneficial vat treatment: a comprehensive guide for yacht owners – private and commercial use explained, publication.

22 November 2023

VAT Treatment for Private and Commercial use of Yachts in Malta

Malta has gained a high reputation in the shipping and yachting world, not only because of its geographical location but also because it offers attractive and competitive incentives, thereby making Malta one of the top flags in the world. Malta’s solid roots as a maritime location continue to enhance and expand the island’s footing in the maritime industry.

As well as creating a complete service offering for yachts; from shipyards to berthing facilities, to chandlers to maritime professionals, Malta offers ship and yacht owners several attractive solutions, including attractive VAT incentives for yacht and superyacht owners.

Reduced VAT Rate as from the Start of 2024

As from 1 st January 2024, short term charters commencing in, Malta have benefited from a reduced 12% VAT rate, subject to the fulfilment of certain criteria.

The Tax & Customs Administration’s has released new Guidelines, specifically tailored for the application of the 12% Value Added Tax (VAT) rate pertaining to the rental of pleasure yachts.

The Guidelines can be accessed by clicking this link .

VAT Treatment of Yachts Intended for Private Use

In March 2020, Malta published its guidelines establishing the means by which leased pleasure yachts are to be treated for VAT purposes, with a particular focus on the use and enjoyment provisions on yacht leasing supplies. The Guidelines issued on the subject matter reflect EU developments and practices.

With respect to operating leases, it is possible for a lessor/owner of a yacht to lease out their yacht to a lessee for a consideration, for a specified period of time. Through such a structure, VAT would be payable by the lessee on the monthly lease instalments, depending on the actual use and enjoyment.

In order to benefit from the said VAT treatment, the following conditions must be  satisfied:

• The lessor must be a Maltese entity, to be eligible for the Yacht leasing Scheme;
• There must be a yacht leasing agreement in place between the lessor and lessee setting out the conditions of the lease;
• The lessee must be a non-taxable person i.e., not using the yacht for commercial business purposes;
• The yacht must be placed at the disposal of the lessee in Malta;
• The lessor must maintain documentary and/or technological data to determine the actual use and enjoyment of the pleasure boat within and outside EU territorial waters;

This VAT treatment works depending on the ratio of use and enjoyment of the yacht in or outside EU territorial waters.

As a rule, full VAT payment at the rate of 18% is payable when the place of supply of the service is in Malta; however, in cases where the actual effective use and enjoyment of the pleasure yacht would be outside EU waters, there is an adjustment method that would apply.

The result will be that VAT would only be charged on the actual use and enjoyment of the yacht by the lessee in EU territorial waters. To this end, no VAT shall be due on the portion of the lease where the yacht is effectively used and enjoyed outside EU territorial waters.

Therefore, Malta VAT will be applicable solely on the use of the yacht within EU territorial waters; depending on the effective use and enjoyment of the yacht, possibly making it amongst the lowest VAT rates within the EU Member States.

Importantly, the VAT treatment options also provides an element of flexibility when it comes to exiting or terminating the lease. In the eventuality that at the end of the lease the lessor decides to contract the sale of the yacht in Malta, then VAT, at the prevailing standard rate, is charged on the value of the yacht upon subsequent sale.

In such a case should the Maltese VAT Department be satisfied that the necessary rules and regulations have been duly observed, a VAT Paid Certificate would be issued at their sole discretion.

VAT Treatment of Yachts intended for Commercial Use

Yachts intended for commercial use may opt for VAT deferment on the importation as follows:

• Obtaining a VAT deferment on the importation of the commercial yacht by a Maltese owning entity having a Maltese VAT registration; without needing to set up a bank guarantee (as historically required); or
• Obtaining a VAT deferment on the importation of the commercial yacht by an EU owning entity having a Maltese VAT registration, provided that the company duly appoints a VAT representative in Malta, without needing to set up a bank guarantee (as previously required); or
• Obtaining a VAT deferment on the importation of the commercial yacht by a non-EU owning entity, on provision by the importing entity, of a bank guarantee amounting to the VAT payable on 0.75% of the value of the yacht, capped at one million euros.

To opt for the first proposed VAT deferment structure, one would need to incorporate a company in Malta, and this company would need to obtain a valid Malta VAT identification number. In each instance, the importation of the commercial yacht will require the yacht to physically sail to Malta to undergo VAT and Customs procedures.

Following which, the yacht would be imported into the European Union, with the VAT payment deferred accordingly, rather than paid upon importation. In such a case, the yacht would be able to sail freely and circulate within EU waters.

Services Available from Dixcart Malta

At Dixcart Malta we have a dedicated team of professionals dealing with yachting matters including, but not limited to; yacht importation, flag registration, resident agent services, crew payroll. We are also able to assist with a number of your Yachting related needs.

Additional Information

For further information about Malta Maritime services please contact  Jonathan Vassallo , at the Dixcart office in Malta:  [email protected] .

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Malta VAT on Yachts

Malta VAT on Yachts can be reduced through a leasing-scheme. This page also includes an overview of the effective rates on Malta VAT on Yachts.

The EU Value Added Tax (VAT) is a form of consumption tax system which applies all throughout all the member states of the European Union. VAT has to be paid on any yacht sailing EU waters unless it falls under the temporary importation relief. The moment at which the VAT has to be paid depends mostly on the ownership of the vessel. Once the VAT is paid by an EU individual or body corporate in one of the EU countries, a yacht can roam around freely throughout all the EU member states. In Malta VAT on Yachts can be mitigated through a system which can reduce the VAT payable to an effective rate of 5.4% depending on the yacht.

Temporary Relief

If a yacht is owned and used by a non EU person but sailed in EU waters a temporary relief is available. Should the owner choose to sail the yacht in EU waters indefinitely, the yacht VAT shall be paid for the purpose of importing the yacht to the EU. 

Reducing the Malta VAT on yachts

In Malta, VAT on yachts can be reduced by setting up a Maltese company, which firstly must acquire the yacht and lease it to a third party before finally selling the yacht. The exact rate of VAT that has to be paid depends on the propulsion and length of the yacht. Through this system the owners of the yacht are allowed to sail freely within the EU waters while also benefitting from the savings on the yacht VAT that has to be paid on the value of their yacht.

Effective rates

The effective rates for Malta VAT on yachts are applicable as follows:

• Sailing boats or motor boats over 24 metres in length  - 5.4%
• Sailing boats between 20.01 to 24 metres in length - 7.2%
• Motor boats between 16.01 to 24 metres in length - 7.2%
• Sailing boats between 10.01 to 20 metres in length - 9%
• Motor boats between 12.01 to 16 metres in length - 9%
• Sailing boats up to 10 metres in length - 10.8%
• Motor boats between 7.51 to 12 metres in length (if registered in the commercial register) - 10.8%

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Privacy policy.

At Chetcuti Cauchi Advocates, we are committed to the privacy of every client. We recognise that our clients entrust important personal information to us, and we take seriously our responsibility to protect and safeguard this information. Our long-standing privacy policies and practices are described below.

What type of non-public personal information do we collect?

The non-public personal information that we collect relating to individual clients will vary with the purpose and scope of our representation. When we advise a client on personal financial, tax or immigration matters, the information we collect will include:

Information that a client has provided to us

Information about our client or our client's transactions with others, provided by others whom our client has requested or authorized us to contact;

Information about our relationship with and our services to our client

For example, for estate or succession planning, we will typically collect all relevant personal information, including information about our c lient's personal assets, goals and preferences. For tax return preparation, we will collect personal financial information relevant to our client's income and deductions for the relevant year.

What Type of Information Might We Disclose, and To Whom?

As advocates and members of our respective professional associations, we adhere to our professional duty to keep confidential all non-public personal information relating to a client's representation.

Our strict levels of confidentiality are backed by Maltese law, namely the Professional Secrecy Act which has established a high common standard of confidentiality for all professional practitioners. Those who violate professional secrecy may be prosecuted under Section 27 of the Criminal Code and on conviction may be liable to a maximum fine of EUR46,587 and/or a 2 year prison sentence.

Therefore, we do not disclose personal information about any current or former client except if necessary to carry out, administer or enforce a transaction that our client has requested or authorized us to perform; in that connection, we may make such disclosures to:

Our employees or agents who are assisting us in serving our client

At our client's direction or with his or her consent, the client's financial service providers, such as the client's accountant, investment advisor, insurance agent, or the financial institution that our client has designated as trustee of a living trust;

Any person whom we jointly represent with our client. For example, if our client and his spouse have both requested estate planning services from us, we regard our representation of husband and wife as joint and may share information provided by one with the other, unless otherwise agreed;

Any other person or entity to whom our client has authorized our making a disclosure, or to whom disclosure is required by law or applicable rules of procedure.

How Do We Protect the Security & Confidentiality of Client Information?

Within our firm, we retain records relating to our professional services, accessible to our staff, to assist us in effectively representing you and, in some cases, to administer our business or to comply with professional standards. We maintain physical, electronic, and procedural safeguards for your personal non-public information that comply with our professional standards.

If you have further questions regarding the confidentiality of your personal information, please contact any Chetcuti Cauchi lawyer with whom you have worked.

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Malta Yacht Leasing – Vat Issues 2024

In March 2020, the Commissioner for Revenue issued guidelines on the VAT treatment for  pleasure yacht leasing .

The new guidelines open the possibility for the yacht owners to benefit from VAT optimization operating by the attractive lease models.

To benefit from the VAT schemes the yacht owner needs to comply with the following requirements:

• Lessor Company would beq owner of the yacht;
• Register for VAT in Malta;
• Lease agreement done for 12 to 36 months;
• Would be considered as a supply of service;
• Complete the provisional VAT Declaration;
• Obtain the VAT Paid Certificate.

The national VAT rates vary within the EU attaining up to the 27%.

In Malta, the standard applicable VAT rate is 18%.

The yacht leasing scheme allows the yacht to be leased out. The Lessee may acquire the yacht on the lease termination. 

The ending result allows the yacht owners significantly reduce the applicable VAT rate payable on the yacht and obtain an EU VAT Paid Certificate.

Let’s try to figure this out together.

    1. Malta VAT General Concept     1.1. Who is a taxable person?     1.2. What is a supply of goods or service?     1.3. Place of supply – PoS     1.4. Examples     2. Focusing on yachting leasing: VAT schemes     2.1. Introduction: hiring of means of transport provisions     2.2. Guidelines regarding item 12 of part two of the 3rd schedule to the VAT act     2.3. Conditions of using the leasing schemes     2.4. Other VAT considerations

1. Malta VAT General Concept

1.1. who is a taxable person.

A person, who carries on an economic activity*, whatever the purpose or the result of that activity:

• Includes physical person, body of persons and any entity capable of carrying on economic activity;
• Excludes employees and public authorities acting in the functions assigned by law;

A holding company:

• Not a taxable person when it exclusively holds shares and derives dividend therefrom;
• ECJ Case C-60/90 Polysar: Dividend is the result of ownership of property not the furtherance of an economic activity;
• Considered taxable when it manages related companies for consideration (not mere financing);
• Considered to be single legal entity with head office;
• ECJ Case-210/04 FCE Bank plc: No taxable supplies within a single entity;

* Economic activity:

• Any trade or business,
• Any profession or vocation and the provision of personal services,
• The exploitation of tangible or intangible property for the purpose of obtaining income therefrom on a continuing basis,
• The provision by a club, association or organisation against payment of the facilities or advantages available to its members,
• The admission, against payment, of persons to any premises;
• ECJ Case-266/83 Rompelman: preparatory activities for subsequent taxable supplies are inherently economic activities in themselves;
• Excludes illegal or illicit activities;
• Business intention matters – resulting profit or loss is irrelevant.

Registrations:

• Article 10 – regular registration – all persons, who are not registered under another article carrying out economic activity;
• Article 11 – registration for small undertakings whose turnover falls below specific thresholds – VAT number is ‘invalid’ for intra- community transactions and has no MT prefix;
• Article 12 – registration by taxable persons whose supplies are exempt without credit but who make ICAs or acquire services cross-border in excess of €10,000 – allows self-charge of VAT.

1.2. What is a supply of goods or services in terms of Article 4?

• Every supply of goods or services that takes place (or is deemed to) in Malta for consideration by a taxable person acting as such;
• Every intra community acquisition made for consideration:
• Transfer of right to dispose as owner, which goods are transported to or on behalf of the customer;
• Inverse of Intra Community Supply.

3.  Every importation that takes place in Malta (entry into Malta of goods from a third country);

Supply of goods is a transfer of the right to dispose of the property as owner.

Supply of services is what is not a supply of goods.

Where there is a mix, the principal nature of the supply is taken into consideration.

1.3. Where is a place of supply (PoS)?

Most important concept in VAT law determines in which member state VAT will be paid on a taxable transaction;

• goods that are transported – PoS where transport begins;
• goods that are not transported – PoS where goods are placed at disposal of the customer;
• goods installed by/on behalf of supplier – where the goods are installed;
• goods supplied on board ships and aircraft – point of departure;

Intra Community Supply and Intra Community Acquisition:

• A supply of goods with transport to another member state;
• ICA – takes place where goods are when transport ends;
• ICS – deemed to place where the goods depart;
• Both parties must be duly registered for VAT;
• Reported in Recapitulative Statements;
• Business to Business (B2B: customer has valid VAT number or is acting  as a taxable person) – supplies to taxable person acting as such where the customer is established .

• Business to Customer (B2C: customer does not have valid VAT number) – supplies to person acting in own capacity where the supplier is established .

Reverse charge:

• where the burden of payment of VAT shifts to the customer;
• customer self – charges VAT;
• applies when a good is supplied from another EU member state (and also whenever cross – border transactions occur in terms of services, EU or non-EU).

1.4. Examples

AAA Limited is a Maltese company, which provides maritime service to the international ship owners. One of its clients is a company established in Italy with a valid VAT number. When AAA Limited provides a service to this Italian company, where would the PoS be deemed to be?

Since the Italian company is a taxable person acting as such, it is a B2B transaction. Hence, PoS where the customer is established .

In another transaction, BBB Limited provided VAT advisory services to a non-taxable Dutch individual in his personal capacity. Will the PoS be where the customer is established?

No, this is a B2C transaction since the customer is not a taxable person acting as such. Hence, PoS is where the supplier is established .

CCC Limited is a Maltese company, which sells marine equipment to principally EU countries. Its biggest client is a company, which is based and VAT registered in Spain. The goods are transported directly from Malta to Spain. Will the PoS be deemed to be in Spain?

No, this is deemed to be an Intra – Community Supply since it involves the transport of goods between two EU member states and two taxable persons. Hence, the POS would be where the transport begins .

DDD Limited acquires most of its goods from a Chinese Company. How should this transaction be treated from a VAT perspective?

Goods are being transported from a third country. Therefore, this is not an Intra – Community Acquisition but an importation . The importation is deemed to take place in Malta .

2. Focusing on yachting leasing: VAT schemes

2.1. introduction: hiring of means of transport provisions.

• The place of short – term hiring * of a means of transport shall be the place where the means of transport is actually put at the disposal of the customer.
• The place of hiring, other than short-term hiring , of a means of transport to a non -taxable person shall be the place where the customer is established , has his permanent address or usually resides.
• However, the place of hiring a pleasure boat to a non-taxable person , other than short-term hiring, shall be the place where the pleasure boat is actually put at the disposal of the customer, where this service is actually provided by the supplier from his place of business or a fixed establishment situated in that place .

* “short-term” shall mean the continuous possession or use of the means of transport throughout a period of not more than thirty days and, in the case of vessels – not more than 90 days.

In summary.

Argo Ltd has the following yachts available for leasing at its disposal in Malta. It is in current negotiation to lease out as follows and the place of supply would be:

• A lease of 60 days:
• With a Dutch National – the place of supply is Malta ;
• With a British National – the place of supply is Malta ;
• A lease to a commercial entity established in Greece for 365 days – the place of supply is Greece ;
• With an Italian customer for a lease of 120 days – the place of supply is Malta .

2.2. Guidelines regarding Item 12 of Part Two of the Third Schedule of the VAT Act

In order to prevent double taxation, non-taxation or distortion of competition, the Commissioner may, with regard to services the place of supply of which is governed by items 2, 8, 10 and 11 of this part:

—  consider the place of supply of any or all of those services, if situated within Malta, as being situated outside the Community, if the effective use and enjoyment of the services takes place outside the Community;

—  consider the place of supply of any or all of those services, if situated outside the Community, as being situated within Malta, if the effective use and enjoyment of the services takes place within Malta.

Colloquially known as the “use and enjoyment rules” for:

• item 2: General Supplies (not governed by special rules);
• item 8: Hiring of Transport – we focus on ;
• item 10: Supply of telecommunications, broadcasting and electronic services to non -taxable persons;
• item 11: Supply of services to non – taxable persons outside the Community.

Enjoyment rules

The place of supply of certain services may be deemed outside of the supplier’s country, if the effective use and enjoyment of said service takes place outside of said country.

Likewise, if the service is provided by a supplier in a non – EU country and enjoyed within the EU, the place of supply will be in the Member State in which the service was enjoyed.

Focusing on the guidelines:

—  For leases after 1st November 2018, when place of supply is Malta to calculate when the effective use and enjoyment is outside EU territorial waters:

• lease commences in Malta;
• for long-term leases – lessor is established in Malta;
• lease agreement must be submitted to the IRD and requires prior approval;
• lessor must maintain proper records and calculations; and
•  lessor must be registered for VAT.

—  Commencement of Lease.

Upon commencement of the new lease, intended to effectively be used and enjoyed outside Malta, the lessor shall apply VAT as follows:

• If lease begins at least 30 days prior to the end of the tax period in which the lease commencement falls (i.e., first tax period) the lessor shall charge full VAT due in that period;
• If lease begins less than 30 days prior to the end of the tax period, in which the lease commencement falls, full VAT will be charged in the first period and the second period.

Hence first period the lessor shall always charge 18%.

ABC Ltd is considering leasing out its yacht as from 15th May 2021. Its next VAT period determines from 1st April 2021 to 30th June 2021. In which periods does it need to charge 18%?

In first period only, subsequently it will need to use the ratio and adjust accordingly.

ZZZ Ltd is considering leasing out another yacht as from15th June 2021. Its next VAT period ranges from 1st April 2021 to 30th June 2021. In which periods does it need to charge 18%?

The first and second one, since the lease commences less than 30 days before the VAT period end .

—  The new VAT regime is calculated based on an actual ratio of the actual effective use and enjoyment of pleasure boat:

Determination of Actual Ratio based on Actual effective use and enjoyment:

Actual effective use and enjoyment in the EU during the 1st or 1st and 2nd tax periods as applicable

Total effective use and enjoyment during the 1st or 1st and 2nd tax periods as applicable

The Commissioner for Revenue recognises the lessor should obtain “reasonable documentary proof/technological data” to determine effective use and enjoyment within/outside the EU during the lease period, such as:

• logs held by the captain of the pleasure yacht;
• GPS/AIS data;
• other documentary proof showing the actual navigation of the pleasure yacht whilst lease is applied.

Thus, provided the lessor is a Maltese registered company the VAT is due only on the portion of the lease that takes place within EU territorial waters.

To help the lessor in recording, the Malta VAT Department has determined the following percentages to be the deemed amount of use of a yacht in EU territorial waters:

☛ Download .pdf 

To summarise the above layout, the new innovative yacht leasing schemes are applicable to reduce the standard VAT rate based on the presumption – the bigger yacht is, the more time it may spend outside the EU waters.

  The effective rate of VAT varies on the size of the yacht.

Argo Ltd has a lease agreement with Aphrodite Ltd for its yacht. The lease agreement is €40,000 per month, and commenced 35 days prior to VAT Period end.

During the 1st year it spend the following time within the EU: 30%, 50%, 40%. During the 1 st year, how should VAT be calculated?

—  Tax adjustments.

• The access VAT paid is calculated by multiplying the 18% VAT paid by the actual ratio calculated.
• First tax period is paid immediately 18%.
• The adjustment is done for every subsequent period, as applicable.
• Adjust in the subsequent VAT return accordingly any access output VAT.

2.3. Conditions of using the leasing schemes

In order to apply the Malta VAT leasing schemes, the following criteria must be followed:

• The leasing must be concluded between a Maltese Company (Lessor) and any Maltese or foreign individual / corporate entity (Lessee);
• Prior approval from Maltese VAT Commissioner of the relevant yacht’s details is required;
• The period of the lease agreement shall not exceed 36 months;
• The yacht must come to Malta at the beginning of the leasing;
• The Lessor is considered to make a profit from the leasing agreement;
• The Lessee may opt to purchase the boat at a percentage of the original price on the lease expiration;
• For the Lessee, whose final consideration is to purchase the yacht after the lease termination, the consideration would be subject to standard Malta VAT rate 18% and the VAT Paid Certificate will be issued to this Lessee provided that total VAT due has been paid.

2.4. Other VAT consideration

—  Purchase of the Yacht by the Lessor where Place of Supply is Malta.

VAT treatment should always be VAT neutral, if yacht is used for trading purposes.

—  Sale of the Yacht by the Lessor where Place of Supply is Malta.

  If the yacht sold locally, it will be charged 18% immediately.

However, if purchaser had not initially claimed back the VAT incurred on the purchase, it is not subject to 18% VAT for the subsequent sale.

Probably it would have had a VAT Paid Certificate.

Should you be interested in latest local and EU yachting regulations, kindly contact us for Tax advice .

Author: © By Liudmyla Skryvanek

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The relevance of VAT for boats and yacht owners lies in the fact that VAT liability arises for vessels purchased in or formally imported in EU waters.

The European Union (EU) Value Added Tax (VAT) is, broadly speaking, consumption tax on goods and services brought and sold for use or consumption within the EU VAT Area. This form of taxation is deemed favourable as it strikes a better balance between direct and indirect taxes.

In being a consumption tax, while it must be paid to the revenue authorities by the seller of the goods, deemed as a “taxable person”, the charge is borne by the final consumer and not the business owner.

In practice, VAT is collected each time a transaction takes place in the supply chain however businesses may recover VAT paid on the products and services (input tax).

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Following the introduction of Legal Notice 231 of 2023, the Malta Tax and Customs Administration (MTCA) has today published Guidelines on the special 12% VAT rate applicable to the hiring of pleasure yachts.

The 12% VAT rate, which came into effect on 1 January 2024, applies to several services, including the hiring of a pleasure yacht subject to a number of conditions. The Guidelines provide several hypothetical examples to determine whether a hiring of a pleasure yacht is entitled to the special 12% VAT rate.

Our Tax and VAT Compliance teams are available to provide guidance.

The Guidelines may be accessed on the following link:  Guidelines – 12 percent VAT on pleasure boats.pdf (gov.mt)

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ARTICLE - Malta

Special 12% VAT Rate for Yacht Charters in Malta

Special 12% vat rate for yacht charters in malta - introduction, guidelines and regulatory framework.

Conditions for VAT Rate Eligibility

• The yacht must be available for charter in Malta at the commencement of the charter period.
• The charter must be under a specific charter party agreement for a set term.
• The total charter duration for the specified yacht (or similar types) must not exceed 35 days within the preceding 12 months from the start of the current charter.

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Yacht Registration in Malta

Malta is today one of the most popular jurisdictions for yacht registration. A solid legal framework providing security for financiers, attractive incentives to yacht owners and operators, and a strong maritime tradition stemming from its geographical location in the middle of the Mediterranean, have all contributed to Malta becoming the second largest maritime flag in Europe and the eight largest in the world.

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All kinds of sea going vessels, from large cruise liners and super tankers to private and commercial yachts, may register under the Maltese Flag; which is widely known and respected by Port Authorities across the world.

Financiers of sea vessels take comfort from the fact that their rights are adequately protected under Maltese legislation. Depending on their intended use, yachts can be registered under the Malta Flag either as a private pleasure yacht or as a commercial yacht.

Companies operating yachts on a commercial basis, such as chartering, may benefit from various fiscal advantages.

Private Pleasure Yachts

In terms of the Merchant Shipping Act, the registration of pleasure yachts is normally done in two stages namely, the Provisional Registration followed by the Permanent Registration.

For Provisional Registration of a yacht, certain basic documentation would need to be presented to the Merchant Shipping Directorate following which a provisional certificate of registration would be issued.

Provisional Registration lasts for six months during which time other documents would need to be presented for Permanent Registration. 

Commercial Yachts

Yachts used on a commercial basis are registered as commercial yachts with the Maltese Commercial Yacht Register. 

The registration of a commercial yacht is similar to that of pleasure yachts, however, the vessel must additionally comply with the requirements of the Commercial Yacht Code (‘the Code’) or equivalent standard.

The Code applies to commercial yachts that do not carry cargo, do not carry more than 12 passengers and are operated by the owner or the body corporate owning 

the vessel for commercial use. Yachts are categorised under three distinct classes depending on size and gross tonnage and for each class the Code stipulates a level of safety standards corresponding to size and gross tonnage.

Commercial yachts navigating on the high seas and carrying passengers for reward are exempt from VAT on supplies like maintenance costs, chartering, fuelling, provisioning, supplies for the direct needs of the vessels and passenger/crew assistance.

Furthermore commercial yachts may take advantage of the low effective income tax rate of 5%.  Any foreign income tax suffered on such a yacht’s commercial operations would be available as a credit against the Maltese income tax so that the effective Maltese tax could even be reduced to 0%.

Yacht Leasing

Back in 2005, the VAT Department issued guidelines on the VAT treatment of the long-term leasing of yachts by a Malta company. In terms of the guidelines the overall VAT incidence incurred on the long-term leasing of a pleasure yacht can be reduced substantially depending on the use of the yacht within or outside EU waters.

Similarly the Maltese VAT incidence on the short-term chartering of yachts used for leisure purposes, commencing in Malta, may be limited to the portion of the use that the yacht is deemed to make within the territorial waters of the EU.

Malta the Jurisdiction of choice for Yacht Owners and Charterers

The Yachting Sector represents one of the main pillars of the Shipping economy in Malta.

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• YACHT REGISTRATION
• IMPORTATION AND LEASING OF PLEASURE YACHTS

Andrew Massa

Lead senior associate, kenneth deguara, cfo of df group & head of yachting department, guidelines on reduced 12% vat rate on yacht charters commencing in malta.

In terms of Legal Notice 231 of 2023, which amended the Eighth Schedule of the Maltese VAT Act (Cap 406 of the Laws of Malta), a reduced VAT rate of 12% shall apply to the yacht charters commencing in Malta. On 29 th January 2024, the Malta Tax and Customs Administration issued guidelines for the application of the reduced 12% VAT rate on the chartering of yachts.

This reduced VAT rate applies where the yacht is put at the disposal of the customer in Malta and has come into effect in respect of services which became chargeable for VAT on or after 1 st January 2024.

In order to benefit from the reduced 12% VAT rate, the main requirements are the following:

• A charter agreement is entered into between the lessor and the lessee.
• The agreement is entered into for any term which, when added to the term of previous charter/s by the same lessee within the 12 months preceding the lease, does not exceed 35 days.
• The lessee takes physical possession of the yacht in Malta.

The Guidelines provide a number of hypothetical examples to enable interested parties to determine whether they are eligible to benefit from the reduced 12% VAT rate. These guidelines are accessible through the following link .

Should you require any assistance or advice in connection with the applicability of the Guidelines, please do not hesitate to contact DF Advocates on [email protected] for guidance.  

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In terms of Legal Notice 231 of 2023, which amended the Eighth Schedule of the Maltese VAT Act (Cap 406 of the Laws of Malta), a reduced VAT rate of 12% shall apply to the yacht charters commencing in Malta. On 29th January 2024, the Malta Tax and Customs Administration issued guidelines for the application…

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On the 30th October 2023, the Malta Financial Services Authority (‘MFSA’) issued an updated version of the ‘Corporate Governance Manual for Directors of Collective Investment Schemes’. The Manual is complementary to the new ‘Corporate Governance Code’ published by the MFSA in August 2022, and focuses on the principles that should be followed by directors of…

Reduced VAT rate for short-term yacht charters

The yachting industry in Malta is an ever-growing sector. At present, there are over 1,000 yachts above 24 metres in length registered under the Malta flag. Several yachting companies have opted to establish themselves in Malta due to the various benefits that may be enjoyed as well as the facilities available on the island. As…

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The Malta Financial Services Authority (‘MFSA’) has, on the 18 September 2023, issued a draft version of the updated Chapter 3 of the Virtual Financial Assets Rulebook for consultation (the ‘Consultation Document’). The Consultation Document aims to align the VFA Framework following the entry into force of the Markets in Crypto- Assets Regulation (‘MiCAR’) in…

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L-Avukat Dr. Marlon Borg bħala mandatarju speċjali tal-assenti Michael Debono Mrden vs. Direttur tar-Reġistru Pubbliku (452/21/1 JVC) Court of Appeal (Superior Jurisdiction) 12th July 2023 Overview On the 12th of July 2023, the Court of Appeal in its Superior Jurisdiction (“COA”) overturned a judgment delivered from the First Hall Civil Court (“FHCC”) whereby the COA…

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On the 25th July 2023, the FIAU published its supervisory priorities for the year 2023-2024. In determining the said plan, the FIAU has adopted a risk-based approached which was based on the information submitted annually by subject persons through the submission of an “Annual Risk Evaluation Questionnaire” along with data obtained from other sources such…

VAT on Maltese Registered Pleasure Yachts

The Maltese legislation offers third parties the ability to become the owners of an EU VAT-paid yacht with an effective VAT rate of 6.12%, excluding tax and cost transactions which give a risen outlay of 8%. The VAT treatment guidelines on yacht leasing published in 2019, offer parties the ability to deduct any input VAT incurred on the purchase of the yacht through a lease agreement between the owning company, a company registered under the laws of Malta that primarily acquires the yacht, and the lessee. This has to be executed in adherence to the provisos listed in the regulation and briefly listed below.

The yacht can be purchased both as new as well as second hand, and may be purchased from an EU supplier or a Non-EU supplier as the beneficial owner deems fit. Upon registration of the yacht in Malta, it is imposed that the vessel is brought and berthed in Malta and that the prior approval from the Director General VAT is acquired.  Furthermore, following the revision of the regulations, the VAT portion is no longer paid in proportion to the size of the yacht, but is to be paid in full at the standard rate of 18%, which in turn is claimed back by the lessor through the trimester VAT return. The VAT paid certificate is then issued. Throughout the lease, a log is to be maintained by the lessee throughout the use of the pleasure craft, whereby the percentage use of the pleasure craft in EU and non-EU territorial waters is determined. In this regard, the lessor can determine the portion of the lease that is taxable at the 18% rate as well as the portion that is not subject to tax due to the effective enjoyment being outside EU waters.

For understanding purposes, the following is a worked out case study of an individual who purchased a yacht from a an Italian supplier. The individual sets up a company in Malta which acquires a 25-metre yacht with a value of €1,000,000. The yacht is brought to Malta and berthed. The full 18% VAT, i.e. €18,000, are paid upon registration, which are then fully claimed back in the company's trimester VAT return under Article 2 of the VAT Act. In this regard, the VAT paid at a company level (lessor) will be that of 0%, as the yacht is bought as a capital good. The company then leases the yacht to the individual subject to the above-mentioned requirements, on a 36-month basis contract, at a lease of 10% of the value of the yacht i.e. that of €100,000 over a period of 36 months. During the period of the lease, the lessor gathers data from reasonable documentation, of the yacht's effective use of enjoyment, and charges VAT on the lease depending on the preliminary ratio established of the effective enjoyment of the pleasure craft in EU territorial waters, i.e. if the yacht is 60% of the time outside EU waters, and the lease is that of €2,778 per month, only €1.111 are taxed at 18% VAT. The rest are non-taxable. The details on the preliminary ratios and method statement are further explained in this link . Further to the above VAT implications and computation, the lessor is charged tax only on the annual financing charging, which in turn is allowed a deduction against this income through expenses relating to repairs, maintenance and insurances attributable to the yacht. Additionally, the lessee is allowed capital allowances in respect of the yacht and may opt to shift the burden of such allowances onto the lessor, subject to written agreement between the parties listed in the contract. Where the lessee exercises the option to purchase the yacht, the financial consideration received by the lessor is deemed of a capital nature and therefore no tax thereon shall be paid. Moreover, the owner of the Malta Company is eligible to further  tax benefits , including an effective corporate tax rate of 5% on the distribution of dividends.

The procedure for the above is relatively facilitated and cost-effective with the steps being mainly as follows:

Incorporation of a Malta Company

Purchase of Yacht

Yacht Registration

Lease of the Vessel 

Discover all the advantageous of registering and berthing your yacht in the Maltese Islands through our array of professional and timely services. Contact us to set-up an appointment and we will guide you through owning your dream yacht.

EU VAT on Yachts Explained – Interview

What is the VAT treatment of the sale of a yacht?

Primarily it would be pertinent to assess whether the transaction falls within the scope of VAT, meaning that it is effectively supplied by a taxable person acting in the normal course of his business, takes place in the Community and a consideration is received in return for the supply rendered. Once falling within the scope of VAT the transaction should be analysed using the methodical approach.

Does the VAT treatment change if the yacht is sold second-hand?

Yes. In principle where a yacht is sold second-hand by a taxable person who had a right to deduct input VAT upon its acquisition then VAT must be charged on the current value of the yacht. On the other hand, where the sale of a second-hand yacht is being made by a person or entity that had no right to deduct the input VAT upon its acquisition, the transaction shall fall outside scope of EU VAT and hence no VAT is chargeable. Another, however improbable, scenario would be the transfer of a yacht made by a second-hand dealer, in which case the VAT would be charged only on the profit registered by the second-hand dealer.

Does the VAT treatment differ where the yacht is supplied in the EU or outside the EU?

Yes, definitely. Where a yacht is purchased outside the EU territorial waters, what is commonly referred to as “a sale on the high seas”, its entry into a Member State of the EU would be treated as an importation, with VAT to be paid to the Customs authority of the Member State in which the importation takes place, for the yacht to be released into free circulation. This, unless the payment of the import VAT is authorised to be deferred by the tax authority, generally in a situation where the yacht will be used to carry out commercial chartering operations that are subject to VAT.

On the other hand, if purchased within the EU, it could be a domestic supply (if the supply takes place within the territory of a Member State) or if supplied cross-border, an intra-Community transaction (meaning an exempt IC supply by the supplier in the Member State of origin and a taxable intra-Community acquisition by the purchaser in the Member State of destination). The purchaser has to be a taxable person identified for VAT in the Member State of destination. If the purchaser is not a taxable person, the cross-border supply could classify as a distance sale of goods, taxable in the Member State of the customer. Mention must also be made where a yacht is acquired as a “new means of transport”, which is a vessel exceeding 7.5 metres in length, not to be used as a commercial vessel, with not more than three months since first entry into service or with not more than one hundred hours in sail time. The VAT on the acquisition of a new means of transport is payable by the person making the acquisition in the Member State where the transport of the new means of transport to that person ends.

May the VAT chargeable on importation be deferred and what does that mean?

In principle, the importation of a yacht is taxable with the importer required to pay VAT to the Customs authorities in order for the yacht to be released for free circulation within the EU. However, at the discretion of the Commissioner for Revenue, the payment of VAT upon the importation of a yacht taking place in Malta can be deferred. In other words, the VAT is not paid as it is considered to have been deferred to the VAT return.

What are the conditions which would allow for a VAT deferment at importation in Malta? Is a bank guarantee always required?

In practice, to be considered for deferment the importation has to be carried out by a taxable person registered for VAT purposes in Malta who must show to the satisfaction of the Office of the Commissioner for Revenue that he will be using the imported yacht to carry out commercial chartering operations. Currently, Malta incorporated companies are not required to set up a bank guarantee, but foreign incorporated companies are required to set up a bank guarantee calculated at 0.75% of the import value of the yacht capped up to EUR 1 million.

What is meant when a yacht has a “VAT paid” status?

“VAT paid” status means that the VAT due on the yacht had been accounted for and paid to the Tax authority without the possibility of it being recovered or refunded. A Customs import payment receipt, an invoice or fiscal receipt issued by the seller (a taxable person), or a certificate issued by the Office of the Commissioner all bear testimony to the “VAT paid” status of a yacht and may become useful when the yacht enters the territory of another Member State and the VAT status of the yacht needs to be shown.

Can a yacht forfeit its “VAT paid” status?

In addition to serving as evidence that the VAT had been paid, the “VAT paid” status implies that the yacht is in free circulation within the territory of the EU Community, meaning that it can cross and enter the territorial waters of the respective Member States without being subjected to further Customs formalities, such as those at importation. The VAT paid and free circulation status are not perpetual and can be forfeited if the yacht leaves the territory of the EU and is then re-imported by a person other than the one who had exported it or where the yacht is taken out of the territory of the EU and re-enters into the EU beyond a period of thirty-six months even though it is imported by the same person who had exported it.

How is yacht chartering treated for VAT purposes?

In principle yacht chartering is treated as a taxable supply. An exemption technically applies where a yacht is chartered to another taxable person who would be using the yacht to himself carry out commercial chartering operations. As a matter of fact, the European Court of Justice in the Bacino case had ruled that this exemption shall not apply  to services consisting of making a vessel available, for reward, with a crew, to natural persons for purposes of leisure travel on the high seas.

Are there any practical arrangements for the acquisition of yachts in Malta?

Yes, there are two, one being the Malta yacht leasing arrangements, that is based on the concept of “use and enjoyment” clause in the VAT Directive and which provides for the taxation of only that portion of the lease where the yacht is used and enjoyed within EU territorial waters. Conversely the use outside EU territorial waters is not taxed. The calculation of the taxable/exempt portions has to be made by the lessor on the basis of documentary and technological data of the yacht’s time spent within or outside the territory of the EU. The other practical arrangement, which is supported by a European Court of Justice decision in the Weald Leasing case, entails the long-term leasing of the yacht to the UBO. The lessor would be a company set up by a UBO with the UBO financing the purchase of the yacht by the company with the loan being set-off against the monthly instalments due by the UBO for the leasing of the yacht. The structure has the benefit of extending the payment of VAT relating to the yacht over a long period of time rather than having to pay the VAT at one go, as would have happened had the yacht been purchased outside of this arrangement under the normal VAT rules.

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VAT Treatment of Yachts in Malta

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CSB Group assists clients throughout the entire ship registration and deregistration process, among other shipping services.

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Malta has retained its importance in the shipping and yachting world not only because of its geographical location but also because it offers attractive and competitive incentives, thereby making Malta one of the top flags in the world. Malta’s solid roots as a maritime settlement continue to enhance and expand the island’s footing in the maritime industry.

Besides offering world-class berthing facilities to the superyacht industry, Malta offers ship and yacht owners several attractive solutions, including attractive VAT incentives for yacht and superyacht owners.

VAT Treatment of Yachts intended for Private Use

In March 2020, Malta published its guidelines regarding its VAT treatment options establishing the means in which leased pleasure yachts are to be treated for VAT purposes, with a particular focus on the use and enjoyment provisions on yacht leasing supplies. The Guidelines issued on the subject matter reflect EU developments and practices.

With respect to operating leases, it is possible for a lessor/owner of a yacht to lease out their yacht to a lessee for a consideration for a specified period of time (both for a short term lease or a long term lease). Through such a structure, VAT would be payable by the lessee on the monthly lease instalments, which VAT would be payable on a quarterly basis, and depending on the actual use and enjoyment of the yacht within EU waters. In order to benefit from the said VAT treatment option, the following conditions would need to satisfied:

• The lessor must be a Maltese entity and possess a valid Maltese VAT identification number to be eligible for the Yacht leasing Scheme;
• There must be a yacht leasing agreement in place between the lessor and lessee setting out the conditions of the lease;
• The lessee must be a non-taxable person i.e. not using the yacht for commercial business purposes;
• The yacht must be placed at the disposal of the lessee in Malta;
• The lessor must maintain documentary and/or technological data to determine the actual use and enjoyment of the pleasure boat within and outside EU territorial waters;
• An annual declaration must be filed by the lessor with the Commissioner for Revenue within the prescribed timeframe.

The scheme works depending on the ratio of use and enjoyment of the yacht in or outside EU territorial waters. As a general rule, full VAT payment at the rate of 18% is payable when the place of supply of the service is in Malta; however, in cases where the actual effective use and enjoyment of the pleasure yacht would be outside EU waters, there is an adjustment method that would apply. The end result will be that VAT would only be charged on the actual use and enjoyment of the yacht by the lessee in EU territorial waters. To this end, no VAT shall be due on the portion of the lease where the yacht is effectively used and enjoyed outside EU territorial waters.

Therefore, Malta VAT will be applicable solely on the use of the yacht within EU territorial waters; the applicable VAT rate will be reduced, depending on the effective use and enjoyment of the yacht, possibly making it amongst the lowest VAT rates within the EU Member States.

Importantly, the VAT treatment options also provides an element of flexibility when it comes to exiting or terminating the lease. In the eventuality that at the end of the lease the lessor decides to contract the sale of the yacht in Malta, then VAT at the standard rate of 18% is charged on the value of the yacht upon subsequent sale.

In such a case should the Maltese VAT Department be satisfied that the necessary rules and regulations have been duly observed, a VAT Paid Certificate would be issued.

VAT Treatment of Yachts intended for Commercial Use

Yachts intended for commercial use may opt for VAT deferment on the importation as follows:

• Obtaining a VAT deferment on the importation of the commercial yacht by a Maltese owning entity having a Maltese VAT registration; without needing to set up a bank guarantee (as previously required);
• Obtaining a VAT deferment on the importation of the commercial yacht by an EU owning entity having a Maltese VAT registration, provided that the company duly appoints a VAT representative in Malta, without needing to set up a bank guarantee (as previously required); or
• Obtaining a VAT deferment on the importation of the commercial yacht by a non-EU owning entity on provision by the importing entity of a bank guarantee amounting to the VAT payable on 0.75% of the value of the yacht, capped at one million euro;

To opt for the first proposed VAT deferment structure, one would need to incorporate a shipping company in Malta, which company would need to obtain a valid Malta VAT identification number. In each instance, the importation of the commercial yacht will require the yacht to physically call at Malta in order to undergo VAT and Customs procedures. Following which, the yacht would be imported into the European Union with the VAT payment deferred accordingly rather than paid upon importation. In such a case, the yacht would be able to roam freely and circulate within EU waters.

Should you have any questions or require clarifications please do not hesitate to contact us on [email protected] so that we may be able to guide and advise you further.

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Temporary Yacht Importation via Malta:

What is it, for whom, and how, vat rules on importation of yachts.

In accordance with Council Directive 2006/112/EC on the common system of value added tax (VAT) , the importation of goods , including yachts , refers to the entry into the EU of a yacht which has not been previously placed into free circulation within the EU .

This means that yachts deriving from a third country, i.e. a country which is outside the EU, shall be considered to be in free circulation in a Member State of the EU only if the import formalities have been complied with on arrival within a particular EU country.

Therefore, any yacht that finds itself within the EU VAT zone waters is liable to pay VAT , irrespective of the nationality of the owner.

However, third-country nationals, who intend to use the vessel within the EU only temporarily , may, fortunately, free themselves from this predicament through Malta by placing the yacht under temporary importation arrangements .

A yacht that is imported into EU waters through Malta customs with the intention of re-exportation within the allotted timeframe may find themselves exempt from paying VAT and customs duties , in addition to numerous benefits ensuring an uninterrupted voyage through EU waters, so long as the vessel is only used for private purposes .

When a yacht is placed under temporary importation , the chargeable event shall occur and VAT shall become due only when the yacht shall cease to be covered by those arrangements. This means that as long as a yacht follows the time frames and established periods for entry or otherwise in the EU, no VAT shall become due at any point in time of the yacht’s cycle inside and outside of EU waters.

Temporary Importation – facts and figures

Even though the current regulations of Temporary Admission have been in place since 2006, a question on the requirements to apply for temporary admission and how long a yacht can remain in the European Union while operating under Temporary Admission remain the most frequently asked questions.

In accordance with EU law, a non-EU flagged private yacht , owned by a non-EU resident which is imported to EU waters with the intention of re-exportation, may be exempt from paying VAT and customs duties as long as the yacht is used only for private purposes for a total duration of 18 months.

Temporary admission begins upon the crossing of EU customs territory and ends on the re-exportation, or exit of the vessel from EU customs territory into Non-EU customs territory.

Therefore, once the 18-month period is over , the vessel must leave the EU , thus discharging the temporary admittance period. If the vessel does not leave on the expiry of the 18 months, customs duty and VAT become payable.

It is important to note, that temporary importation can be renewed , provided that the vessel has been sailed out of the EU and cleared in and out of a non-EU port. In this case, upon returning to the EU waters, a new period of temporary admission will begin .

Conveniently, there is no minimum period in which the vessel must remain outside of EU customs to be eligible for the renewal of its temporary admittance.

Furthermore, temporary admission into the EU means that during this 18-month period the yacht owner would benefit from:

The freedom to move from one Member state to another with no further customs formalities.

The possibility to employ EU residents to work on the vessel provided that a formal contract of employment exits between the owner and the seafarer.

It is important to remember, that the owner of the vessel must comply with the established requirements and restrictions throughout the whole period of the temporary importation:

It is the responsibility of the beneficial owner/Captain of the vessel to keep evidence of the vessel’s movements.

Temporary admittance is not available to beneficial owners who have an EU residence .

The 18-month allowance period is only applicable to the vessel , and the beneficial owner must comply with the fiscal residential legislation of each individual member state, as well as applicable immigration laws.

The vessel may not be used commercially during the temporary importation period. In some member states, this includes advertising the vessel for sale.

Voluntary Customs Bonding and its synergy with Yacht admission

When the vessel is not in use and has been laid up (anchored) in port, it is possible to apply for voluntary customs bonding.

The vessel may be in bond for a maximum period of 24 months , differing between member states. Furthermore:

• Crew members may remain on board the vessel during the bonding process, provided that they have a formal contract of employment.
• During the period of customs bonding, the 18 month admission period is suspended whilst the vessel is not in use.
• When the beneficial owner requests for the vessel to be unbonded, the temporary   importation period resumes from where it had left off when the vessel was bonded.

Upon expiry of both, the 24 month bonding period and the 18 month admission period , the vessel will be required to leave EU customs territory , failing to do so will make the beneficiary liable for VAT and customs duty.

Temporary Yacht Importation into EU via Malta

To begin the temporary admission of the vessel into EU via Malta, Malta shall be the first port of call on the vessel’s arrival into EU customs territory.

Once the yacht is in Malta, one has to make arrangements with Customs in order to pay a visit to the yacht. Before this Customs officer will usually require the submission of supporting documents . If all documents are at hand the procedure is relatively easy and straightforward.

After Customs has ensured all corresponding documentation is in place, importation exemption will be issued , allowing the vessel and its beneficiary to take full advantage of their new found freedom from VAT , customs duties and travel restrictions between EU member states .

This page is intended to serve as a general guide on the subject matter. For further information and guidance on the subject we recommend seeking professional assistance.

SMM Yachting Department

At SMM we can assist with the importation of the vessel into EU to obtain temporary admission status through dealing with Customs on your behalf. We aim to resolve the matter in the shortest time possible to make the process stress-free and smooth for you.

Contact  SMM Yachting team  for personalized guidance and free consultation. We are always available for both face-to-face or online consultations, get in touch with our team and speak with one of our experts today.

VAT Yacht Lease

The Maltese Commissioner for Revenue has published Guidelines regarding the effective use and enjoyment by a lessee of a pleasure boat within and outside EU territorial waters where such pleasure boat is contracted by the owner thereof to a lessee for advance lease payments in virtue of a lease agreement. Yacht owners who are in a position to demonstrate usage of the yacht subject to a lease outside of EU waters will be able to benefit from an overall reduced rate of VAT calculated on the percentage of usage of the yacht within as well as outside of EU waters. Please note the Guidelines on the following link:

https://cfr.gov.mt/en/vat/guidelines_to_certain_VAT_Procedures/Documents/Guidelines%20re%20Item%2012,%20Part%20Two,%20Third%20Schedule%20to%20the%20VAT%20Act%20-%20280219.docx.pdf

In terms of the Guidelines, the VAT rate will be worked out according to the actual usage of the yacht in and outside EU waters. If it is the yacht owner’s intention to sail in international (non-EU) waters frequently, then the owner may be interested in entering a yacht lease pursuant to the said Guidelines. The estimated percentage of the time spent outside EU waters would be required together with details of the yacht including the make, size, year of built, port where it will be/is berthed, flag and value of yacht for us to guide the owner in terms of the application of the Guidelines.

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Malta Clarifies VAT On Yacht Charters

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By Louise Marsh   20 August 2013

The Maltese Value Added Tax Authority has released new guidelines on the taxing of short-term yacht charter contracts.

In Malta , the definition of a short-term yacht charter is an agreement where the owner or operator of a yacht contracts out the use of the vessel either with a crew or on a bare-boat basis for no more than 90 days.

The short-term chartering of a yacht is understood to be the supply of a service and so is taxable at the standard rate of VAT in Malta, which is 18%. However, in certain cases the taxation of this supply falls outside the scope of VAT for the portion of time the yacht is chartered outside the territorial waters of the European Union.

These new guidelines have been released in order to clarify the rules governing the calculation of VAT liability where a luxury charter yacht is used partly outside EU territorial waters and in recognition of the challenges in ascertaining what portion of a charter voyage takes place within, and outside of, EU waters.

They set out to establish the estimated percentage portion of the charter based on the time the yacht is used within the territorial waters of the EU, according to the length of the yacht and its means of propulsion - motor or sailing.

If the yacht charter vacation meets the requirements set out in the guidelines, the following percentage of the charter is deemed to be liable to Maltese VAT:

Sailing yachts or motor yachts over 24 metres long - 30% (an effective rate of 5.4%)

Sailing yachts between 20.01 metres and 24 metres long, and motor yachts between 16.01 metres and 24 metres long - 40% (an effective rate of 7.2%)

Sailing yachts between 10.01 metres and 20 metres long, and motor yachts between 12.01 metres and 16 metres long - 50% (an effective rate of 9%)

All other yachts - 100% (subject to the full 18% VAT rate).

These new guidelines have been released in order to clarify the rules governing the calculation of VAT liability where a luxury charter yacht is used partly outside EU territorial waters...

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Malta Yacht Registration Scheme – Register a Yacht in Malta

The Maltese VAT Department has issued guidelines on the VAT Treatment of yacht leasing applicable to pleasure yachts, which offer a very attractive VAT regime to owners, allowing an effective and low-cost solution for the acquisition of an EU VAT paid certificate .

Yacht Leasing Agreement

In order to avail oneself of the advantageous VAT rate (described above), a financial leasing agreement (whereby the lessee retains an option to purchase the craft at the end of the lease) would be entered into between the Maltese Company (the lessor) and the lessee.

The Maltese Company must be the owner of the craft (either bought directly from the owner or if craft is new, directly from yacht-builder).  The Maltese Company shall lease the craft to a lessee (no nationality restrictions, and the lessee can be a physical or legal person).

Applicable Rate of VAT

When a Maltese Company buys a pleasure yacht and lease-purchases it to third parties, VAT is due on the normal rates of VAT (currently at 18%).  However, VAT is payable only on that portion of the lease during which the yacht is in EU waters.  The Maltese VAT Dept. has set out guidelines which establish the presumed portion of time spent in EU waters, based on the presumption that the larger the craft, the less time, it shall be in EU waters.  The effective rate of VAT shall vary on the size of the craft, in the manner set forth below.

Conditions of Financial Leasing Agreement

The financial leasing agreement must have the following characteristics:

(i) The financial leasing must be between a Maltese Company (lessor) and any Maltese or foreign person / company;

It is therefore possible, to preserve anonymity for the ultimate beneficial owner, through the use of nominee shareholders and/or corporate vehicles.

(ii) The Lessee must pay the Lessor an initial contribution amounting to at least 50% of the value of the craft;

(iii) The lease installments shall be payable every month;

(iv) The currency of the lease agreement shall not exceed thirty-six (36) months;

(v) The lessor is expected to make a profit from the leasing agreement over and above the value of the boat;

(vi) Any purchase value at the end of the lease agreement shall not be less than 1% of the original value of the craft, and this will be subject to a standard rate of VAT at 18%

Registration Process

In order to avail oneself of the aforesaid favourable rate for VAT, the applicable steps, are as follows:-

(i) Prior Approval from Maltese VAT Commissioner;

The applicant should, on submission of relevant details of the craft, apply to the Maltese VAT Department, for a prior confirmation of the applicable rate of VAT.

(ii) Register Maltese Company;

Provided that all the necessary know-your-clients are provided, the incorporation of a Maltese Company is a relatively straight-forward process, which may be accomplished in two (2) working days.

The Maltese Company, as owner of the craft, would be empowered to operate, charter and manage yachts in its trading objects

(iii) Maltese company applies for VAT;

Following incorporation, the Maltese Company would apply for registration of a VAT number with the Maltese VAT Department;

(iv) Maltese company enter into lease agreement;

Following registration, the Maltese Company would enter into a lease agreement with the lessee.

(v) Submission of Lease agreement and supporting documentation to VAT Department;

The Maltese company would submit a copy of the lease agreement, together with the details of the yacht (certification, specification list, surveyor’s valuation, bill of sale if bought new etc;) to the Maltese VAT Department and apply for the applicable rate of VAT.

(vi) VAT Department issues letter of approval

The Maltese VAT Department would, upon satisfaction of the supporting documentation set forth in paragraph (iv) above, issue a letter of approval, confirming the applicable rate of VAT.

Illustration of Scheme

For the purpose of this illustration, we shall assume that:-

(i) The yacht is worth ten million Euro (€ 10,000,000);

(ii) The yacht has a length of fifty (50) metres;

(iii) The currency of the lease agreement shall be of 36 months; and

(iv) The Maltese company shall sell the craft to the lessee, at the end of the lease period for a profit of 1% (i.e. € 100,000 – 1% of € 10,000,000)

The Maltese Company acquires the yacht from client or from a third party which owns the yacht and enters into the financial leasing agreement with the lessee.

The lessee pays 50% of the value of the craft on the date of the contract (i.e. € 5,000,000). The balance (€5,000,000) shall be re-payable over 36 months.

Tax and VAT Applications

VAT on Initial Contribution

The VAT on the value of the lease is calculated on € 5,000,000 X 5.4% (VAT applicable rate because craft exceeds 24 metres) = €270,000

VAT on monthly lease payments

The value of the lease is €5,000,000.  Divided over the currency of 36 months, the monthly lease payment is of € 138,888 a month.

The applicable VAT payable per installment is € 138,888 X 18% X 30% (applicable rate) = €7,500.

The total applicable VAT is € 7,500 a month multiplied by 36 months (currency of agreement) = € 270,000

VAT at end lease

When the lessee exercises the option to acquire the craft from the Maltese company, the applicable rate of VAT shall be 18%.  This is because the delivery of the good (craft) from the supplier (lessor) to the customer (lessee) must be deemed for VAT purposes to have occurred in Malta.

The applicable rate shall be 18% VAT on € 100,000 (purchase value, assuming 1% profit to Maltese company) = € 18,000

The total VAT payable shall be of just €558,000 on a transaction worth € 10,000,000, thereby representing a considerable VAT saving (had the standard rate of 18% VAT been applicable, the VAT would have been of €1,800,000.)

VAT Paid Certificate

When the lessee exercises the option to acquire the craft after the end of the lease, and furnishes evidence thereof (i.e. invoice in relation to the aforesaid 1% and the applicable bill of sale), the Maltese VAT Department shall issue a VAT paid certificate attesting that all VAT due has been paid on the craft.

Taxation of the Maltese Company (lessor)

Although the corporate tax rate of Maltese companies is 35%, shareholders are entitled to a 6/7ths refund on the standard rate of tax at 35% leaving a tax leakage of just five per cent (5%).  Furthermore, foreign tax paid can be taken into account for purposes of the refund calculation, subject to the maximum refund not exceeding Malta tax paid.  Effectively, it is possible to envisage situations where no Maltese tax leakage would be suffered by the Maltese Company, in the manner set forth below:

*632 (6/7ths of 737)

The VAT registration scheme, and the Maltese tax credit system offers an effective, low-cost solution, allowing clients to obtain a VAT paid certificate in relation to the acquisition of crafts within the EU.

Thereinafter, it is advisable that clients seek bespoke tax advice in their country of residence, on the process to register such VAT paid certificate in their respective country of residence.

Contact one of our officers for bespoke VAT Advice and start reaping the full benefits of an onshore, low-tax, reputable, EU jurisdiction. Simply fill in the contact box below or contact us by email on enquiries@fbsmalta.com or by calling at +356 2338 1500

We are committed to providing you with a swift solution best suited to your needs.

Yacht EU VAT

The general precepts that apply to the importation of yachts entering EU waters, may be concisely summarised as follows:

Yachts owned by EU resident individual or corporate entities have the right to free movement throughout the EU, provided VAT has been paid on the craft in one of the EU countries.   Yacht owners should, irrespective of whether they are navigating  in territorial waters of EU member states and when sailing between EU Countries, carry evidence of VAT payment or any exemption thereof at all times.

Non-EU vessels

A VAT-paid yacht will encounter no difficulties in EU waters insofar that the craft is not chartered.  Temporary importation relief from VAT is available to yachts which are beneficially owned by non-EU residents insofar that such non-EU residents do not acquire ordinary residence in the EU (interpretation of ordinary residence varies between EU member states but, as a rule of thumb, is often taken to be 183 days).

Yachts owned by non-EU residents and registered outside the EU are entitled to tax-free temporary importation into the EU for a total period of eighteen (18) months.  This dispensation applies to the entire EU zone (local customs are afforded the discretion to extend this grace period further if good reason is provided e.g. yacth is left in the care of a boatyard for repair), after which period, the yacht must either exit EU territorial waters or obtain an EU VAT certificate.

EU VAT – Paid Certificate

Although the aforesaid rules are clear cut, many yacht owners experience difficulty with local VAT authorities as to the implementation of the aforesaid EU guidelines for yachts purchased in and imported into EU Waters.  The attainment of an EU VAT-Paid Certificate may remain  highly elusive or a considerable expense that must be factored in the acquisition  of the craft.

The applicable rate of VAT varies wildly within the EU – with peaks of up to 27%.  Applying this VAT rate on the value of the craft can therefore have a major impact on the ownership costs and the resale value for the yacht.   Some jurisdictions, in particular Malta and Cyprus have come up with innovative yacht leasing schemes that apply a reduced rate of VAT regard being had to the length and the propulsion of the vessel – the underlying rationale being that the bigger the yacht, the more time it may be assumed that it will be outside EU territorial waters.  Consequently, a derogation applies from the standard rate of VAT, and VAT is only paid on the proportion of time, in which it is assumed that the yacht shall be in EU territorial waters.

The yacht leasing scheme allows the yacht to be leased to a lessee, who has, the option, if he so elects, to acquire the yacht on the expiration of the lease.  The end result allows yacht owners undertaking the yacht leasing scheme to severly mitigate the applicable rate of VAT payable on the yacht and more importantly to obtain an EU VAT-Paid Certificate.

Malta launched the yacht leasing scheme in 2007 effectively reducing the VAT rate to just 5.4% to crafts in excess of twenty-four (24) metres.  The scheme still applies today, and has been availed of, by many yacht owners.  Similarly, Cyprus has in March 2012, launched its own yacht leasing scheme, the mechanisms of which are to an appreciable extent similar to the ones provided under the Maltese scheme, yet the applicable rate of VAT is even more attractive, with a VAT rate of just 3.4% on the top-end of the scale (crafts in excess of twenty-four (24) metres).

View Yacht Scheme comparison between Malta & Cyprus for a complete understanding of the VAT rate on the Yacht leasing schemes in Malta and Cyprus.

Contact one of our officers in Malta or Cyprus for bespoke VAT Advice and start reaping the full benefits of two  onshore, low-tax, reputable, EU jurisdictions. Simply fill in the contact box below or contact us by email on enquiries@fbsmalta.com or by calling at +356 2338 1500 for a better understanding of the scheme.

Malta and Cyprus Yacht Registration

Applicable rate of vat – sailing boats.

The applicable rate of VAT in Malta for the delivery of pleasure yacht is 18% whereas in Cyprus the applicable rate of VAT is 17%. However, VAT is paid only on the portion of the lease during which the craft is in EU waters. The applicable rate of VAT between the two jurisdictions may be summarised as follows:

* Note: Please allow a few seconds for the online calculator to load

Applicable rate of VAT – Motor Boats

As with sailing boats, VAT is paid only on the portion of the lease during which the craft is in EU waters. Cyprus and Malta differ not only in the applicable rate of VAT, but also in the length of the craft. Cyprus presents a significant VAT saving for small, motor-propelled crafts, as may be summarised in the following table:

In order to avail oneself of the aforesaid favourable rate for VAT in either Malta and Cyprus, the applicable steps, are as follows:-

(i) Prior Approval from VAT Commissioner; The applicant should, on submission of relevant details of the craft, apply to the local VAT Department, for a prior confirmation of the applicable rate of VAT.

(ii) Register Company;

Provided that all the necessary know-your-clients are provided, the incorporation of a Maltese or Cypriot Company is a relatively straight-forward process, which may be accomplished in a few working days.

The Company as owner of the craft, must be empowered to operate, charter and manage yachts in its trading objects (iii) Company applies for VAT;

Following incorporation, the Maltese or Cypriot Company would apply for registration of a VAT number with the relevant VAT Department;

(iv) Company enter into lease agreement;

Following VAT registration, the Maltese or Cypriot Company would enter into a lease agreement with the lessee.

(v) Submission of Lease agreement and supporting documentation to VAT Department;

The Company would submit a copy of the lease agreement, together with the details of the yacht (certification, specification list, surveyor’s valuation, bill of sale if bought new etc;) to the local VAT Department and apply for the applicable rate of VAT.

(vi) VAT Department issues letter of approval The local VAT Department would, upon satisfaction of the supporting documentation set forth in paragraph (iv) above, issue a letter of approval, confirming the applicable rate of VAT.

Illustration of scheme

Comparative study of Malta and Cyprus schemes based on the following scenario:-

(i) The yacht is worth ten million Euro (€ 10,000,000);

(ii) The yacht has a length of thirty (30) metres;

(iii) The currency of the lease agreement shall be the maximum allowed by law; and

(iv) The Company shall sell the craft to the lessee, at the end of the lease period for a profit (the minimum prescribed by law)

VAT Paid Certificate When the lessee exercises the option to acquire the craft after the end of the lease, and furnishes evidence thereof (i.e. invoice and the applicable bill of sale), the Maltese or Cypriot VAT Department shall issue a VAT paid certificate attesting that all VAT due has been paid on the craft.

Income Tax Implications for lessor

The Lessor must pay income tax on the trading income derived from the yacht lease scheme and any interest derived therefrom.

The applicable rate of Income Tax may be calculated as follows:

Contact one of our officers for bespoke VAT Advice and start reaping the full benefits of an onshore, low-tax, reputable, EU jurisdiction. Simply fill in the contact box below or contact us by email on enquiries@fbsmalta.com or by calling at +356 2338 1500

EU Yacht Registration VAT Calculator for Sailing and Motor Yachts / Boats

Sailing yachts / boats.

* Note: Please be patient and wait for online calculator to fully load

Motor Yachts / Boats

* Note: Please be patient and wait for online calculator to fully load.

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