EU VAT law requires pleasure yachts travelling within EU territorial waters to be VAT paid. Malta, over the years, has provided a legislative medium in terms of VAT leasing structures which facilitate the possibility to put in place a low VAT paid status for a pleasure yacht within a legislative framework that is accepted throughout EU member states.
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How Maltese VAT on yachts can be reduced through a leasing-scheme?
Maltese VAT on yachts can be reduced through a following leasing-scheme: setting up a Maltese company, which acquires the yacht and leases it to a third party for up to 36 months before finally selling the yacht.
On the 12th of March 2020, the Maltese Revenue published amended guidelines. The point of these changes is the lessor shall use data of the ACTUAL effective use of a pleasure yachts outside EU territorial waters to charge VAT (very important point is to determine the actual time within / outside EU territory, it’s a lessee’s duty to provide the lessor with the necessary technological evidences of this and the lessor’s duty is to retain it for the VAT Department), instead the EXPECTED effective use.
In the same time, the main principle (the principle ‘use and enjoyment’) of the EU VAT Directive remains unchanged – Maltese VAT at the standard rate of 18% applies on the leasing of pleasure yachts that are deemed to take place in Malta in terms of standard VAT rules.
A few general conditions must be satisfied, if you want to apply such VAT treatment: a lessor must be registered for VAT purposes in Malta; using the boat by the lessee only for non-business purposes; using ALP principle in concluding boat leasing agreement; the signed leasing agreement must be presented to the VAT Department and written approval on the application of the effective use and enjoyment principle must be obtained from the VAT Department; a boat must be in Malta at the beginning of the lease term.
Another small point, with the updated guidelines (February 2019 changes), just a pre-determined rate according to the size of the yacht, will not be considered in calculating the VAT of the yacht as was before.