In March 2020, Malta published its guidelines regarding its VAT Yacht Leasing Scheme with a particular focus on the use and enjoyment provisions on yacht leasing supplies.
For VAT purposes, the lease of a yacht is considered to be a supply of services. The supply of such services is subject to VAT according to the use of the vessel. 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. The scheme works depending on the ratio of use and enjoyment of the yacht in or outside EU territorial waters. Providing the lessor is a Maltese registered company, VAT is due only on the portion of the lease which takes place within 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.
In terms of the amended guidelines, the general principle remains that 18% Maltese VAT applies on the leasing of pleasure boats. However, where certain conditions are satisfied, the lessor can make use of ‘Use and Enjoyment’ provisions. This means that the VAT charged would be proportional to the actual time that the yacht spends within EU territorial waters. Such provisions can only be used when the determination of the actual time within / outside EU territory is possible.
In order to benefit from the Maltese VAT Yacht Leasing Scheme, the following conditions must be satisfied
- The Lessor must be a company established in Malta. The lessee can be any Maltese or non-Maltese person but must be a non-taxable person. (i.e. not using the yacht for commercial business purposes)
- Pre-approval of the VAT Department is required to apply the Malta leasing arrangements.
- There must be a yacht leasing agreement in place between the lessor and lessee setting out the conditions of the lease. The lessor company must make a profit.
- The yacht must be placed at the disposal of the lessee in Malta;
- At the end of the lease period the lessee may purchase the boat at a percentage of the original price. The final purchase is strictly an option at the end of the lease. The consideration would be subject to Malta VAT at the full 18%.
- If the lessee opt to purchase the boat after the end of the lease, a VAT paid certificate will be issued to the lessee. Provided that all VAT due has been paid.
- 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;
- The lessor must file an annual declaration with the Commissioner for Revenue within the prescribed timeframe.
Benefits of VAT Yacht Leasing Scheme in Malta
- Malta VAT will only 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
- Malta has adjustment mechanisms in place for VAT to be paid on actual use and enjoyment of the yacht within EU territorial waters
Should you have any questions or require clarifications please do not hesitate to contact us so that we may be able to guide and advise you further.