Cyprus Yacht Leasing

The Cyprus VAT Service launched guidelines in 2012 on VAT payments applicable under the Cyprus Yacht Leasing Scheme. As a result and following the recent VAT circular 181, 2014, effective VAT rates can be reduced to as little as 3.8% of the initial value of a yacht – less than the equivalent in other favoured jurisdictions.

Under the Scheme, a Cypriot company can purchase a pleasure yacht and enter into a lease-sale agreement for the yacht with a third-party lessee – an individual or company irrespective of their location. Since this is a service deemed to be supplied in Cyprus, VAT is due on the lease at the normal rates of VAT in Cyprus – currently 19% – but is payable only on that portion of the lease which the yacht spends in EU waters.

To avoid the difficulty of establishing the exact length of stays in EU waters, the VAT Service has issued its own percentage scales based upon “presumed” lengths of stay for different types and lengths of yacht. Motor and sailing boats over 24-metres in length are deemed to spend only 20% of their time in EU waters to give an effective VAT rate of 3.8%, while motor boats below 8-metres and sailing boats below 10-metres are deemed to spend 60%, giving an effective VAT rate of 11.4%.

TABLE A: MOTOR BOATS

Length of yacht % of use in EU waters Effective VAT rates
Over 24 meters 20% 3.8%
Between 14,01 and 24 meters 30% 5.7%
Between 8,01 and 14 meters 50% 9.5%
Up to 8 meters 60% 11.4%
Boats allowed to sail only within protected waters 100% 17%

TABLE B: SAILING BOATS

Length of yacht % of use in EU waters Effective VAT rates
Over 24 meters 20% 3.8%
Between 20,01 and 24 meters 30% 5.7%
Between 10,01 and 20 meters 50% 9.5%
Up to 10 meters 60% 11.4%
Boats allowed to sail only within protected waters 100% 17%

 

The yacht, which can be registered anywhere within the EU, must arrive in Cyprus within one month of the date of inception of the lease agreement and the initial lease payment must amount to at least 40% of the value of the yacht. Further lease payments are payable on a monthly basis, and the lease period must under no circumstances exceed the period of 48 months.

The lessee may purchase the yacht at the end of the lease period, for a final consideration of not less than 5% of the initial value of the yacht. The VAT authorities will then issue a certificate to the lessee confirming full payment of the total VAT liability. The lessor is expected to make a total profit from the leasing agreement of at least 10% on the initial value of the yacht.

Prior approval from the VAT Commissioner is required for every application of the Cyprus Yacht Leasing Guidelines. Please contact RegisterAYacht for further information or assistance.


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