The outright purchase of a yacht within Europe for non-commercial purposes attracts a VAT charge. The applicable rate varies by EU member state – in Malta it is 18%. Payment of VAT is a legal obligation and results in the issue of a VAT-paid certificate evidencing the right to free circulation in European waters.
Under the Malta Yacht Leasing the VAT treatment for yacht leasing approved by the Maltese VAT department it is possible to reduce the effective rate of VAT to as little as 5.6% of the initial value of a yacht.
The rationale behind this scheme comes from the effective use of a provision within the EU’s sixth VAT directive. Given Malta’s position on the southern flank of EU waters it is presumed that a portion of a vessel’s operation will be in international waters in which VAT is not applicable. This does not affect the VAT payable on an outright sale but is applicable to the lease of a vessel.
The scheme therefore changes the nature of the transaction from an outright sale into a lease with an option to buy, in which case VAT is applicable to only a portion of the amount paid by way of the lease. The proportion on which VAT is applicable is calculated based upon the length and type of the vessel in accordance with the published guidelines of the VAT office.
Conditions for Maltese VAT treatment to apply:
- A company, which must be incorporated in Malta, is formed and registered for VAT. However, the lessee may be a Maltese or foreign individual or company;
- The leased yacht must enter Maltese waters, preferably at the beginning of the leasing agreement;
- The lessor and lessee enter into a leasing agreement, which shall not exceed 36 months. 50% of the lease must be paid at the commencement of the lease and will be subject to VAT on a reduced portion of the lease amount;
- The lessor must make a profit. Any such profit would be taxed at an effective rate of 5% corporation tax;
- Prior approval shall be sought in writing from the Commissioner of VAT.
The table below indicates the establish percentage portions according to the type of boat:
|Type of Boat||Lease % subject to VAT||Effective VAT rate|
|Boats over 24 metres||30%||5.4%|
|Sailing boat between 20.01 to 24 metres||40%||7.2%|
|Motor boat between 16.01 to 24 metres||40%||7.2%|
|Sailing boat between 10.01 to 20 metres||50%||9%|
|Motor boat between 12.01 to 16 metres||50%||9%|
|Sailing boat up to 10 metres||60%||10.8%|
|Motor boats between 7.51 to 12 metres*||60%||10.8%|
|Motor boats up to 7.5 metres*||90%||16.2%|
*if registered in the commercial register
Please contact RegisterAYacht for further information or assistance.