The payment of VAT is considered an extra burden and cost factor in the process of acquisition and use of a yacht within EU waters. When, the purchase priceof a yacht consists in millions of euro, the extra VAT percentage represents a significant amount to the costs that the owner has to pay for the enjoyment of his new yachting adventure. The payment of the full VAT due on the purchase of a yacht is really an ‘expensive option’ and it is for this reason that it is significant to have alternative valid possibilities.The following questions are usually asked at the time of acquiring a new or second hand yacht and before the decision is made on the method in which VAT is to be effected:
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What is the intended to use the yacht?
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Where will the yacht cruise?
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If the yacht is a second hand yacht is it already VAT paid, and if found outside the EU has it been already formally imported in the EU?
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When undertaking the option of Maltese leasing to mitigate the VAT – what is the ultimate result one expects.
The Maltese ‘Guidelines Regarding the Vat Treatment of Yacht Leasing’ issued by the Maltese VAT Department, prescribe that where a leased yacht is used partly in EU territorial waters and partly in international waters only the use of the yacht which is made in EU territorial waters is subject to the payment of VAT. Due to the difficulty in determining the use of yachts within EU territorial waters, the ‘Guidelines Regarding the Vat Treatment of Yacht Leasing’ establish the estimated percentage use of the yacht within the territorial waters of the EU according to the length of the yacht and the means of propulsion.
The table below indicates the established percentage portions according to the type of yacht and its dimensions:
Type of Vessel | Deemed EU Use | Effective Vat Rate | VAT Saving |
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| Motor yachts and sailing yachts exceeding 24 metres in length | 30% | 5.4% | 12.6% |
| Sailing yachts between 20 and 24 metres long Motor yachts between 16 and 24 metres long | 40% | 7.2% | 10.8% |
| Sailing yachts between 10 and 20 metres long Motor yachts between 12 and 16 metres long | 50% | 9% | 9% |
| Sailing yachts up to 10 metres long Motor yachts between 7.5 and 12 metres long, and registered in the commercial register | 60% | 10.8% | 7.2% |
| Motor yachts up to 7.5 metres long, and registered in the commercial register | 90% | 16.2% | 1.8% |
In order to apply these guidelines the following conditions have to be considered:
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A leasing agreement must be drafted; this is an agreement whereby the lessor (the owner of the yacht) contracts the use of the yacht to the lessee (the person who leases the yacht) in return for a consideration. The leasing agreement must be approved by the Maltese VAT Department.
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The lessor in the leasing agreement shall be a Maltese company and the lessee may be any Maltese or foreign person or company. The ownership of the yacht must be through a Maltese company.
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The VAT lease instalments shall be payable every month for a period ranging from 12-36 months.
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In addition, at the end of the lease period, the lessee may opt to purchase the yacht at a percentage of the original price. Once the purchase option is exercised and all VAT due has been paid, a VAT paid certificate will be issued in the name of the lessee, as the new owner of the yacht.
We at Bencini Demajo will be pleased to assist you and inform you further on the cash flow projections and analysis the Maltese yacht leasing structure would entail for your yacht. We understand that each yacht and yacht owner are different, and although we abide with general standards of practice, we endeavour to study each situation in its own light.
FAQs
How is the leasing agreement treated for VAT purposes?
For the purpose of VAT, the lease of a yacht is a supply of services with the right of deduction of input VAT by the lessor, where the right of input VAT applies. This supply of services is taxable according to the use of the yacht, attributed within the territorial waters of the European Union, provided that the lessor is a Maltese company which is leasing the yacht to any Maltese or non-Maltese person or company.
What further documentation is required by the Maltese VAT Department together with the Lease Agreement?
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Invoice/Valuation of the yacht
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Builder Certificate/ Bill of Sale
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VAT Certificate of Maltese Lessor Company
Is it necessary for the yacht concerned to come to Malta during the period of the lease?
The yacht must come to Malta at the beginning of the lease agreement. As from January 2013 the yacht must come to Malta at the end of the lease and the transfer of the yacht through the exercise of the purchase option must take place in Malta.
