VAT on Yacht Leasing – 2019 Guidelines

Posted on : 14 Mar 2019

The yachting industry in Malta is one of the booming industries that resulting from the nation’s marine history through the decades. Over the past year, the shipping registry has grown extensively and lists some of the most prestigious yachts sailing today.

On the 28th February 2019, and in an effort to reflect recent EU Developments, the VAT Department issued a new set of guidelines on the VAT treatment on the leasing of yachts.

The overall VAT rate incurred on the leasing of a yacht can be reduced significantly. As per the new guidelines, the VAT on a lease taking place in Malta, will be payable according to the actual percentage of effective use and enjoyment, within EU waters. As a result, no VAT is chargeable on the portion of the lease attributable to effective use and enjoyment of the yacht within non-EU waters.

The General Rules for the VAT leasing scheme are:

  • The Lessor must be established in Malta for VAT purposes, hold a valid Maltese VAT identification number and maintain adequate and appropriate records to demonstrate effective use and enjoyment of the yacht.
  • The Lessee must be either a Company or an individual, that does not hold a VAT identification number in Malta or abroad.
  • The yacht must be placed at the disposal of the lessee in Malta.
  • A yacht leasing agreement must be in place between the lessor and the lessee. The yacht leasing agreement must be validated by VAT department.
  • Prior approval shall be sought in writing from the Commissioner of VAT who is to confirm the rate applicable according to the effective use and enjoyment within EU territorial waters.
  • An annual declaration must be prepared and filed with the Commissioner of Revenue.
  • Long-term leases the lessor must be established for VAT purposes in Malta and also the lessee, who can be established in or outside Malta, must be a non-taxable person.

For more information and/or clarifications you may require in relation to the Malta VAT Leasing Scheme, please do not hesitate to contact us at: vasslaw@vasslaw.com.mt.