Malta Short Term Yacht Chartering: Guidelines Regarding Vat Treatment of Short-Term Yacht Chartering

January 19, 2017

On the 29th July 2013, the VAT Department published guidelines in relation to the Malta VAT treatment of short-term yacht charters starting in Malta, which guidelines are largely similar to the interpretation which is applicable to long-term yacht leases.

A short-term charter of a yacht is an agreement whereby the yacht owner/operator contracts the use of the yacht for a consideration with a crew or on a bare boat basis. The term of the charter cannot be more than 90 days.

For VAT purposes, the short-term charter of a yacht to be used for leisure purposes is a supply of a service which is taxable at the standard rate of VAT. The place of taxation is the place where the yacht would actually be placed at the disposal of the customer, in this case in Malta. Subject to certain conditions, the taxation of this supply would be limited to that portion of the use of the yacht within the territorial waters of the European Union (EU).

It is very difficult to physically trail the movements of a yacht in order to determine the period during which the yacht is used within the territorial waters of the EU and the period during which it is used outside the EU. In this regard, these guidelines set out to establish the estimated percentage portion of the charter based on the time that the yacht is made use of within the territorial waters of the EU. These percentages are set according to the length of the yacht and its means of propulsion (power or sailing). The standard rate of VAT of 18% is applied on the established percentage of the charter deemed to be related to the use of the yacht within EU territorial waters.

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