Yacht VAT Registration Scheme
The Maltese VAT department has launched as Scheme whereby a Maltese company purchases a pleasure yacht and enters into a lease-sale agreement of the yacht with a third party. The aim of the scheme is to allow to pay VAT on a yacht calculated on the percentage of the time that the yacht is deemed to sail in EU waters This will also result in a VAT paid certificate at the termination of the scheme, thus allowing the yacht free movement within the EU.
Scheme for payment of VAT on yachts
The main Characteristics of this scheme are as follows:
1. A Maltese company is set up to own the yacht. The company would also be registered with a valid VAT number here in Malta. This same company would later become a lessor of the yacht under the lease agreement.
2. This Maltese company will lease the yacht to another person, a Maltese, foreign person or company – the Lessee.
3. A leasing agreement (lease-purchase) of a pleasure yacht being an agreement whereby the lessor (the owner of a yacht) contracts the use of the yacht to the lessee in return for a consideration is then entered into between the lessor and the lessee. At the end of the lease period, the lessee may opt to purchase the yacht at a percentage of the original price.
4. The initial VAT payable at source by the purchaser on the purchase price of the yacht would in actual terms not be payable by the lessor to the seller/supplier of the yacht. In making this statement we are conscious of three possible scenarios that may apply and in any one of them the end result would be nil VAT or refundable VAT on the purchase of the yacht. These scenarios are:
- The yacht is purchased locally.
- The yacht is purchased from another Member State.
- The yacht is imported into the European Union.
Different criteria apply to each scenario mentioned above, which we would be happy to discuss with your specific yacht VAT Scenario (email: [email protected]).
5. What would attract the payment of VAT is the lease of the yacht as a supply of services. The supply of services is taxable according to the use of the yacht within the territorial waters of the European Union.
The Yacht VAT scheme introduced by the Maltese VAT authorities operates as follows:
1. It introduces a schedule of VAT rates which would be payable by the lessee on the lease services that are provided by the lessor based on the percentage of the lease taking place in EU waters which percentage depends on the type of yacht involved e.g. sailing yacht, motor yacht, and the length of the yacht concerned.
The raison d’etre of this scheme is that it is anticipated that yachts of a certain length spend only a part of their time in EU waters and a far greater time outside same. The Yacht VAT guidelines indicate that the VAT department presumes that:
- A yacht of 24 meters or above spends only 30% of its time in EU waters
- A yacht of 22 meters spends 40%; and
- A 13 mtr yacht 50% and so on and so forth
and therefore VAT on the yacht , at 18% Should be computed only on the amount of time the yacht will spend in EU territorial waters.
2. Approval must be sought from the Commissioner of VAT. For this purpose the VAT department would be provided with details necessary to determine the value and size of the yacht which details depend on whether the yacht is a second hand or a new yacht.
3. The VAT department, once it has approved the applicable rate, would upon request and once certain requirements are satisfied issue a provisional certificate at the beginning of this lease scheme confirming that VAT on the said yacht is applicable in Malta.
4. The yacht must come to Malta, possibly at the beginning of the lease agreement.
5. An initial contribution is to be paid by the lessee to the lessor amounting to 50% of the value of the craft at the beginning of the lease period.
6. The balance on the lease of the yacht would then be divided into equal monthly instalments but shall not exceed 36 months. VAT would be charged on each monthly installment at the applicable VAT rate. However it is important to note that the scheme expects the Lessor to make a profit from the leasing agreement over and above the value of the yacht, the amount of which is determinable by the Lessor. VAT is also to be calculated on the profit decided upon
7. The lease agreement will grant the Lessee the option to buy the yacht at the end of the lease period at a price which must be not less than 1% of the original value of the yacht.
8. At this stage, seeing the Lessee thus become the owner of the yacht and VAT thereon has been paid in full, the VAT Department will issue a Yacht VAT paid certificate in the name of the Lessee indicating that VAT has been paid in full.
The content on this website is for information purposes only and should not be taken as tax, legal or any other professional advice.
Contact us for more information as well as for a quote. We will happily guide you through the process and also advise you on the solutions that would best suite your needs!
[email protected] Or call +356 2010 3020