VAT – Yacht Leasing Scheme/Guidelines – VAT mitigation and simplification measure

The VAT Department in Malta has issued guidelines relating to yacht leasing. The guidelines seek to mitigate the VAT impact on the purchase of a pleasure yacht, which is used privately.

The mitigation measure applies by virtue of the adoption of a leasing arrangement which is entered into by the owner of the yacht and its lessee.  The owner, being the lessor, needs to be a Maltese registered company, while the lessee can be any Maltese or non-Maltese person or company.  VAT at the standard Maltese rate of 18% is levied on the percentage of the lease deemed to be carried out within the territorial waters of the European Union (EU). The deemed usage of the boat in the EU is established in the following manner:

Type of boat

% of lease taking place in the EU 

Computation of VAT 

YachtSailing boats or motor boats over 24 metres in length

30% 

30% of consideration x 18%

Sailing boats between 20.01 to 24 metres in length

40% 

40% of consideration x 18%

Motor boats between 16.01 to 24 metres in length

40% 

40% of consideration X 18% 

Sailing boats between 10.01 to 20 metres in length

50% 

50% of consideration x 18%

Motor boats between 12.01 to 16 metres in length

50% 

50% of consideration x 18%

Sailing boats up to 10 metres in length

60% 

60% of consideration x 18%

Motor boats between 7.51 to 12 metres in length (if registered in the commercial register)

60% 

60% of consideration x 18%

         Motor boats up to 7.5 metres in length (if registered in the commercial register)

90% 

90% of consideration x 18%

Boats permitted to sail in protected waters only

100% 

100% of consideration x 18%

At the end of the lease period (the minimum lease period is that of 1 years, whilst the maximum is of 3 years), the yacht should be transferred to the lessee at a nominal value and upon the exercise of a purchase option by the lessee.  A VAT Paid Certificate will be issued once all processes are completed.

The larger the yacht, the lower is the percentage of the deemed usage in EU territorial waters, which would ultimately result in less VAT being paid on the yacht.

Please free to contact Mamo TCV Advocates should you wish to obtain more details on the adoption of this measure.

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