VAT – Aircraft Leasing Guidelines/Initiative – VAT mitigation and simplification measure

The VAT Department in Malta has issued guidelines relating to aircraft leasing. The guidelines which are based on the current yacht leasing measures, seek to mitigate the VAT impact on the purchase of an aircraft and its engines.

The guidelines would apply to aircrafts used privately.

The mitigation measure applies by virtue of the adoption of a leasing arrangement which is entered into by the owner of an aircraft and its lessee. Both the owner and the lessee would need to be Maltese registered entities. VAT at the standard Maltese rate is levied on the deemed usage of the aircraft in the European Union. This deemed usage is determined by reference to the aircraft range in the following manner: 

Aircraft type by Range (KM) 

% of lease taking place in the EU 

Computation of VAT 

0 – 2,999 

60% 

60% of consideration X 18% 

3,000 – 4,999 

50% 

50% of consideration X 18% 

5,000 – 6,999 

40% 

40% of consideration X 18% 

7,000 – upwards 

30% 

30% of consideration X 18%

At the end of the lease period, the aircraft 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 longer the range of the aircraft, the lower is the percentage of the deemed usage in the European Union, which would ultimately result in less VAT being paid on the aircraft and its engines.

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

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