On the 5th April 2016, the VAT Department in Malta issued its new guidelines in respect of the VAT treatment for aircraft leasing. With the introduction of the VAT Departmentâ€™s guidelines, a Maltese structure can benefit from a significantly lower effective rate of VAT.
The VAT rate that can be achieved is based on the time spent in European Union (EU) Airspace, which is difficult to identify in advance. In order to assist, the VAT department in Malta have issued the following guidelines for the established percentage portions according to the maximum range of the aircraft:
% of lease taking place in the EU
Computation of VAT
Effective rate of VAT
0 - 2,999
60% of consideration @ 18%
3,000 - 4,999
50% of consideration @ 18%
5,000 - 6,999
40% of consideration @ 18%
7,000 - upwards
30% of consideration @ 18%
As a result of the above changes, a large number of business aircraft could potentially benefit from a lower effective rate of VAT. For example, the Bombardier Challenger 650 (max range 7,408 km) and Gulfstream G450 (max range 8,056 km) could be imported and benefit from an effective VAT rate of 5.4% utilising a Maltese lease structure.
The conditions that will apply to the above are:
- The leasing structure requires both the lessor and lessee to be established in Malta.
- The lease will not be for a period greater than 60 months.
- The lease payments must be made monthly, and VAT paid every quarter.
- At the end of the lease, the lessee may opt to purchase the aircraft at a percentage of the original cost.
- If the Lessee exercises the option to purchase the aircraft, a VAT paid certificate will be issued as long as all the VAT due under the lease has been paid.
- The Commissioner for Revenue in Malta has the right to request the lessor to submit details of the use of the aircraft.
- Prior approval of the value of the aircraft and the applicable percentage of the lease subject to VAT shall be obtained in writing from the Commissioner for VAT.
How can DCTS (Malta) Limited assist?
DCTS (Malta) was established in 2012 with experienced personnel well versed on Malta as a financial services jurisdiction. Our team has a wealth of experience in the establishment of Maltese leasing structures, having established a number of similar structures for the importation and operation of yachts. Furthermore, by working with our office located in the Isle of Man we are able to deliver the most suitable structuring solution for each client.