Yachting in Malta – New guidelines regarding the VAT treatment of Yacht Leasing – March 2019

Background

Malta has always been at the forefront of offering a wide range of solutions to yacht owners.  Back in 2005, the VAT Department has issued guidelines regarding the VAT treatment of the leasing of yachts by Maltese Companies.  In March 2019, the VAT department has issued a new set of guidelines to reflect industry best practice and recent legal developments.

The guidelines follow Article 59a of the EU VAT Directive which allows Member States to determine the way how to tax the use and enjoyment of services, for the time that the service, such as the lease of a pleasure craft, is effectively used and enjoyed within EU territorial waters.

The guidelines are applicable to operating leases, and state that Maltese VAT on leases that are deemed to take place in Malta is to be calculated on the basis of the actual use and enjoyment of the yacht within EU territorial waters.  Thus, no VAT is due on the portion of the lease that the yacht is used and enjoyed outside EU territorial waters.   The guidelines also set out conditions on how to determine the actual use and enjoyment of the yacht within EU territorial waters and provide mechanisms how the actual amount of VAT that has been paid (initially based on preliminary data) can be adjusted to reflect actual VAT due (based on actual use) without incurring any penalties. 

 

 Conditions for application of the guidelines

·         Lessor must be a Maltese company

·         Lessee may be a Maltese or foreign individual or company

·         The lessor/owner of the yacht would make the yacht available to the lessee for a consideration and for a specified period

·         The lease period and the consideration paid for the use of the yacht must be based on commercial terms and agreed between both parties

·         The yacht must be placed at the disposal of the lessee in Malta

·         The lessor is required to obtain documentary and/or technological data from the lessee to determine the actual movements of the yacht

·         Prior approval shall be sought from the VAT Department seeking confirmation the application of Maltese VAT based on the actual effective use and enjoyment principle     

·         In addition to the quarterly VAT returns, an annual declaration is to be submitted to the Commissioner for Revenue within the prescribed timeframe 

 

How can we help?

We at Döhle Malta together with our other office in the Isle of Man can assist yacht owners and their advisors in the provision of the following services:

·         Creation and management of tax efficient structures

·         Corporate services such as directors and registered address

·         Yacht administration

·         Yacht registration

·         Yacht importation

·         VAT and Yacht leasing in Malta

·         Yacht chartering advice

·         Crew payroll and employment contracts

 

For more information and guidance on the practical application of these guidelines kindly contact :

Keith Fenech

Managing Director, Döhle Malta

Email : keith@dcts-malta.com