Yachting is a rapidly growing industry in Malta. Following the publishing of guidelines issued by the Office of the Commissioner for Revenue, the overall VAT incidence incurred on the leasing of a yacht can be significantly reduced, depending on the use made.
These guidelines were published in 2019, following a progression in industry knowledge and the necessity of these being more coherent with the latest EU developments and best market practices. The first set of guidelines were published back in 2005.
With respect to these updated guidelines in relation to a lease taking place in Malta, VAT will be charged on the portion of the lease covering effective use and enjoyment of the yacht within EU waters. No VAT will be charged on the portion of the lease covering effective use and enjoyment of the yacht within non-EU or international waters. There are certain conditions which one needs to abide by to benefit from the Yacht Leasing guidelines. These include that:
- The lessor must possess a valid Maltese VAT identification number;
- The yacht has to be placed at the disposal of the lessee in Malta;
- The lessor and lessee must enter into a binding yacht leasing agreement, which needs to be presented to the VAT Department;
- The lessor needs to seek written approval from the VAT Department to apply Maltese VAT on the basis of effective use and enjoyment;
- The lessor must keep track of adequate and appropriate records to demonstrate effective use and enjoyment within or outside the EU territory; and
- An annual declaration must be filed with the Commissioner for Revenue within the prescribed timeframe.
In addition to the above-mentioned conditions, there are others which apply for long-term lease. These include that the:
- Lessor must be established for VAT purposes in Malta; and
- Lessee, who can be established in or outside Malta, must be a non-taxable person, i.e. a person who does not lease in the yacht for business purposes.
The 2019 Yacht Leasing Guidelines underpin the conditions for the Commissioner to exercise his discretion and approve that the lessor levies VAT only on the portion of the lease covering effective use and enjoyment within the EU.