AML offers solutions to yacht owners who have acquired or are in the process of acquiring a yacht and would like to sail the yacht within EU territorial waters. This can be done through the following methods.
Importation of Yachts intended for Commercial use
Yachts intended for commercial use may be imported into the EU via Malta for the relevant VAT and customs procedures to be undertaken. This would then allow the yacht to be chartered out and to sail freely within EU waters.
Malta’s VAT rate on the importation of yachts for commercial yachts is 18%, however a VAT deferment scheme is available which replaces the need to pay the 18% VAT.
- Deferment of VAT on the importation of commercial yachts by Maltese owning entities having a Maltese VAT registration without the requirement of the importing entity setting up a bank guarantee.
- Deferment of VAT on importation of commercial yachts by EU owning entities having a Maltese VAT registration provided that the company appoints a VAT representative in Malta in terms of Article 66(2)(b) of the VAT Act without the requirement of the importing entity setting up a bank guarantee.
- Deferment of VAT on importation of commercial yachts by non –EU owning entities on provision by the importing entity of a bank guarantee in an amount equivalent to VAT on 0.75% of the value of the yacht which would be capped at Euro 1 million. The bank guarantee shall be released by the VAT department once the chartering activities commence and once the chartering company has filed its first VAT return.
Temporary Importation intended for Private use
Yachts and superyachts flying a non-EU flag, owned by non EU residents and using their yacht privately, may place their yachts under temporary importation via Malta, for a period of 18 months. During this period the yacht can sail freely within EU waters without any further customs formalities. Here the Customs Authority in Malta will require the provision of a security or guarantee to cover the payment of customs duty & VAT which would become due if the yacht does not leave EU territory after the operative period.
At the end of the temporary importation period, the vessel must either leave EU waters or pay VAT.
Short Term Yacht Leasing
Short term yacht leasing refers to a continuous lease of not more than 90 days. The VAT rules on the place of supply for short term hiring is where the yacht is placed at the disposal of the customer. Malta’s VAT rate for short-term hiring for charters commencing in Malta is 18%. In order for this to apply:
- The yacht must be put at the disposal of the lessee in Malta
- Owner/operator of yacht (lessor) must be VAT registered in Malta
- Owner/operator may claim input VAT incurred on chartering activities
- Owner may claim input VAT on acquisition of yacht
Malta’s VAT Guidelines on Yacht Leasing
On the 12th March 2020, the Maltese Authorities have issued new guidelines regarding Item 12 of Part Two of the Third Schedule to the VAT Act. The new guidelines are based on the application of the VAT “use and enjoyment” rules of Article 59a of the EU VAT Directive whereby the use of the pleasure yachts which are used within and outside EU territorial waters are taxed on the part which is used within the EU.
For the purpose of Item 12 of Part Two of the Third Schedule of the VAT Act, the Commissioner shall only consider the place of supply of the hiring of pleasure yachts, if situated within Malta, as being situated outside EU territorial waters if the actual effective use and enjoyment of the services, in whole or in part, takes place outside EU territorial waters and as long as the conditions referred to in the Guidelines are satisfied.
The Guidelines relate to the use and enjoyment of a pleasure yacht which is used within and outside EU territorial waters by a lessee who would have entered into an operating lease with a lessor. The size of the yacht and the method of propulsion are not factors which are taken into account in the new guidelines.
The Commissioner for Revenue recognises that lessors will not be able to assess at the commencement of the lease, the extent to which the pleasure boat is effectively used and enjoyed by the lessee within and outside EU territorial waters in those situations where lease payments are paid in advance by the lessee to the lessor. Therefore the Commissioner has adopted a system of adjustment of VAT based on actual use and enjoyment. The lessor will thus charge the full Malta VAT of 18% on full lease charged at commencement of lease but shall make VAT adjustments in future VAT returns to reflect the actual time the yacht spends in EU territorial waters. This may only be done when the time actually spent within/outside EU waters can be determined through documentary and technological data obtained either through logs held by the master or GPS/AIS data which the lessor can obtain from the lessee.
The Guidelines present the manner in which the use and enjoyment of the pleasure yacht is treated for VAT in Malta through an “Actual Ratio” obtained by the lessor, through documentary/technological data, of actual effective use and enjoyment outside EU territorial waters by dividing the effective actual use and enjoyment outside EU territorial waters by the total effective use and enjoyment of the yacht in and outside EU territorial waters during a tax period. An “Excess of Output Tax”shall then be calculated as the difference of VAT actually charged and the result of the “Actual Ratio” multiplied by the taxable value charged for the period multiplied by the standard rate of VAT. In this way the excess of output tax paid is adjusted in the following vat return.
The operating lease would typically be setup as follows:
- Setting up of a Maltese Shipping Organization which shall act as lessor
- Lessor shall acquire the yacht in Malta through this Maltese Shipping Organization by applying the place of supply rules
- The lessor shall enter into an operating lease agreement with a lessee for a consideration and for a specified period of time which shall be agreed between the parties
- The consideration to be paid during the lease period shall be agreed between the lessor and lessee
- Lessor shall supply the yacht to the Lessee in Malta
- The lessee shall pay VAT on the lease instalments to the Lessor on the actual use and enjoyment of the yacht in EU waters
- The lessor shall procure from the lessee such reasonable documentary and /or technological data to determine the actual effective use and enjoyment by the lessee of the pleasure yacht
AML offers advisory to owners on different models which best suit their particular intended use of operation.
For more information on how you may benefit from Malta’s new Guidelines on the leasing of Private Yachts contact Suzanne Brincat Dowdall on sdowdall@amlmalta.com
