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. This is done through the provision of a bank guarantee amounting to 20% of the VAT due. Once the yacht has commenced its commercial activities the VAT department shall release the bank guarantee.
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. A tax effective system for VAT payment is the VAT Leasing Structure as explained below.
Malta’s VAT Guidelines on Private Yacht Leasing
The Maltese Authorities have published the new VAT guidelines relating to the place of supply on the hiring of pleasure yachts. These are based on the 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 places 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 Guidelines present the manner in which the use and enjoyment of the pleasure yacht is treated for VAT in Malta through a “Preliminary Ratio” used at arriving at the VAT due. The Lessor shall obtain the “Preliminary Ratio” of actual effective use and enjoyment of the yacht in EU territorial waters by dividing the actual effective use and enjoyment of the pleasure yachts in EU territorial waters by the total effective use and enjoyment in and outside EU waters during the said tax period or tax periods as applicable. A provisional tax payment shall be calculated by multiplying the taxable value of each supply by the preliminary ratio by the standard rate of VAT. A method of adjustment on the actual use and enjoyment shall then be carried out in the subsequent year after the first year of the lease.
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 firstname.lastname@example.org