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.
Maltese Yacht Leasing Structure
The Maltese leasing structure offers yacht owners purchasing yachts for their own private use, which are imported from outside the EU or yachts built within the EU, to pay VAT on their yachts on a calculated percentage which the vessel is deemed to be used in EU waters and for them to obtain a VAT paid certificate at the end of the structure.
The Malta VAT Department has published the “Guidelines Regarding treatment of Yacht Leasing” in 2005 which outline the terms and conditions which can be applied to the leasing of pleasure yachts owned by Maltese companies which work on the deemed use and enjoyment rules. It is assumed that the larger the length of the yacht the less time it is deemed to spend in EU territorial waters and thus the lower the VAT payable.
The yacht lease structure as outlined by the guidelines explain how the lessor who is the owner of the yacht (in this case a Malta limited liability company) enters into a lease agreement with a lessee, who could be either be another Maltese company or foreign holding company (which are not VAT registered) or to a private individual. At the end of the lease period, the lessee has an option to purchase the yacht in return for a consideration. During the lease agreement, the lease of the yacht is deemed to be a supply of service and is taxable according to the percentage deemed use of the yacht within EU territorial waters.
Since it is very difficult to trail the movements of a pleasure yacht, the VAT department has established the estimated percentage portion of the lease based on the time that the yacht is used within EU territorial waters. These percentages are set according to the length of the yacht and its means of propulsion (power or sailing).
|Type of boat||% of lease taking place in the EU||Computation of VAT|
|Sailing boats or motor boats over 24 metres in length||30%||30% of consideration x 18%|
|Sailing boats between 20.01 to 24 metres in length||40%||40% of consideration x 18%|
|Motor boats between 16.01 to 24 metres in length||40%||40% of consideration x 18%|
|Sailing boats between 10.01 to 20 metres in length||50%||50% of consideration x 18%|
|Motor boats between 12.01 to 16 metres in length||50%||50% of consideration x 18%|
|Sailing boats up to 10 metres in length||60%||60% of consideration x 18%|
|Motor boats between 7.51 to 12 metres in length||60%||60% of consideration x 18%|
|Motor boats up to 7.5 metres in length||90%||90% of consideration x 18%|
|Boat permitted to sail in protected waters only||100%||100% of consideration x 18%|
- Prior approval must be sought from the Director General of VAT in regards to the value of the yacht and the applicable percentage on which VAT is chargeable according to its use within EU waters. Each application is considered on a case by case basis and may be subjected to further conditions.
- The yacht must be physically in Malta at the beginning and at the end of the lease agreement.
- A provisional VAT paid certificate will be issued by the department upon the submission and payment of the first VAT return to the VAT Department which may be placed on board and will allow the vessel to call other European ports.
- At the end of the lease agreement, subject that all VAT obligations have been paid, a VAT paid certificate shall be issued by the department which will allow the yacht to sail freely within EU territorial waters.