Navigating VAT: Yacht Leasing arrangements in Malta
Over the past few decades, Malta’s yachting industry has not only experienced steady growth but has also positioned itself as one of the leading yachting jurisdictions. This success stems not just from Malta’s strategic location, but also from the attractive incentives and competitive arrangements it offers, including attractive VAT incentives to yacht owners.
Malta VAT treatment of yachts intended for Private Use
As a general rule, the importation or acquisition of a luxury yacht within the European Union requires the full and immediate payment of VAT in order to allow the yacht to move freely within EU territorial waters.
That being said, in March 2020, Malta introduced guidelines outlining an attractive VAT deferral solution specifically for pleasure yachts intended for the lessee’s private use through a structured leasing arrangement.
This structured leasing arrangement is based on principles which emanated from a European Court of Justice decision, which clarified that the adoption of an asset leasing structure which defers VAT does not in itself give rise to a tax advantage and is not considered to be abusive as long as the contractual terms of such arrangement, correspond to arm’s length terms.
To benefit from the structured leasing arrangement, the following key conditions must be met:
- The lessor must be a Maltese-registered Limited Liability Company;
- The lessor must be registered for VAT purposes in Malta;
- A yacht leasing agreement must be in place between the lessor and the lessee outlining the terms and conditions of the lease;
- The lessee must be a non-taxable person;
- The pleasure boat must be actually put at the disposal of the customer in Malta.
Additional Considerations – ‘Use & Enjoyment’ rules
Malta also applies the ‘Use & Enjoyment’ principles laid down in article 59a of Council Directive 2006/112/EC. Under these rules, where the place of hiring is determined to be Malta, the general principle is that full taxation in Malta is applicable, however, should the yacht be used and enjoyed outside EU territorial waters, a VAT adjustment in favour of the lessor may be granted.
It is pertinent to note that to apply the ‘Use & Enjoyment’ rules, the lessor must obtain reasonable documentary and/ or technological data including logs and GPS/AIS data as evidence to substantiate such adjustment.
Should you need more information, do not hesitate to contact us on info@zencopartners.com
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