Yachting: Private & Commercial Malta has always been popular for the registration of commercial and pleasure yachts. From an infrastructural point of view, Malta offers numerous yacht marinas that are found along the coasts of the Maltese islands. Additionally, facilities for super yachts, fuel bunkering, technical services for repairs and services, luxury on-site facilities and immediate access to other off-site facilities are also available. Use of Maltese Companies in Pleasure Yacht Structures Ownership of yachts through the formation of Maltese companies is generally inexpensive while also being very beneficial as: it reduces personal liabilities and increases anonymity for the actual owner; the transfer of ownership could be carried out through a transfer of shares in the Maltese company holding the yacht – share transfers by non-residents are exempt from taxation in Malta; the setting-up of a Maltese company by non-residents to act as a lessor of pleasure yachts (i.e. having a commercial intent) will be subject to an effective tax rate of only 5%. This could also be lowered to 0% if the yacht in question falls to be classified as a tonnage tax ship (please refer to Fact Sheet on Commercial Shipping Activities).
Reduced VAT Rate in case of Private Pleasure Yachts The Maltese VAT Department has issued a scheme through which yacht owners are allowed to sail freely within EU waters while simultaneously benefitting from a considerably reduced effective VAT rate payable on the value of the yacht acquired albeit for private purposes. The scheme commences with the acquisition of a pleasure yacht by a Maltese company. This would be subject to VAT in Malta at the standard rate of 18%, but the Maltese company would have the right to deduct such input VAT incurred since in return it will be carrying out an economic activity consisting in the leasing of the yacht to a lessee (resident or not resident). This means that the effective VAT incurred until this stage is nil. The leasing of the yacht is considered to be a supply of service for VAT purposes and is therefore taxable on the use of the yacht made within EU territorial waters. Obviously, calculating the portion of time during which a yacht would have sailed within EU territorial waters is considerably complex, and for this reason, the VAT Department has established means based on the length and mode (sailing or motor) of the yacht in question – please refer to Table 1. By applying these VAT rates, at the end of the lease agreement the overall effective VAT rate incurred upon the acquisition of the yacht could be lowered to as low as 5.4%. Other conditions which must also be satisfied include: The yacht must come to Malta, preferably at the start of the lease agreement; Prior written approval from the Maltese VAT Department is required
© 2014 KSi Malta, a member firm of the KS International an association of independent member firms. All rights reserved. No one should act or rely on information prior to seeking appropriate professional advice on his/her specific situation.
The lessee must pay to the lessor an initial contribution of 50% of the value of the yacht; The lease instalments must be payable each month up to a maximum of 36 months; The lessor is expected to make a profit from the lease agreement; The final purchase value of the yacht, if purchased by the lessee from the lessor, must be at least equal to 1% of the original value of the yacht.
Nevertheless, the guidelines provide that, subject to certain conditions being satisfied, Maltese VAT should only be levied on that part of the charter that is deemed to take place in EU territorial waters. Similarly, to the VAT Leasing scheme for private yachts (above), the guidelines provide means by which to establish a VAT rate which specifically represents the portion of the yacht’s movement taking place in EU territorial waters: Table 2 Type of Yacht
% of lease
Effective VAT %
Table 1 Type of Yacht
% of lease
Effective VAT %
Sailing/motor over 24m
30%
5.4%
Sailing/motor over 24m
30%
5.4%
40%
7.2%
Sailing between 20.01 to 24m
Sailing between 20.01 to 24m
40%
7.2%
Motor between 16.01 to 24m
40%
7.2%
Motor between 16.01 to 24m
40%
7.2%
50%
9%
Sailing between 10.01 to 20m
Sailing between 10.01 to 20m
50%
9%
Motor between 12.01 to 16m
50%
9%
Motor between 12.01 to 16m
50%
9%
All other yachts
100%
18%
Sailing up to 10m
60%
10.8%
Motor between 7.51 to 12m
60%
10.8%
Motor up to 10m
90%
16.2%
Reduced VAT Rate in case of Chartered Pleasure Yachts The place of supply for short-term (which for VAT purposes is taken to be a period not exceeding 90 days) chartering of yachts, whether with crew or not, is the place where the yacht is put at the disposal of the customer, in other words where the customer takes physical possession of it. Therefore, the short-term chartering of a yacht to private persons for pleasure purposes which embark from Malta will be subject to the standard 18% VAT rate in Malta.
Prior to applying this VAT treatment, written authorisation must be obtained from the Maltese VAT Department. Sufficient information and data about the yacht in question must be duly provided to the VAT Department before any decision is taken. Normal expenses incurred directly in the provision of the services incurring VAT are subject to the normal input tax deduction rules. However, with respect to costs for the fuelling and provisioning incurred by the supplier of a yacht charter (which would be for the private enjoyment of the charter customers), any input VAT incurred thereon may only be claimed if these are then re-sold/reinvoiced separately to the chartering customer. The supply of these goods to the chartering customers would have to be charged at the full 18% standard rate of VAT.
Contact us
Our Office
Bernard C. Gauci Senior Advisor bgauci@ksimalta.com
Villa Gauci Mdina Road Balzan BZN 9031 Malta Tel: (+356) 21226176 Fax: (+356) 21226019
Benjamin Griscti Senior Advisor bgriscti@ksimalta.com
www.ksimalta.com
A member of KS International
© 2014 KSi Malta, a member firm of the KS International an association of independent member firms. All rights reserved. No one should act or rely on information prior to seeking appropriate professional advice on his/her specific situation.