GUIDELINES REGARDING VAT TREATEMENT OF YACHT LEASING
What is financial leasing agreement
of a pleasure craft?
A financial leasing agreement of a pleasure craft
is an agreement whereby the lessor (the owner
of a craft) contracts the use of the craft to
the lessee (the person who leases the craft) in
return for a consideration. In addition, at the
end of the lease period, the lessee may opt to
purchase the craft at a percentage of the original
price.
How is the leasing agreement treated
for VAT purposes?
For the purpose of VAT, the lease of the craft
is a supply of services with the right of deduction
of input VAT by the lessor, where such right applies.
This supply of services is taxable according to
the use of the craft, attributed within the territorial
waters of the European Union (EU), provided that
the lessor is a Maltese company (including a commercial
bank) which is leasing the craft to any Maltese
or non-Maltese person or company.
How is the use of crafts within EU
territorial waters calculated?
It is very difficult to trail the movements of
pleasure crafts in order to determine the period
that the craft spends within the territorial waters
of the EU and the time it spends outside the EU.
In this regard, these guidelines establish the
estimated percentage portion of the lease based
on the time that the craft is used within the
territorial waters of the EU. These percentages
are set according to the length of the craft and
its means of propulsion (power or sailing).
The standard rate of VAT of 18% is only applied
on the established percentage of the lease, deemed
to be related to the use of the craft in EU territorial
waters. The table below indicated the established
percentage portions according to the type of craft:
|
% of
lease
subject to VAT
|
|
Sailing boats or motor boats
over 24 metres in length |
|
|
Sailing boats between 20.01
to 24 metres in length |
|
|
Motor boats between 16.01 to 24 metres
in length |
|
|
Sailing boats between 10.01 to 20 metres
in length |
|
|
Motor boats between 12.01 to 16 metres
in length |
|
|
Sailing boats up to 10 metres in length |
|
|
Motor boats between 7.51 to 12 metres
in length *
|
|
|
Motor boats up to 7.5 metres in length*
|
|
|
Craft permitted to sail in protected
waters only |
|
|
*
(if registered in the commercial register)
In order to apply these
guidelines the following conditions shall apply:
- The boat must come to Malta, possibly at the
beginning of the lease agreement.
- The financial leasing agreement shall be between
a Maltese company and any Maltese or foreign
person or company.
- Prior approval shall be sought in writing
from the Commissioner of VAT who is to confirm
the rate applicable according to the use in
EU territorial waters (depending on the size
and propulsion of the craft), as well as the
acceptability of the value of the craft as declared.
For this purpose a valuation certificate of
the craft shall be submitted with the application
for approval.
- An initial contribution shall be paid by the
lessee to the lessor amounting to 50% of the
value of the craft.
- The Lease instalments shall be payable every
month and the lease agreement shall not exceed
36 months.
- The lessor shall be expected to make a profit
from the leasing agreement over and above the
value of the boat.
- Any purchase value at the end of the lease
agreement shall not be less than 1% of the original
value of the craft, and this will be subject
to the standard rate of VAT at 18%.
If the lessee opts to purchase the craft at the
end of the lease, a VAT paid certificate will
be issued to the lessee provided that all VAT
due has been paid.
|
