Malta's Yacht Leasing Structure
For several decades Malta has been a preferred destination and jurisdiction for yacht owners. The islands location in the central Med, well serviced marinas and yacht yards and beautiful cruising spots in clean crystal clear water, has made Malta a popular choice for visiting yachts, refit and repair, a wintering destination and a sound jurisdiction for a reputable European flag of confidence.
The Maltese Authorities have published guidelines covering the the VAT treatment of the long-term hiring of pleasure yachts including their application in the context of the use and enjoyment provisions of the VAT law.
The Commissioner for Revenue recognises that lessors of means of transport which are pleasure boats will not be able to assess, at the date of each chargeable event, the extent to which the pleasure boat is effectively used and enjoyed by the lessee within and outside EU territorial waters in those situations where lease payments are payable in advance by the lessee to the lessor.
Accordingly, and for the purposes of Item 12 of Part Two of the Third Schedule to the VAT Act, the Commissioner shall only consider the place of supply of the hiring of pleasure boats, 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 place outside EU territorial waters and as long as the conditions referred to in the Guideline are satisfied.
The lessor will be a Maltese shipping company who leases the yacht to a lessee. The lease payments and the duration of the lease will be based on commercial decisions which will be agreed to between the parties and form part of the lease agreement. The commercial decision will consider factors such as the yachts age and usage, her specification and value at the time as well as market conditions at the time.
The lease payments by the lessee to the lessor will be taxed according to actual use and enjoyment. The guidelines explain how the use and enjoyment of the vessel in territorial waters is calculated. In this regard, the lessor shall procure from the lessee such reasonable documentary and/or technological data which confirm actual effective use and enjoyment by the lessee of the pleasure yacht within and outside EU territorial waters.
Based on such documentary or technological date , the lessor shall obtain a preliminary ratio by dividing the actual effective use and enjoyment of the pleasure yacht in EU territorial waters by the total effective use and enjoyment in and outside EU territorial waters, during the initial tax period/s.
The guidelines provide the method by which the preliminary ratio is to be used to calculate the initial tax as well as the method for tax adjustments and the calculation of output tax for the remaining duration of the lease.