2. INTRODUCTION
In November 2005, the Maltese VAT Department issued
Guidelines explaining the Department’s policy with regard to the
VAT treatment of yacht leasing arrangements entered into by
Maltese companies.
3. LEASE AGREEMENT
A leasing agreement of a pleasure craft is an agreement whereby
the lessor (the owner of the 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. The final
purchase is strictly an option which may be exercised at the end
of the lease for a separate consideration.
4. VAT TREATMENT OF LEASE
For VAT purposes, the lease of the craft is a supply of services
with the right of deduction of input VAT by the lessor, where the
right of input VAT applies. This supply of services is subject to VAT
according to the use of the craft, which is 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 individual or
company.
5. CALCULATION OF USE IN
EU WATERS
It is very difficult to trail the movements of a pleasure craft in
order to determine the period that the craft spends within EU
territorial waters and the time it spends outside EU territorial
waters. In this regard, the guidelines establish an estimated
(deemed) percentage portion of the lease based on the time that
the craft is used within the EU territorial waters. These
percentages are set according to the size of the craft and its
means of propulsion (power or sailing). The standard rate of VAT
of 18% in Malta is then applied on the established percentage of
the lease, deemed to be related to the use of the boat in EU
territorial waters.
6. VAT RATES :: MOTORYACHTS
% OF LEASE
TYPE OF MOTORYACHT VAT COMPUTATION
IN EU WATERS
Motoryachts cruising in protected waters only 100% 100% of consideration X 18%
Motoryachts up to 7.50m* 90% 90% of consideration X 18%
Motoryachts between 7.50m - 12.00m* 60% 60% of consideration X 18%
Motoryachts between 12.01m - 16.00m 50% 50% of consideration X 18%
Motoryachts between 16.01m - 24.00m 40% 40% of consideration X 18%
Motoryachts over 24.00m 30% 30% of consideration X 18%
* This size of craft is only permitted within the commercial registry
7. VAT RATES :: SAILING YACHT
% OF LEASE
TYPE OF SAILING YACHT VAT COMPUTATION
IN EU WATERS
Sailing Yachts cruising in protected waters only 100% 100% of consideration X 18%
Sailing Yachts up to 10.00m 60% 60% of consideration X 18%
Sailing Yachts between 10.01m - 20.00m 50% 50% of consideration X 18%
Sailing Yachts between 20.01m - 24.00m 40% 40% of consideration X 18%
Sailing Yachts over 24.00m 30% 30% of consideration X 18%
8. CONDITIONS
(a) The craft must enter a Maltese port, ideally at the beginning of the lease agreement.
(b) An initial contribution shall be paid by the lessee to the lessor amounting to 50%
of the value of the craft.
(c) The leasing agreement shall be between a Maltese company and any Maltese or foreign
person or company.
(d) The Lease installments shall be payable every month for a period of not less than
12 months and not more than 36 months.
(e) 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%.
9. CONDITIONS
(e) Prior approval shall be sought in writing from the Maltese Commissioner of VAT and each
application will be considered on its own merits and certain conditions may be applied.
Moreover the Commissioner of VAT may require the lessor to submit details regarding the use
of the boat.
(f) 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%.
(g) If the lessee exercises the option to purchase the boat after the end of the lease, a VAT paid
certificate will be issued to the lessee provided that all VAT due has been paid by the lessor.
10. PRACTICAL EXAMPLE
Peter, an individual residing in Spain acquired a 27 meter power boat from an Italian
shipyard for the price of €1,000,000.
Plan
Being a power boat and with an overall length of 27 meters, it will qualify for a ‘deemed’ EU use
of 30%, meaning that only 30% of the lease payments will be subject to Maltese VAT.
Step 1
Set up a Maltese Company to acquire the craft. The company must register for VAT in Malta.
Step 2
Italian ship yard will invoice the Maltese company for the full cost of the craft. This is an intra
community supply and hence, VAT is accounted for under the reverse charge mechanism
(no input VAT).
(If the vessel were acquired from outside the EU, a VAT deferral on the ‘importation’ may be
obtained).
11. PRACTICAL EXAMPLE
Step 3
The vessel is registered under the Maltese flag.
Step 4
The lease between the Maltese company (the lessor) and Peter himself (as the lessee) commences.
VAT is charged accordingly on the portion of the lease which is deemed to
take place in the EU,
i.e. 30%.
Step 5
Once the lease term is over, Peter exercised his option to acquire the craft at a predetermined
price of 1% of the original value of the craft. This is fully vatable.
12. PRACTICAL CALCULATION
Mechanics of the lease
Craft type: Power boat
Craft length: 27 meter
Craft value: €1,000,000
Total Payment
•Down payment from the lessee to the lessor = €500,000 (50% of €1,000,000 see note b)
•Only 30% of the initial deposit is subject to VAT (see table) hence €150,000 x 18% = €27,000.
Total payout to the lessor is €527,000
•The profit (referred to as the finance charge) from the leasing operation is set at +/- 5% and
therefore, the finance charge works out to €1,000,000 x 5% = €50,000
•Assuming that the lease will take place over a 36 month period, the 36 lease installments will be
calculated on the remaining €500,000 + €50,000 that is €550,000 divided by 36 installments =
€15,278.
13. PRACTICAL CALCULATION
•Note that only 30% of the €15,278 are subject to VAT hence:
•€15,278 x 30% = €4,583 x 18% = €825
•Therefore the lease installments amount to €15,278 + €825 = €16,103.
•At the end of the lease, the lessee may opt to acquire the craft, that is at say 1% of original value
and vat is charged on the full price hence €1,000,000 x 1% = €10,000 x 18% VAT = €1,800 =
€11,800
•TOTAL effective VAT LEAKAGE = €27,000 + €29,700 (this is 825 x 36 installments) + €1,800 =
58,500 i.e. 5.8%
14. SUMMARY 27M MOTORYACHT
36 months + 1
€ €
Vat
€
Tax
€
Total
Cost of yacht 1,000,000.00
Deposit 0.50 500,000.00
Vatable deposit 0.30 150,000.00 27,000.00
Total lease value 500,000.00
Finance charge 0.05 50,000.00
Total payable 550,000.00
Vatable element 0.30 165,000.00 29,700.00
Vat free element 385,000.00
Monthly install 16,102.78
Buy out 0.01 10,000.00 1,800.00
Taxable Fin charge 50,000.00 17,500.00
Taxable buy out 10,000.00 3,500.00
Totals (VAT & INCOME TAX) 58,500.00 21,000.00 79,500.00
Vat no option 1,000,000.00 x 18% VAT = 180,000.00
Saving 100,500.00
Effective Rate after expenses 0.08
VAT LEAKAGE 0.06
15. TAX REBATE FOR
FOREIGN NATIONALS
In certain cases it is also possible as a foreign EU national
to reclaim 85% of the corporation tax paid through the
lease. This possibility varies on a case-by-case basis and
depends on the individual’s tax status and domicile.
Should this have been possible in our practical example a
further tax saving of €17,850 (€21,000 X 85%)
would have been realised
16. QUESTIONS ?
We would be pleased to answer any queries you
may have relating to this presentation or the
Maltese Yacht Leasing Scheme at this time.
17. INTERESTED?
We are personally reachable at all times and we
look forward to demonstrating your case study
We would be pleased to prepare a fully-fledged
proposal including a breakdown of costs,
VAT Payable and Tax Payable at your request
18. GET IN TOUCH!
Mr. Niki Travers Tauss
+356 99442122
niki@esprityachting.com
