Yacht Leasing VAT Scheme

In November 2005 the Malta VAT Department introduced a set of guidelines on the applicable VAT for yacht leasing. This new scheme reduces to a large extent the payment of VAT on the lease-purchase of a pleasure yacht by a Maltese Company to a third party (whether company or individual).

A lease-purchase agreement (also known as financial lease) of a yacht is basically an agreement whereby the Maltese Company as the Lessor, being owner of the craft, leases it to a third party ( the Lessee) with an option in favour of the Lessee to purchase the boat at a reduced price, at the end of the lease period.

This incentive applies if a yacht bought by a Maltese Company is leased for a minimum period of 1 year to a maximum period of 3 years to another related person / company who will pay VAT on the lease payments.

Through this scheme the Lessee of the yacht will become the owner of an EU Vat certified yacht by paying effectively a VAT rate of circa 6.2% on the original yacht’s value. The Malta VAT Department has established that where a Maltese company buys a pleasure yacht and lease-purchases it to third parties, VAT is to be charged on the lease at the normal rate of 18% since this is a supply of a service deemed to be supplied in Malta. However, VAT is payable only on the time period of the lease during which the yacht is in EU waters. Since it is very difficult to accurately determine this period, the VAT department has issued its own ‘ presumed’ length of stay during which the yacht is expected to be staying in EU waters. The table below indicates the established percentage according to the type and length of yacht:

 Type and length of Yacht  % of lease subject to VAT  Effective rate of VAT
 Yachts over 24 metres  30%  5.4%
 Sailing Yachts 20.01 to 24 metres  40%  7.2%
 Motor Yachts 16.01 to 24 metres  40%  7.2%
 Sailing Yachts 10.01 to 20 metres  50%  9%
 Motor Yachts 12.01 to 16 metres  50%  9%
 Sailing yachts of up to 10 metres  60%  10.8%
 Motor yachts 7.51 to 12 metres  60%  10.8%