VAT treatment of Short-term yacht chartering
A short-term charter of a yacht is defined as an agreement under which the yacht owner/operator
contracts the use of the yacht for reward, whether with a crew or on a bare boat basis, for a maximum of 90 days.
For VAT purposes, the short-term charter of a yacht for leisure purposes is a supply of a service that is taxable at the standard 18% VAT rate. The place of taxation is where the yacht is placed at the disposal of the customer, in this case in Malta. Subject to certain conditions, the taxation of this supply is limited to that portion of the use of the yacht within the territorial waters of the EU.
The supplier of the charter has the right to claim input tax incurred on the fuelling and provision of the boat, provided these goods are sold to the client under a separate contract, or provided they are invoiced separately from the charter service. The supply of these goods to the charter client is made at the full standard 18% VAT rate.
Furthermore, the supplier of the charter is also entitled to claim input VAT incurred on fuel purchased for the outward journey of the yacht to its next port of destination after completion of the charter. Terms and conditions apply depending on the applicable locale and on EU VAT laws. In accordance with the guidelines related to the percentage of a lease deemed to take place within the EU, the VAT department has established percentages it deems as standard for the use of short-term chartered yachts within EU territorial waters.