The yachting industry has continued to be an ever-growing industry in Malta due to its central Mediterranean location and because of the fiscal incentives granted for income derived by Maltese flagged vessels.

The Maltese VAT Department issued gudielines on the VAT treatment of yacht leasing in terms of the effective use of enjoyment rules.

The Maltese VAT yacht leasing scheme permits the acquisition of a yacht without suffering exorbitant VAT costs on the purchase whilst at the same time not requiring a complex corporate set up.

VAT treatment of Yacht Leasing

In fact, it is based on the setup of a single company in Malta which would acquire the yacht and subsequently lease such pleasure craft to a person or another company. The company, which would act as the lessor has the right to deduct input tax (VAT) on the purchase of a yacht, since it will be carrying out the economic activity, that is the leasing of the yacht, but would charge VAT on only a portion of the lease payment, depending on the use of the pleasure craft within the EU.

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 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.

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