The yachting

industry sails across a dynamic regulatory environment, increasingly leading to

more paperwork, administration, checks and procedures.  In this context, and considering that yachts

are generally a leisure escape, yacht owners are constantly looking for straight

forward solutions that allow them to sail their yachts worry-free.  Malta has been at the forefront in providing

such solutions

and finding a balance between what are usually deemed two opposing needs: those

of proper regulation and application of procedures on the one hand, and

enjoyment of the yacht without unnecessary and unwarranted restrictions, on the

other.

Malta’s solution for pleasure yachts is characterized by

practical as well as fiscal advantages whereby a yacht owner may register a

yacht in Malta in less than three days and potentially be in a position to pay

an effective rate of Value Added Tax (VAT) of 5.4% commensurate to the use of

the specific yacht in  European Union

(EU) waters.

With special focus on pleasure yachts and super-yachts,

Malta’s success in the maritime industry finds its basis on two main pillars:

The Reputability of its Flag and Register

Over the years, Malta has emerged as a flag of

choice guaranteeing professional guidance and non-bureaucratic procedures.

Malta’s shipping registry retains its status as the largest maritime registry

in Europe and the sixth largest in the world.

Particularly, Malta is considered a world leader in the registration of pleasure yachts and super-yachts

mainly due to logistical as well as legal advantages.

The registry has maintained its positive reputation for its

straightforward procedures for

yacht registration, provisional registration of a pleasure yacht obtainable

within one to three days. Whilst enjoying competitive registration and renewal

fees, a twenty-four hour, seven days a week service is guaranteed, utterly

useful in emergency situations.

Additionally, minimum technical requirements apply for pleasure yachts,

allowing yacht owners to freely design their vessels.  Malta has a flag state inspectorate to ensure

adherence to international standards, whilst no restrictions

apply in relation to the nationality of the master, officers and crew serving

on vessels flying the Maltese flag.

The Possibility of Fiscal Planning and VAT

payment minimisation in the context of Yachts and Super-Yachts used for pleasure

purposes.

In the case of yachts and super-yachts registered as pleasure yachts in the

European Union (EU), Malta offers an effective and favourable regime for VAT

payment, potentially down to an effective VAT rate of 5.4%, through a

leasing structure.

Malta’s

solution comes handy in a context where yacht owners generally have

difficulty in understanding the VAT principles applicable to the purchase of a

pleasure yacht to be sailed in EU waters.

Additionally, the amount of VAT payable on such an acquisition might be

a considerable expense to take into consideration when purchasing a vessel.

As per the EU Customs Code and its implementing provisions,

the rules regulating the use of pleasure yachts in EU waters revolve around two

main factors:

whether the yacht is

owned by persons or entities established in the EU or otherwise; and whether

the yacht shall be used in the EU temporarily or permanently.

Yachts owned by persons or entities established outside the

EU, or more specifically outside the customs territory of the community, and

which will be used for a short time in the EU, may be temporarily brought into

and used for private purposes in the EU, and this without the need to pay

customs duties or VAT. In such cases the yacht has to be placed under the

‘temporary importation procedure’. Once put under the temporary importation

regime, a yacht may be freely used in the EU with no further customs formality

up to 18 months.

In cases of yachts owned by a person or entity established

in the EU for private use whether temporary or otherwise, or in all other cases

where the private use of the yacht in EU waters is not temporary, VAT

implications arise. In such cases VAT liability arises for yachts purchased in

or formally imported into the EU.  The

applicable rate of VAT in the EU varies widely ranging from the lowest

percentage being 17% and cresting at 27%. In Malta the standard VAT rate is

18%.

The Maltese

solution is based on the economic activity of a Maltese company that

purchases the yacht and leases it out.

On the yacht being made available to the lessee in Malta, VAT is payable

in Malta on the lease of the yacht as a supply of services, given that supply

of services is taxable according to the use of the yacht within the territorial

waters of the European Union.  Such VAT

is payable at a rate proportionate to the time that the yacht is deemed to be

used and sailed in EU waters, taking into consideration the yacht’s propulsion

and length.  A sailing yacht of

twenty-four meters and over is deemed to sail in the EU for 30% of its time

and, hence, 30% of the standard 18% rate of VAT is due (5.4%).  At the expiration of the lease period and

sale of the yacht, a certificate confirming that VAT has been paid in relation

to the particular yacht is issued by Malta’s VAT Commissioner allowing the free

movement of the yacht within EU waters.

Dr Silvana Zammit B.A.,

M.A.(Law), LL.D.

Silvana

is a gaming law specialist advising on regulatory aspects, taxation &

general matters relating to the gaming industry.  Silvana is an active member

of the Malta Remote Gaming Council & the Chamber of Advocates. Silvana also

heads our Transport Practise Group which services clients in the maritime,

aviation and general transport industries.

For additional information about

yachting, please read:

The Yachting Industry in Malta

Malta VAT

Yacht Solutions