.jpg)
Maltese VAT legislation contains special rules dealing with finance leasing of yachts – in short, these rules represent an interesting tax planning opportunity for owners and financiers and a reduction on the VAT incidence on finance leasing of vessels. These rules are particularly attractive for yacht owners who wish to use Malta as a base for the importation or purchase of a new yacht into or within the EU.
Finance leasing is a contract which provides for the lease of a yacht by the lessor to the lessee in return for a fee and also provides for an option by the lessee to purchase the yacht at the end of the lease period at a price which is typically calculated as a percentage of the value of the vessel. A service consisting in the leasing of a yacht takes place where the lessor is established for VAT purposes. Where the lessor is established in Malta and registered for VAT in Malta, the lease will be subject to Maltese VAT.
Due to Malta’s proximity to non-EU waters, many yachts that are leased in Malta are effectively used within non-EU waters and therefore Malta treats leasing services as subject to Maltese VAT to the extent that their effective use and enjoyment is within the EU. Owing to the objective difficulty in establishing the time spent by the yacht within and outside EU waters, Malta has adopted a simplified method to determine the duration of the use of the yacht within and outside EU waters. This method is based on the length of the yacht and the method of propulsion as illustrated below:
Type of vessel |
Deemed EU use |
Effective Maltese VAT rate |
VAT saving |
| Motor yachts and Sailing yachts exceeding 24 metres in length | 30% | 5.4% | 12.6% |
| Sailing yachts between 20.01 and 24 metres long Motor yachts between 16.01 and 24 metres long |
40% | 7.2% | 10.8% |
| Sailing yachts between 10.01 and 20 metres long Motor yachts between 12.01 and 16 metres long | 50% | 9% | 9% |
| Sailing yachts up to 10 metres long Motor yachts between 7.51 and 12 metres long (if registered in the commercial register) | 60% | 10.8% | 7.2% |
| Motor yachts up to 7.5 long (if registered in the commercial register) | 90% | 16.2% | 1.8% |
In order to qualify for the above reductions in VAT, the rules prescribe a number of conditions, mainly :
- the lessor must be a Maltese limited liability company and registered for VAT in Malta
- the Lease agreement must be for a period not exceeding 3 years
- the contract must provide for an option of the lessee to purchase the yacht at the end of the lease at a percentage of the value of the yacht – the price payable upon the exercise of the option to purchase the yacht is taxable at the standard rate of 18%
- the finance lease agreement and the value of the yacht must be approved by the VAT Department prior to the commencement of the finance lease.
Maltese law does not provide for a possession tax on yachts nor is a transfer of a yacht subject to duty or other taxes.
This VAT finance leasing rules should be of interest to owners of EU and non-EU new and second hand yachts as well as to financiers and yacht agents and brokers. For further in- formation, please contact This e-mail address is being protected from spambots. You need JavaScript enabled to view it