Yacht owners have always looked at Malta as a desirable destination not only because of its picturesque bays but also because of its stable legislative system offering attractive solutions surrounding pleasure yachts. New Malta Place of Supply Guidelines have just been issued on the 28th of February 2019, which tackle the place of supply of the hiring of pleasure yachts. They also offer rules for a new operating lease model which will give attractive results for Malta registered yacht owners.
The Place of Supply Guidelines
The “Guidelines regarding item 12 of Part Two of the Third Schedule to the Value Added Tax Act” (Malta Place of Supply Guidelines) provide that the Commissioner shall only consider the place of supply of the hiring of pleasure boats, if situated within Malta, as being situated outside EU territorial waters if the actual effective use and enjoyment of the services, takes place outside EU territorial waters. The leases which will be regulated by these rules are ones that commence on or after the 1st of November, 2018. The new legislation, therefore, gives an opportunity to those yacht owners in Malta who have started their leases late last year to also avail themselves of these rules.
Malta VAT on Lease of Pleasure Yachts
With regards to new leases on pleasure yachts, intended to be effectively used and enjoyed outside EU territorial waters in accordance with the Malta Place of Supply Guidelines, the lessor shall not take into account the expected effective use and enjoyment of the pleasure yacht by the lessee and shall apply VAT as follows:
(a) Where the lease commences at least 30 days prior to the end of the tax period in which the lease commencement date falls (“the first tax period”), the lessor shall charge the full VAT due on the consideration payable by the lessee for the said first tax period; and
(b) Where the lease commences less than 30 days prior to the end of the first tax period, the lessor shall charge the full VAT on the consideration payable by the lessee for the first tax period and the subsequent tax period (“the second tax period”).
The determination of VAT payable in accordance with the Malta Place of Supply Guidelines will depend on the determination of a preliminary ratio. In order to determine this the lessor has to obtain documentation/technical data that determines the use and enjoyment of the pleasure yacht both within and outside EU territorial waters. The ratio is worked out as follows:
- By dividing the actual effective use and enjoyment of the yacht in EU waters by the use outside EU territorial waters during the tax period;
- The result provisionally determines the use in the subsequent tax periods;
- Provisional output tax is calculated by multiplying the taxable value of each supply by the “Preliminary Ratio” by the standard rate of VAT;
- Tax overpaid will be calculated and adjusted in the tax return for the following period.
The adjustment and calculation of output tax depends on the duration of the lease.
Requirements for the Malta Yacht Leasing Solution
The requirements are those of :
- Setting up a Malta shipping organisation as the yacht owner leasing the yacht to another entity.
- Establishing a lease period and a consideration in a lease contract between the parties (depending on yacht value and specifications).
- Working out a financial model based on the specifications of the yacht and intended use.
- Payment of VAT by the lessee on a quarterly basis on the lease instalments established between the parties, that are worked out depending on the use and enjoyment within EU territorial waters in accordance with the Malta Place of Supply Guidelines.
A leading Maritime and Yacht Practice
We welcome the Malta Place of Supply Guidelines for superyachts and add this to our international yacht ownership and yacht management solution offerings.
Chetcuti Cauchi's tradition in international maritime law practice and yacht solutions has its inception in Malta's growing ship and yacht registry as an international maritime hub. Our Yachting Practice grew with yacht owners and managers' demands for bespoke solutions required for their yacht operations in and outside European waters.
The team enjoys dedicated yacht service resources handling all aspects required by a maritime operator including local representation and advice, yacht registration, yacht finance and dispute resolution. Our Yachting Practice is made up of a dedicated team of lawyers and paralegals that cater on a 24-hour basis for the needs of the yachting industry. We work hand in hand with the maritime authorities, surveyors, tax and VAT authorities and financial institutions. Over the past 16 years, we have garnered success and recognition with the yachting industry. We provide services through all of our offices, particularly our London office in Temple.
Yacht owners have always looked at Malta as a desirable destination not only because of its picturesque bays but also because of its stable legislative system offering attractive solutions surrounding pleasure yachts. New Malta Place of Supply Guidelines have just been issued on the 28th of February 2019, which tackle the place of supply of the hiring of pleasure yachts. They also offer rules for a new operating lease model which will give attractive results for Malta registered yacht owners.
The Place of Supply Guidelines
The “Guidelines regarding item 12 of Part Two of the Third Schedule to the Value Added Tax Act” (Malta Place of Supply Guidelines) provide that the Commissioner shall only consider the place of supply of the hiring of pleasure boats, if situated within Malta, as being situated outside EU territorial waters if the actual effective use and enjoyment of the services, takes place outside EU territorial waters. The leases which will be regulated by these rules are ones that commence on or after the 1st of November, 2018. The new legislation, therefore, gives an opportunity to those yacht owners in Malta who have started their leases late last year to also avail themselves of these rules.
Malta VAT on Lease of Pleasure Yachts
With regards to new leases on pleasure yachts, intended to be effectively used and enjoyed outside EU territorial waters in accordance with the Malta Place of Supply Guidelines, the lessor shall not take into account the expected effective use and enjoyment of the pleasure yacht by the lessee and shall apply VAT as follows:
(a) Where the lease commences at least 30 days prior to the end of the tax period in which the lease commencement date falls (“the first tax period”), the lessor shall charge the full VAT due on the consideration payable by the lessee for the said first tax period; and
(b) Where the lease commences less than 30 days prior to the end of the first tax period, the lessor shall charge the full VAT on the consideration payable by the lessee for the first tax period and the subsequent tax period (“the second tax period”).
The determination of VAT payable in accordance with the Malta Place of Supply Guidelines will depend on the determination of a preliminary ratio. In order to determine this the lessor has to obtain documentation/technical data that determines the use and enjoyment of the pleasure yacht both within and outside EU territorial waters. The ratio is worked out as follows:
- By dividing the actual effective use and enjoyment of the yacht in EU waters by the use outside EU territorial waters during the tax period;
- The result provisionally determines the use in the subsequent tax periods;
- Provisional output tax is calculated by multiplying the taxable value of each supply by the “Preliminary Ratio” by the standard rate of VAT;
- Tax overpaid will be calculated and adjusted in the tax return for the following period.
The adjustment and calculation of output tax depends on the duration of the lease.
Requirements for the Malta Yacht Leasing Solution
The requirements are those of :
- Setting up a Malta shipping organisation as the yacht owner leasing the yacht to another entity.
- Establishing a lease period and a consideration in a lease contract between the parties (depending on yacht value and specifications).
- Working out a financial model based on the specifications of the yacht and intended use.
- Payment of VAT by the lessee on a quarterly basis on the lease instalments established between the parties, that are worked out depending on the use and enjoyment within EU territorial waters in accordance with the Malta Place of Supply Guidelines.
A leading Maritime and Yacht Practice
We welcome the Malta Place of Supply Guidelines for superyachts and add this to our international yacht ownership and yacht management solution offerings.
Chetcuti Cauchi's tradition in international maritime law practice and yacht solutions has its inception in Malta's growing ship and yacht registry as an international maritime hub. Our Yachting Practice grew with yacht owners and managers' demands for bespoke solutions required for their yacht operations in and outside European waters.
The team enjoys dedicated yacht service resources handling all aspects required by a maritime operator including local representation and advice, yacht registration, yacht finance and dispute resolution. Our Yachting Practice is made up of a dedicated team of lawyers and paralegals that cater on a 24-hour basis for the needs of the yachting industry. We work hand in hand with the maritime authorities, surveyors, tax and VAT authorities and financial institutions. Over the past 16 years, we have garnered success and recognition with the yachting industry. We provide services through all of our offices, particularly our London office in Temple.