Yacht Leasing Structure

In November 2005 the Malta VAT Department introduced reduced rates of VAT in relation to leasing arrangements with respect to yachts, entered into between a Maltese yacht-owning company as lessor and any lessee,, which could effectively reduce the Malta VAT on such transactions to as little as 5.4%.

Whilst the monthly lease charges by the lessor to the lessee are subject to VAT at the standard Malta VAT rate of 18%, it is deemed that the yacht will be only be used partly within EU territorial waters and consequently VAT is chargeable only in respect of the portion that the yacht is deemed to be within EU territorial waters during the lease period. The VAT Guidelines indicate that this percentage will be determined according to the type of the craft as demonstrated in the following table:

% of lease subject to VAT Effective rate of VAT
Yachts over 24 metres in length 30% 5.40%
Sailing yachts between 20.01 and 24 metres in length 40% 7.20%
Motor yachts between 16.01 and 24 metres in length 40% 7.20%
Sailing yachts between 10.01 and 20 metres in length 50% 9%
Motor yachts between 12.01 and 16 metres in length 50% 9%
Sailing yachts up to 10 metres in length 60% 10.80%
Motor yachts between 7.51 to 12 metres in length (if registered in the commercial register) 60% 10.80%
Motor yachts up to 7.51 metres in length (if registered in the commercial register) 90% 16.20%

The salient features of the yacht leasing structure can be summarised as follows:

  • The yacht may be registered under the Malta Flag or any other EU flag;
  • The lessor company is entitled to deduct any input VAT incurred on the purchase of the yacht since the yacht represents an asset used for the conduct of the lessor company’s economic activities;
  • The yacht must be physically imported into Malta during the lease period or at the time when the purchase-option is exercised.  Changes in the “place of supply” rules in 2013 will require that the yacht must be in Malta on the date when any lease longer than 90 days commences;
  • The leasing agreement is to be concluded between the Maltese yacht-owning company as lessor and any Maltese or foreign person or company as lessee;
  • Prior approval of the lease arrangement must be sought in writing from the Commissioner of VAT;
  • An initial contribution is to be paid by the lessee to the lessor amounting to 50% of the value of the yacht;
  • The lease instalments shall be payable every month and the lease agreement shall not be less than 12 months and shall not exceed 36 months;
  • Any purchase value at the end of the lease agreement shall not be less than 1% of the original value of the yacht, and this will be subject to the standard rate of VAT at 18%;
  • If the lessee opts to purchase the yacht at the end of the lease, a VAT paid certificate will be issued to the lessee provided that all VAT due has been paid;
  • The structure is officially recognised by the Malta VAT Department

Following payment of the VAT for the first quarter of lease payments, a provisional VAT-paid certificate will be issued enabling the yacht to cruise EU waters.

If you would like to receive customised workings of the savings that could be availed of through the implementation of the said leasing structure kindly send us the following details:

  • the principal method of propulsion of the yacht (motor or sailing);
  • its overall length (LOA); and
  • its estimated value (subject to confirmation by an approved valuer).