Malta VAT Guidelines on the Hiring of Pleasure Yachts

After a one year consultation process with the EU, the Maltese Government released the new Malta VAT Guidelines on the Hiring of Pleasure Yachts on 28th February 2019. These guidelines have replaced the previous well established Guidelines on the VAT Treatment of Yacht Leasing issued in 2005. Among all the EU Member States who have had their old leasing systems disrupted, the Maltese Government has been a catalyst in devising the establishment of this new regime.

The new guidelines provide a secure option for yacht owners due to their strict conformity with the EU VAT Directive. The high level of accountability set out by the new rules is demonstrative of the strong legal abidance required by this system, in order to ensure that the owner suffers no disruptions and that a VAT paid certificate is obtained at the end of the lease, subject to rigorous accounting and regulations.

The purpose of the new guidelines is to merely reflect how the rules of use and enjoyment work in practice when applied to superyachts. Although it is indicative that the new guidelines are mostly advantageous for the larger superyachts which have the capacity to navigate outside EU waters for longer periods of time, the average sized superyacht can also find a cash flow advantage when undertaking a long period lease.  

With the establishment of these new guidelines it is of essence that the service provider chosen by the client is well versed with the regulatory requirements. This will ensure the owner has true peace of mind when deciding to undertake this system of action.

Some interesting facts about the New Guidelines on the Hiring of Pleasure Yachts:

• The guidelines are not prescriptive on the duration of the lease or what happens during the final sale of the yacht
• The Lessor is to file an annual declaration with the VAT Department whereby the Department is informed about the ongoing activity of the lease
• The new rules devise an “adjustment mechanism” whereby the proportional VAT is adjusted so as to reflect the actual VAT that applies in accordance with the actual use and enjoyment of the vessel
• No penalties are applicable if there are any significant differences when the adjustment mechanism is applied
• It is important for the Lessor to maintain proper records of the yacht’s movements
• The yacht must not stay idle for long periods of time
• A VAT paid Certificate may be obtained at the end of the structure if all formalities have been adhered to during the duration of the lease

We have been advising clients on the new Malta lease structure ever since its inception fourteen years ago and we are now pleased to be able to provide this new service for those clients for whom it will be most convenient to undertake this path.