Summa Fiduciary Services Ltd.
Yacht Leasing Agreements
The Maltese VAT Department has published guidelines about the taxation of yachts which are leased to third parties by a Maltese company. In a lease transaction a Maltese company purchases a yacht and leases it to a third party with an option in favour of the third party to purchase the boat at a reduced price at the end of the lease.
For the structure to be valid, the Maltese VAT department has issued the following criteria all of which must be satisfied:
- The boat must come to Malta, preferably at the beginning of the lease agreement;
- The financial leasing agreement shall be between a Maltese company and any Maltese or foreign person or company;
- The transaction is reported in advance to the VAT department;
- The Maltese company makes a profit of 5% on the transaction;
- The lease instalments shall be payable every month and the lease agreement shall not exceed 36 months;
- Any purchase at the end of the lease agreement shall not be less than 1% of the original value of the vessel, and this will be subject to the standard rate of VAT at 18%.
Further to these guidelines, the lessee of the yacht can now become the owner of an EU VAT-paid yacht by paying as little as 6.18% VAT on the original value of the yacht. Company tax and administration costs on the transactions will have an incidence on the final outlay raising the total outlay by about 2%. Further details can be provided on request. We are including hereunder a practical example of how the VAT payments work.
| Example of a Vessel with a length of 22 metres | Amount in € |
| Value | 1,000,000 |
| Estimated profit @ 5% | 50,000 |
| Total value incl. profit | 1,050,000 |
| €1,000,000 x 50% = 500,000 x 40% = 200,000 | |
| VAT= 200,000 @ 18% = 36,000 | 36,000 |
| Installments: | |
| €1,050,000 – 500,000 = 550,000 divided by 18 monthly installments | |
| Installments of 30,555.55 x 40% = 12,222.22 | |
| VAT = 12,222.22 @ 18% = 2,200 | 39,600 |
| Redemption: | |
| 1% of €1,000,000 = 10,000 | |
| VAT = 10,000 @ 18% | 1,800 |
| Total VAT payments | 77,400 |
| Effective VAT rate: | 7.74% |
The company would also be able to avail itself of Malta’s attractive company taxation system permitting the shareholder to reduce the effective Malta company tax rate to 5%.
Commercial Yachts
Yachts in commercial use of over 15 metres in length which do not carry cargo and do not carry more than 12 passengers may be registered in Malta as commercial yachts subject to compliance with the requirements of the Commercial Yacht Code, a code drawn up by the Merchant Shipping Directorate within Transport Malta to specifically regulate the construction, equipment and operation of such yachts.
Yacht registration in Malta under the Commercial Yacht Registry provides many benefits amongst which are that,
- No tax is chargeable in Malta on income derived from the chartering of a commercial yacht by a licensed shipping organisation, which may be a Maltese Company or an international owner recognised by the Merchant Shipping Directorate. An annual tax calculated on the basis of the yacht’s tonnage would be payable to the Merchant Shipping Directorate instead;
- No tax or duty is chargeable in Malta upon the disposal of a yacht by a licensed shipping organisation;
- No tax is chargeable in Malta upon a distribution of dividends by a licensed shipping organisation;
- No tax or duty is chargeable in Malta upon a disposal of shares in a licensed shipping organisation;
- No restrictions on the nationality of the Master, Officers and crew carried on board Maltese yachts;
- There is a total exemption from payment of VAT on the value of the yacht, while the yacht is used for commercial purposes (chartering) on the high seas;
- VAT refunds would be recoverable on purchases made (e.g equipment, fuel, provisions).