Yachting is an ever-growing industry in Malta. The Maltese VAT Department has issued guidelines, whereby the overall VAT rate incurred on the acquisition of a yacht can be reduced substantially depending on the size and means of propulsion of the yacht. A leasing agreement has to be entered into by the lessor (the owner of the yacht) whereby he contracts the use of the boat to the lessee for a consideration which should be at arm’s length. At the end of the lease agreement, the lessee may opt to purchase the boat at a percentage of the original price. At the end of the lease agreement, the lessee will become the owner of an EU vat paid yacht registered in Malta.
Maltese VAT is due on the time that a yacht spends within EU waters. In view of the difficulties in determining the exact period of time which the yacht spends inside and outside EU territorial waters, the yacht leasing guidelines provide that VAT will only be due on a percentage of the lease based on a presumption as to the time that a yacht is to be within EU territorial waters. These percentages are set according to the length of the boat and its means of propulsion (power or sailing). The standard rate of VAT of 18% is applied on the established percentage of the lease, deemed to be related to the use of the boat in EU territorial waters.
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