VAT Treatment of Yachts for Private Use

In March 2020, Malta released guidelines on the VAT treatment of leased pleasure yachts, aligning with EU practices. Operating leases allow yacht owners to lease their vessels to non-taxable lessees, who pay VAT on monthly lease installments based on actual use in EU waters. To qualify:

• The lessor must be a Maltese entity with a valid VAT number.
• A lease agreement between the lessor and lessee must be in place.
• The lessee must not use the yacht for commercial purposes.
• The yacht must be available to the lessee in Malta.
• The lessor must track the yacht’s use within and outside EU waters.
• An annual declaration must be filed with the Commissioner for Revenue.

VAT is charged at Malta’s standard rate of 18% when the yacht is used in EU waters. However, if the yacht is primarily used outside EU waters, VAT is adjusted accordingly, reducing the rate. No VAT is due on the portion of the lease where the yacht is used outside EU waters.

This VAT treatment offers flexibility in terminating leases. If the lessor sells the yacht in Malta after the lease, VAT at 18% is charged on the yacht’s value upon sale, with a VAT Paid Certificate issued upon compliance.

VAT Treatment of Yachts for Commercial Use

• Commercial yachts may defer VAT on importation by:
• A Maltese owning entity with a Maltese VAT registration.
• An EU owning entity with a Maltese VAT registration and a appointed VAT representative in Malta.
• A non-EU owning entity with a bank guarantee covering VAT payable.

Each option requires compliance with Malta’s VAT regulations and physical presence in Malta for VAT and Customs procedures before roaming freely in EU waters.