Malta VAT Yacht Solution for Brokers

Malta VAT Yachts Solution

| 07 Sep 2017

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Pleasure yachts are a leisurely escape for yacht owners who enjoy losing themselves in the beauty of the Mediterranean Sea. However, as both yacht owners and brokers can confirm, the pleasure of sailing in European waters comes at a high cost in the form of VAT, which is an important expense to take into consideration when purchasing a yacht. It is also an expense which may force enthusiastic yacht owners to opt for smaller yachts against their wishes.

What not all brokers know is that there is a possibility to minimise VAT liability on yachts by opting for Malta’s VAT yacht solution. This will allow yacht buyers to benefit from a minimal VAT rate which can be reduced to 5.4% depending on the size and type of yacht. The solution does not only allow buyers to save money on tax requirements, but it actually encourages them to buy a larger yacht and benefit from a more advantageous effective rate of tax.

As a broker, by offering your clients the possibility to opt for the Malta VAT yacht solution, you will be selling larger yachts thus maximising your profits, while saving money for your clients and offering them the best solution which Europe has to offer. With this solution, everyone is a winner.

How does the Malta VAT Yacht Solution work?

The Malta VAT Yacht Solution provides a practical and fiscally advantageous route which allows both the owner and the seller to benefit from a leasing structure (lasting up to 36 months) that will lead to the sale of the yacht. By virtue of the lease set-up, yacht owners will be able to benefit from an effective VAT rate which is determined by calculating the percentage of time that the yacht is deemed to be sailing within EU waters.

The beauty of the Malta solution is that it allows both the broker as well as the owner to enter into an agreement which will ensure that all VAT liability has been catered for. By benefitting from Malta’s VAT Yacht leasing set up, yacht owners to sail freely within the EU waters while at the same time benefit from savings on yacht VAT payable on the value of their yacht.

Whereas under other tax regimes, the client would need to factor in tax expenses as a considerable part of the overall expenses when purchasing a yacht, as a broker you will be able to show your client that by opting for this set-up they will be able to choose a larger yacht than what they initially thought their budget would cater for.

To benefit from this Solution, your client will need to:

  1. the setting up of a Maltese company;
  2. the acquisition of the yacht through the Malta company;
  3. the registration of the yacht optionally under the Malta flag;
  4. the arrival of the yacht in Malta at the beginning of the lease;
  5. the leasing of the yacht by the company to a third party;
  6. the sale of the yacht to a third party for at least 1% of the purchase value on the return of the yacht to Malta at the expiration of the lease;
  7. subject to all the relative VAT payments, the issuing of a VAT paid certificate in relation to the yacht by the authorities, following which the yacht may circulate freely in the EU.

Depending on the size of the yacht, the effective rates applicable are as follows:

  • Sailing boats or motor boats over 24 metres in length  - 5.4%
  • Sailing boats between 20.01 to 24 metres in length - 7.2%
  • Motor boats between 16.01 to 24 metres in length - 7.2%
  • Sailing boats between 10.01 to 20 metres in length - 9%
  • Motor boats between 12.01 to 16 metres in length - 9%
  • Sailing boats up to 10 metres in length - 10.8%
  • Motor boats between 7.51 to 12 metres in length (if registered in the commercial register) - 10.8%
  • Motor yachts up to 7.51 metres in length (if registered in the commercial register) – 16.2%

Why choose Malta?

Malta has amassed great success as the largest ship and yacht registrar in Europe and the 6th largest registry in the world despite being the smallest island-state in the European Union. Particularly, it is the largest shipping registry in Europe for super yachts. The reason why it has managed to amass this success is that whilst implementing measures that make it a highly advantageous and business-friendly jurisdiction, it has also fostered a golden reputation as a reputable and well-regulated jurisdiction. The reputability of the Malta flag and its booming economy has made it the jurisdiction of choice for HNWI in the Mediterranean, particularly those with ties to the maritime industry. 

Why choose us?

Our maritime practice at Chetcuti Cauchi Advocates has established itself as one of the leading-players in the Maritime sector in Malta. The practice is headed by Dr Silvana Zammit, a seasoned maritime lawyer who has been listed as a 'next generation lawyer' for the general maritime law industry by Legal 500. 

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Key Contacts

Dr Charlene Mifsud

Partner, Corporate & Commercial

+356 2205 6298

Dr Priscilla Mifsud Parker

Senior Partner, Corporate, Tax & Immigration

+356 22056122

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