Malta Launches Aircraft VAT Simplification Procedure

Daniela Bartolo | Published on 26 Oct 2012

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Malta launched its aircraft VAT Simplification procedure providing the possibility of mitigation of VAT on the use of aircrafts in EU airspace. 

The simplified procedure just published results in an effective VAT payable on the use of the aircraft which is lower than the standard 18%. This is possible through a financial leasing agreement entered into between a Malta company as the owner of the aircraft and a third party lessee, being also a Malta company, that leases the aircraft. 

The leasing  service being deemed to be supplied in Malta, the VAT due on the lease is at the standard VAT rate in Malta of 18%.  However, VAT is due only on the period that the aircraft is used within the airspace of the EU.  Malta shall use a technical test dependent on the features of the aircraft including aircraft type, MTOM, maximum fuel capacity, fuel Burn, optimum altitude and optimum cruising speed to assess the time that the aircraft is used in the EU airspace.   VAT shall be due solely on the period of use of the aircraft in the EU as per the calculations.

In 2010 Malta has amended its Aircraft Registration Act with the purpose of enhancing the role of Malta in the aviation industry.  This has resulted in an increased number of aircrafts being registered in Malta.  With the launch of the new aircraft VAT simplification procedure it is expected that Malta will continue down the road of success in the aviation industry it started two years ago, replicating the success it currently enjoys in the maritime industry: Malta being the large ship register in the EU. 


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