Malta Yacht Lease Set-up

Dr. Silvana Zammit | 22 Sep 2015

Ccmalta Default

Any person wishing to own a pleasure yacht, whether a new build or second hand, may benefit from a system facilitating the payment of VAT and the sailing of yachts in EU waters.
Malta offers a system which provides for the payment of VAT through the setting up of a Maltese company which must firstly acquire the yacht, proceed with its lease to a third party
and finally transfer the ownership of the yacht. The lease agreement is a determining factor of this advantageous set-up. Through the said agreement, the lessor company uses the
yacht for its economic activity, which in return grants the lessor company the right to deduct any input VAT incurred on the purchase of the yacht.


For a yacht owner to benefit from this system the following guidelines have to be followed:

  • the yacht must be brought to Malta, at the beginning of the lease agreement;
  • an initial contribution amounting to 40% of the value of the yacht must be paid by the lessee to the lessor as first lease payment;
  • the lease instalments must be payable every month and are subject to the local standard rate of VAT at 18%;
  • the lease agreement may not exceed 36 months; 
  • the lessor must be expected to make a profit from the leasing agreement over and above the value of the yacht;
  • the purchase value at the end of the lease agreement shall not be less than 1% of the original value of the yacht, and this will be subject to the standard rate of VAT at 18% on the yacht returning to Malta and being sold thereon;
  • if the lessee opts to purchase the yacht at the end of the lease, a VAT-paid certificate will be issued to the lessee provided that all VAT due has been paid.

Malta Yacht Lease Set-up Step 1: Incorporation of a Maltese Company & Purchase of Yacht

A Maltese company must be incorporated with the object of owning and leasing the yacht which shall obtain a VAT number, purchase and lease out the yacht. The nature of the VAT treatment on the purchase of the yacht will depend on whetherthe yacht is imported from outside or within the EU, or otherwise bought from Malta. In such cases, VAT may be either:

  • Payable and recoverable;
  • Not payable; 
  • Deferred, subject to approval by the authorities.

Malta Yacht Lease Set-up Step 2: Yacht Registration

The registration procedure of a vessel if undertaken in Malta is very straightforward. This procedure is divided in two stages, whereby initially an application is made to the Maltese registry for the yacht to be registered provisionally for six months. During this timeframe, yacht owners have the possibility of using the Malta Flag prior to the permanent registration of the yacht without restrictions. Within the six-month provisional period, the documents necessary for the registration, namely an original bill of sale or builders’ certificate and a deletion certificate, if the vessel has been previously registered elsewhere, are to be handed over to the registry. An inspection must also be undertaken by a Malta Government Appointed Surveyor. This will conclude the registration of a yacht under the Malta flag as a pleasure yacht.

Malta Yacht Lease Set-up Step 3: Lease of the Vessel

Upon the arrival of the yacht in Malta, a lease agreement is drawn up whereby the owner of the vessel, acting as the lessor will lease the yacht to the lessee in return for a  consideration. The owner of the yacht shall be the company incorporated in Malta and the lessee can be any party. The lease agreement would provide the lessee with the option of purchasing the yacht at the expiration of the lease agreement for a percentage of the purchase price (normally 1% or higher). 

Malta Yacht Lease Set-up The Applicable VAT Rates 

The VAT rate applicable on the monthly lease installments payable by the lessee to the company will depend on the type and length of the yacht. Since each application is considered on its merits, prior approval must be sought in writing from the Commissioner of VAT. The table below indicates the effective rate of VAT applicable.

 

Type of boat Computation
of effective
VAT
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 boats up to 7.5 metres in length (if registered in the commercial register) 16.2%

 


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