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Malta offers yacht owners looking to buy a new boat attractive savings on VAT. This scheme is recognised by the EU (since Malta is a full EU member state) and vessels will be ‘EU VAT PAID’ and free to navigate in EU waters without any restrictions. Malta’s shipping registry has grown extensively in the last years and lists some of the most prestigious yachts sailing today.

What is financial leasing agreement of a pleasure craft?

A financial leasing agreement of a pleasure craft is an agreement whereby the lessor (the owner of a craft) contracts the use of the craft to the lessee (the person who leases the craft) in return for a consideration. In addition, at the end of the lease period, the lessee may opt to purchase the craft at a percentage of the original price.

How is the leasing agreement treated for VAT purposes?

For the purpose of VAT, the lease of the craft is a supply of services with the right of deduction of input VAT by the lessor, where such right applies. This supply of services is taxable according to the use of the craft, attributed within the territorial waters of the European Union (EU), provided that the lessor is a Maltese company (including a commercial bank) which is leasing the craft to any Maltese or non-Maltese person or company.

How is the use of crafts within EU territorial waters calculated?

It is very difficult to trail the movements of pleasure crafts in order to determine the period that the craft spends within the territorial waters of the EU and the time it spends outside the EU.