Much has been said and written in recent years about Malta’s reputable position as one of the largest international ship registers across the globe. Fuelled by a robust legal and regulatory framework and bolstered by a comprehensive array of international maritime services and infrastructure, Malta’s maritime flag registry stands at the forefront on an international level, ranking first in Europe and sixth globally in terms of registered tonnage.
Over the past decades, Malta has developed its natural harbours, making significant investments in modern superyacht marinas. Simultaneously, it has fostered the establishment of numerous onshore service providers, including top-tier yacht yards and yacht management companies, all of which adhere to the highest standards.
Registering a commercial yacht in Malta can offer significant advantages due to its favourable legal yachting regime and the financial benefits associated with Value Added Tax (VAT) registration of yachts. However, before delving into these benefits, it’s crucial to understand the fundamental concepts of yacht VAT registration.
The European Union (EU) VAT is essentially a consumption tax system that applies throughout all member states of the EU. VAT is payable on any yacht sailing across EU waters unless it falls under the temporary importation relief. Such type of temporary admission makes it possible for any non-EU privately owned yacht to sail within the EU for a period of not more than eighteen months upon its first arrival, otherwise known as the period of discharge.
Opting to navigate yachts across the EU on a permanent basis requires paying VAT upon importation of the yacht to the EU. Once the VAT is paid by an EU individual or body corporate in an EU country, a yacht can roam around freely throughout all the EU member states.
In essence, the importation of a yacht in Malta is subject to 18% VAT, payable to the Customs Authorities upon customs clearance. When examining how VAT on yachts operates in Malta, it is essential to first consider the primary purpose and utilisation of the vessel, whether it is for recreational or commercial purposes.
When a yacht is imported for non-business purposes in Malta, the standard 18% import VAT is not reclaimable. However, starting from January 1st, 2024, the short-term hiring of a pleasure boat in Malta for a period or part of a period not exceeding five weeks incurs a reduced VAT rate of 12%. To determine if the 5-week term has elapsed, one must consider if the same pleasure boat or a similar one was made available to the same person during the previous 12-month period, ending on the start date of the current hiring.
Conversely when the yacht is intended to be leased out or used commercially, the import VAT can be claimed back by the importer through standard VAT claim procedures. Acknowledged as a prominent maritime hub within the EU, Malta continues to be an attractive jurisdiction for VAT registration for yachts, despite recent legislative changes implemented in 2020. For instance, Malta is now applying an attractive VAT deferment procedure for commercial yachts replacing the need to physically pay and eventually recover the VAT, hence giving a substantial cashflow advantage to the importer.
Following recent changes, the overall procedure has become more practical. Subject to meeting specific conditions, VAT-registered importers of commercial yachts can now obtain authorisation to defer VAT payment. In some cases, a bank guarantee may also not be necessary, especially if the revenue authorities can easily monitor the importer’s activities.
In other instances, the most that the Revenue Authorities would require is either a bank guarantee of 0.75% of the yacht’s value, capped at EUR1 million or the appointment of a VAT representative in terms of Maltese VAT law.
Registering a yacht for VAT in Malta can also have a notable impact on its resale value. Yachts registered within favourable tax and regulatory regime are sought after by potential buyers. Consequently, yachts registered in Malta may possess higher resale values due to their compliance with VAT requirements and the financial benefits they offer.
In addition to the aforementioned aspects that have made Malta the choice of many ship-owners, another attractive feature is represented by the Malta tonnage tax rules. Principally, a shipping company is liable to pay tonnage tax rather than income tax on the actual profits registered by the company. This type of tax is mainly calculated based on ship net tonnage, that is on the volume of ships operated by the shipping company.
Evidently, choosing Malta as the jurisdiction for yacht registration not only grants a robust access to EU waters but also unlocks a wide array of financial benefits.