Malta Yacht Registration
Malta is not just the ideal place to register your yacht because it is an island in the Mediterranean Sea, but because of the many VAT advantages incorporated within our law. Hence, the reason why so many super yachts around the world carry the Maltese flag. As you might already be aware, any yacht registered to EU residents should have its VAT paid in any country in the EU.
Guidelines issued by the Maltese VAT department, endorsed by the EU, allow yacht owners the possibility of saving a significant portion of the VAT due on the yacht, reducing significantly the total VAT due. Not only because Malta has a VAT rate amounting to 18% but due to the VAT Yacht Leasing Scheme which reduces further the VAT expense as explained here.
VAT Yacht Leasing Scheme
A leasing agreement of a pleasure yacht is an agreement between: –
– the ultimate beneficial owner; and
– a Maltese incorporated company
Whereby the lessor (the owner of the craft), which should be a Malta registered company, leases it to the lessee for a consideration. The lessee can be any Maltese or non-Maltese person or company.
The Malta VAT Act stipulates that the lease is a supply of services and the lessor has the right of deduction of input VAT. Any normal lease entered into Malta (excluding the VAT Yacht Leasing Scheme), should have chargeable VAT at the normal rate of 18%.
However, when the VAT Yacht Leasing Scheme is applied, the VAT rates charged are reduced significantly based on two determining factors;
– the size of the yacht; and
– the type of yacht (motor vs sail).
The purpose behind the reduction in VAT is to reflect the estimated time in which the yacht would be operated in waters other than the EU territorial waters. Hence, no VAT is charged when the yacht is operated outside of the EU.
Obviously, this is something very difficult to determine. A mechanism was put in place by the Malta VAT department when it issued the below table that determines the percentage proportion of VAT to be charged depending on the length and type of yacht:
Strategic Alliance with Allure Yachting
We are also pleased to announce that Borg Galea have teamed up with Allure Yachting Malta, a Maltese registered company directed by vivid marine enthusiast and a qualified captain with many years of experience onboard of super yachts. This collaboration enables us to provide our clients with all the services required when having their yacht registered in Malta, berthing facilities, yacht maintenance and other yacht requirements.
The main purpose of our alliance is to serve as a one stop shop for yacht owners who decide to register their yacht in Malta and save the time and energy required to subcontract different service providers just to register the yacht.
For more information about allure, please visit their site www.allureyachting.com
Explaining how the VAT Yacht Leasing Scheme Table Works
The VAT Yacht Leasing Scheme table makes a distinction between a sailing yacht, a motor yacht and their respective size. It is presumed that the bigger the yacht, the more time it will spend outside the EU territorial waters. The VAT department cannot request proof of the time spent in EU and outside of the EU as it is impossible to determine.
Looking at the first type of boat, a sailing boat or motor boat over 24 metres in length is presumed to sail 30% of its time during the lease, in EU territorial waters. As previously mentioned, the lease will be charged at the normal VAT rate of 18%, but in this case only on 30% of the lease. This will leave us with a 5.4% VAT rate on the total value of the lease.
Mr A incorporates a new company in Malta and the company (which would be the lessor) purchases a 26 metre motor boat from Italy. The consideration of the yacht is €1,500,000 excluding VAT. VAT would not be paid in Italy due to the VAT Yacht Leasing Scheme.
The newly set up company enters into an agreement with Mr A (who can also be the lessee) whereby he agrees, as requested by the Malta lease agreement to pay 50% of the consideration of the yacht, in this case €750,000 and monthly lease payments.
Since the yacht is larger than 24metres, then the VAT charged is Eur750,000 x 18% x 30% = Eur40,500.
The minimum lease period will be of 36 months and the company has to make at least 10% profit. Therefore the remaining €750,000 and the €150,000 (10% profit of €1,500,000) will be settled in equal monthly instalments over the duration of the lease agreement, thus this will result in monthly instalments of €25,000 excluding VAT.
The effective amount of VAT to be paid in this case would be, €25,000 x 18% x 30% = Eur1,350 on a monthly basis for 36months, totaling to Eur48,600.
At the end of the lease the lessee will have the option to pay a consideration equal to 1% of the original value of the yacht and become the rightful owner of the yacht. In this case the normal 18% Vat rate will be applied on the whole 1% (€1,500,000 x 1%= €15,000 x 18%= 2,700).
The total amount of VAT to be paid when using the Malta lease agreement is €91,800 which results at an effective rate of 6.12%.
Should the Malta lease agreement not been applied, the VAT to be paid would have been €270,000. This means than the yacht owner saved Eur178,200.
VAT Yacht Leasing Scheme Requirements
Few conditions are required for yacht owners to start benefiting from the reduced VAT rates which would be detailed during the meeting with us. The main points are: –
- A lease agreement must be in place for a period of not more than 36months (3 years). This agreement shall be between a Maltese company and any lessee being Maltese or non-Maltese person or company;
- The yacht must be purchased by a Maltese registered company which is also registered with a valid Maltese VAT number;
- Prior to applying the VAT lease agreement, it must be approved by the Maltese VAT department;
- Prior to the registration, the VAT department need to approve the Yacht Leasing Registration;
- The lease agreement must be profitable;
- The yacht purchased need to come to Malta at least once at the beginning of the lease for registration purposes at least in the beginning;
- The yacht can be sold to the lessee at the end of the period for at least 1% of the value of the yacht. If the lessee exercises this option, a VAT paid certificate will be issued to the lessee provided that all VAT due has been paid;
- Once the Yacht is sold at the end of lease, a VAT paid certificate will be issued.
In addition, kindly note that Malta has one of the best taxation systems for nonresidents. Any profits made would in general be subject to a 35% flat rate corporate tax. However, any non-Maltese residents can avail themselves from a tax refund which effectively reduces the tax rate to just 5%!
If these savings sound good, we’ve got more in store for our potential clients. As a boutique accounting firm, our experts are dedicated to provide our clients with all the assistance required to register their yacht in Malta. In addition, we’ve got all the required contracts, paper work required and process in place to provide our clients with a plain sailing experience when registering their yacht.
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