Tuesday, 20 August, 2013

Malta: VAT on short-term yacht charters.

In July 2013, Malta's VAT Department published guidelines clarifying the VAT treatment of short-term yacht charter activity commencing in Malta.

The guidelines specifically apply to third party holiday type yacht charters whereby the charter is of a short-term duration not exceeding 90 days. These guidelines to a large extent follow the interpretation which at the moment is being applied to long-term yacht leases.

For VAT purposes, before the guidelines were issued, the short-term charter of a yacht to be used for leisure purposes was seen as a supply of services which typically would be taxed at the standard rate of VAT, being 18%.

As a result of the VAT Department's interpretation however this has now changed. The new guidelines state that where the short-term charter of a yacht commences in Malta the application of VAT will only apply to the portion of the charter taking place within the territorial waters of the European Union (EU).

Furthermore, the guidelines state that the standard rate of VAT in Malta of 18% will be applied to yacht charters based only on the established percentage of the charter deemed to be related to the use of the yacht within EU territorial waters. The following schedule provides for a clear overview regarding the percentages.

Motor Yachts

Length % of charter subject to VAT Effective rate of VAT
Over 24 metres 30% 5.4%
16.01 to 24 metres 40% 7.2%
12.01 to 16 metres 50% 9%

Sailing Yachts

Length % of charter subject to VAT Effective rate of VAT
Over 24 metres 30% 5.4%
20.01 to 24 metres 40% 7.2%
10.01 to 20 metres 50% 9%

There are certain conditions to the VAT treatment being granted, namely:

  • The supplier of the yacht charter shall be a person or company registered for VAT in Malta.
  • The yacht charter contract shall clearly indicate that the charter commences in Malta and shall clearly indicate the charter fee as well as including a statement that it is intended that the yacht shall sail outside EU waters.
  • The VAT Department of Malta reserves the right to request proof of any payment made in connection with the charter.
  • Upon application, the supplier of the charter has to produce sufficent documentation to identify the yacht with regards to hull number, port of registry, registration number, and any further documentation confirming the size and type of the yacht.
  • Following submission of these documents, and provided that the conditions are met to the satisfaction of the Director General (VAT), the applicant shall be informed in writing regarding the applicable portion of the charter fee which would be subject to VAT.
  • Approval must be sought in writing from the VAT Department of Malta and each application shall be considered on its own merits.

For further information, please contact Gerard Jan van Spall or email malta@vistra.com.

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