Update 1 September 2018 - Structure currently under review by the Maltese Authorities, updates to follow.
Maltese leasing is a leasing arrangement over a term of between one and three years. The owner of a yacht (Lessor) contracts the use of the craft to another party (Lessee) who leases the yacht in return for a consideration. The Lessor must be a Maltese company and the Lessee can either be a Maltese person, a foreign person or company.
This lease is a supply of services and as such is taxable for any of the time the yacht spends within EU territorial waters.
Due to the difficulty in trailing the movements of yachts, an estimate of the time it spends inside and outside the EU is calculated on its size.
Maltese VAT at 18% is only charged on the percentage of the lease deemed to relate to time spent in the EU, resulting in a reduced effective annual rate, as shown below.
For each application, prior approval will need to be sought from the Commissioner of VAT, who will also confirm the rate applicable as well as the acceptability of the value of the craft as declared. For this purpose, a valuation certificate shall be submitted with the application for approval.
Supply of the Yacht
The yacht will need to be delivered to Malta at the start of the lease period, with the vessel being either imported into Malta or supplied by an EU supplier as an intracommunity supply.
The yacht will need to return to Malta at the end of the lease period when the lessee exercises its purchase option right.
The presence in Malta at both the start and end of the lease is important and ensures that the supply of the yacht takes place in Malta and is therefore subject to Maltese VAT.
An initial payment of 50% of the lease is made by the Lessee to the Lessor, and the lease instalments shall be payable monthly with the agreement not exceeding the term of 36 months. The Lessor shall also be expected to make a profit from the leasing agreement over and above the value of the yacht.
Choice of Flag
Being an EU structure, it is important that an EU flag is selected for the yacht. This EU flag will also protect the VAT paid status of the yacht if the option to purchase is taken up at the end of the term. The yacht can be registered with any EU flag where Maltese entities qualify for registration, this includes Malta and the UK.
Right to Purchase
At the end of the term, the Lessee can exercise their right to purchase the yacht for a sum equal to at least 1% of the value of the yacht. This amount will be subject to VAT at the current Maltese rate of 18%. A VAT-paid certificate will be issued by the Maltese authorities to the Lessee providing that all VAT due has been paid.