Ever since the EU instigated the infringement proceedings, a shake-up of Maltese Leasing was inevitable. The EU commissioners raised questions as to whether Maltese Leasing met the tests set out in the ECJ ruling (Mercedes case) in determining if Maltese Leasing is a supply of goods or a supply of services as only a supply of services can benefit from the use and enjoyment relief which generates the effective VAT rate of 5.4%,7% or 9% applied to Maltese Leasing.
Under the test it was deemed to be a lease purchase due to the fact that there is an economical expectancy that the lessee will acquire the yacht at the end of the lease. As a result, the Malta authorities are not accepting further applications for Maltese Leasing in its current form.
It is hoped that a revised Maltese Lease will be announced shortly and that it is in the format of a supply of services which therefore enables the application of the use and enjoyment relief and associated reduced effective VAT rates. Under the supply of services rules, any benefits will be realised during the lease period and not at the end of the term.