On 12th March 2020, the Office of the Commissioner for Revenue (“CfR”) published new guidelines (the “Guidelines”) in connection with the leasing of pleasure yachts and the corresponding treatment of such leases for VAT purposes, which guidelines are essentially based on Article 59a of the EU VAT Directive.
The Malta Commercial Code was launched in 2006 and brings together in one document the requirements for both yachts below 24 metres and yachts above 24 metres in order to be operated commercially. As at December 2015 more than 230 yachts, with an average length of 31 metres, are registered as commercial yachts under the Malta flag.
In identifying a potential flag administration under which to register a vessel, fiscal considerations play a significant role. Malta is the smallest European country with the largest ship register in Europe and the sixth largest worldwide. As at end of December 2014, the registered gross tonnage was 57.9 million gross tons with over 2,500 merchant vessels flying the Maltese flag. The success of the Maltese flag is arguably due, in no small measure, to the application of a favourable tonnage tax regime introduced by virtue of the Merchant Shipping Act, 1973.
A guide to ship registration in Malta
The dreaded VAT question which is invariably asked by a yacht owner, is whether to charge VAT on the supply of services consisting in making the said yacht available for charter. The main concern here is naturally the necessity to retain competitive charter rates, whilst remaining above board from a VAT perspective.
A Snapshot of the Salient Features of the Malta Commercial Yacht Code
A yacht qualifies as a “commercial” yacht when it is more than 15 metres in length and does not carry cargo or passengers exceeding 12 in number. Moreover, a commercial yacht is operated by its owner (whether an individual or corporate entity) for commercial activities, such as, chartering to third parties.
A short-term charter of a yacht is defined as an agreement whereby the yacht owner/operator contracts the use of the yacht for a consideration with a crew or on a bare boat basis for a period which cannot exceed 90 days.