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.
A decade or so of key regulatory innovation spanning various industries, such as financial services, gaming, yachting and aviation, has incentivised several global entrepreneurs to use Malta not only as an efficient domicile of choice for their business interests but also as a base for their luxury ‘toys’.
Malta has in recent years become an attractive base for anyone involved in the aviation industry. Malta’s Aviation Registry has in fact continued to achieve a steady growth with a record of 61 aircraft registered in 2015. The success of the Aviation Registry is sustained by fiscal incentives including a low corporate tax regime as well as rebate on profits. This is complemented by specialised technical personnel who are readily available, flexible and accessible.
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.
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.