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.
In terms of the Guidelines, the CFR recognises that lessors of yachts intended for pleasure use will not be able to assess, at the date of each chargeable event, the extent to which the yacht is effectively used and enjoyed by the lessee within and outside territorial waters if lease payments are charged by the lessor in advance. Accordingly, the CFR shall only consider the place of supply of the leasing of pleasure yachts that are deemed to take place in Malta, as being situated outside EU territorial waters if the actual effective use and enjoyment of the lease takes place outside territorial waters.
Summarily therefore, the standard VAT rate of 18% is chargeable on the leasing of pleasure yachts however subject to certain conditions as set out in the guidelines, the ‘Use and Enjoyment’ provisions may be availed of such that the VAT charged would correspond to the accrual time that the yacht spends within EU territorial waters. It is noteworthy that such provisions may be availed of only if the time spent within EU territorial waters may be determined. Therefore, actual proof such as logs maintained by the captain of the yacht, GPS data and any other documentation evidencing the yacht’s location during the term of the lease.
The Guidelines also cater for an adjustment in the VAT returns of the lessor such that VAT charged to the lessee at the commencement period of the lease (i.e., prior to the determination of actual ‘use and enjoyment’) is adjusted to reflect the actual use and enjoyment by the lessee after the end of the applicable VAT period.