EU VAT on Yacht solutions

Chetcuti Cauchi Advocates | View firm profile

The yachting
industry sails across a dynamic regulatory environment, increasingly leading to
more paperwork, administration, checks and procedures.  In this context, and considering that yachts
are generally a leisure escape, yacht owners are constantly looking for straight
forward solutions that allow them to sail their yachts worry-free.  Malta has been at the forefront in providing
such solutions
and finding a balance between what are usually deemed two opposing needs: those
of proper regulation and application of procedures on the one hand, and
enjoyment of the yacht without unnecessary and unwarranted restrictions, on the

Malta’s solution for pleasure yachts is characterized by
practical as well as fiscal advantages whereby a yacht owner may register a
yacht in Malta in less than three days and potentially be in a position to pay
an effective rate of Value Added Tax (VAT) of 5.4% commensurate to the use of
the specific yacht in  European Union
(EU) waters.

With special focus on pleasure yachts and super-yachts,
Malta’s success in the maritime industry finds its basis on two main pillars:

The Reputability of its Flag and Register

Over the years, Malta has emerged as a flag of
guaranteeing professional guidance and non-bureaucratic procedures.
Malta’s shipping registry retains its status as the largest maritime registry
in Europe and the sixth largest in the world. 
Particularly, Malta is considered a world leader in the registration of pleasure yachts and super-yachts
mainly due to logistical as well as legal advantages.

The registry has maintained its positive reputation for its
straightforward procedures for
yacht registration
, provisional registration of a pleasure yacht obtainable
within one to three days. Whilst enjoying competitive registration and renewal
fees, a twenty-four hour, seven days a week service is guaranteed, utterly
useful in emergency situations. 
Additionally, minimum technical requirements apply for pleasure yachts,
allowing yacht owners to freely design their vessels.  Malta has a flag state inspectorate to ensure
adherence to international standards, whilst no restrictions
apply in relation to the nationality of the master, officers and crew serving
on vessels flying the Maltese flag.

The Possibility of Fiscal Planning and VAT
payment minimisation in the context of Yachts and Super-Yachts used for pleasure

In the case of yachts and super-yachts registered as pleasure yachts in the
European Union (EU), Malta offers an effective and favourable regime for VAT
payment, potentially down to an effective VAT rate of 5.4%, through a
leasing structure

comes handy in a context where yacht owners generally have
difficulty in understanding the VAT principles applicable to the purchase of a
pleasure yacht to be sailed in EU waters. 
Additionally, the amount of VAT payable on such an acquisition might be
a considerable expense to take into consideration when purchasing a vessel.

As per the EU Customs Code and its implementing provisions,
the rules regulating the use of pleasure yachts in EU waters revolve around two
main factors:

whether the yacht is
owned by persons or entities established in the EU or otherwise; and whether
the yacht shall be used in the EU temporarily or permanently.

Yachts owned by persons or entities established outside the
EU, or more specifically outside the customs territory of the community, and
which will be used for a short time in the EU, may be temporarily brought into
and used for private purposes in the EU, and this without the need to pay
customs duties or VAT. In such cases the yacht has to be placed under the
‘temporary importation procedure’. Once put under the temporary importation
regime, a yacht may be freely used in the EU with no further customs formality
up to 18 months.

In cases of yachts owned by a person or entity established
in the EU for private use whether temporary or otherwise, or in all other cases
where the private use of the yacht in EU waters is not temporary, VAT
implications arise. In such cases VAT liability arises for yachts purchased in
or formally imported into the EU.  The
applicable rate of VAT in the EU varies widely ranging from the lowest
percentage being 17% and cresting at 27%. In Malta the standard VAT rate is

The Maltese
is based on the economic activity of a Maltese company that
purchases the yacht and leases it out. 
On the yacht being made available to the lessee in Malta, VAT is payable
in Malta on the lease of the yacht as a supply of services, given that supply
of services is taxable according to the use of the yacht within the territorial
waters of the European Union.  Such VAT
is payable at a rate proportionate to the time that the yacht is deemed to be
used and sailed in EU waters, taking into consideration the yacht’s propulsion
and length.  A sailing yacht of
twenty-four meters and over is deemed to sail in the EU for 30% of its time
and, hence, 30% of the standard 18% rate of VAT is due (5.4%).  At the expiration of the lease period and
sale of the yacht, a certificate confirming that VAT has been paid in relation
to the particular yacht is issued by Malta’s VAT Commissioner allowing the free
movement of the yacht within EU waters.

Dr Silvana Zammit B.A.,
M.A.(Law), LL.D.

is a gaming law specialist advising on regulatory aspects, taxation &
general matters relating to the gaming industry.  Silvana is an active member
of the Malta Remote Gaming Council & the Chamber of Advocates. Silvana also
heads our Transport Practise Group which services clients in the maritime,
aviation and general transport industries.

For additional information about
yachting, please read:

The Yachting Industry in Malta

Malta VAT
Yacht Solutions

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