The Maltese Commissioner of Revenue issued a new set of guidelines which took into consideration the treatment of VAT in relation to the leasing of pleasure yachts.
Effective Use and Enjoyment
The guidelines laid down that if the effective use and enjoyment of a pleasure yacht, in whole or in part, takes place outside EU territorial waters, then the Maltese Commissioner for Revenue will begin to treat the place of supply of the hiring of such pleasure yacht, if situated within Malta, as being situated outside EU territorial waters. The main scope of analysing the use and enjoyment of such yacht is to establish the manner in which such lease is to be treated for VAT purposes.
This is effectively permitted in accordance with Item 12 of Part Two of the Third Schedule of the Maltese VAT Act which is modelled on Article 58 of the EU VAT Directive and which was introduced to avoid double taxation, non-taxation or distortion of competition.
Since there seems to be this tie between the location of the yacht and its VAT treatment, the guidelines naturally seem to impose an obligation on the Lessee to provide the Lessor with documentary and/or technological data to determine the actual effective use and enjoyment by the Lessee of the pleasure yacht within and outside EU territorial waters during the lease period. Such data is important because no VAT is chargeable on the portion of the lease attributable to effective use and enjoyment of the yacht within non-EU or international waters.
The Guidelines provide for a (i) Method of calculating a preliminary ratio on the basis of which initial VAT returns are submitted by the Lessor and (ii) a method of adjustment of such preliminary ratio based on the actual use and enjoyment of the Lessee subsequent to the first year of the lease.
These arrangements effectively continue to allow Malta, as a leading maritime jurisdiction, to be more competitive and attractive for potential Lessors and Leasing companies. The Commissioner of Revenue in Malta has taken full advantage of this opportunity by issuing guidelines to this effect and introducing an even more attractive package for potential Lessors and Lessees.