Malta, a small island in the heart of the Mediterranean, wedged between the European and African continents, ranks as the largest shipping registry in Europe and the 6th largest in the world. How come has such a small island managed to amass this success? There are many reasons why Malta is seen as an attractive jurisdiction in the maritime sector; apart from its strategic location, warm climates, and marina facilities, it also offers a highly efficient Malta VAT Super Yacht Solution. Malta is also a very reputable jurisdiction – it is even listed on the low-risk ship list of both the Paris and the Tokyo Memorandum of Understanding which makes it ideal for yacht registration.
How does the Malta VAT Super Yacht Solution work?
Under the Malta VAT Yacht Solution, the larger the yacht, the less VAT is paid on the yacht. The Malta Solution provides for effective VAT savings between 12% & 20% over the standard Maltese tax rate of 18%. This substantial reduction in tax is achieved through a leasing structure, whereby the yacht is leased to a third party (the client) through a Malta Company, and after the lease expires, the client may formally buy the yacht and sail freely across the EU. At Chetcuti Cauchi, our lawyers would be able to assist you in order to benefit from this solution. Dr Silvana Zammit, the maritime law partner at our firm with extensive expertise in the maritime sector, would be able to guide you in order to make the most of the Malta VAT Super Yacht Solution.
‘How much will I really save with the Malta VAT Super Yacht Solution?’ – a worked example
Sailing boat: 24.1 meters | Value: 14 million EUR | Effective rate of VAT: 5.4%.
Should full Malta VAT apply (18%), a total of €2,520,000 would be payable in VAT (18% x €14,000,000).
VAT payable through leasing set-up would approximately be €856,800. This is obtained as follows:
- The total on which VAT is payable during the lease is of 5.4% on the purchase price + a margin of profit for the company usually set at 10% of the purchase price, hence: €14,000,000+10% x 5.4% = EUR 831,60.
- At the end of the lease, the yacht is sold at 1% of the original value. At this stage the full rate of VAT is payable, hence €14,000,000x1% x 18% (VAT) = €25,200
Savings: €2,520,000 – €856,800 = €1,663,200, translating in 66% less VAT payable on the transaction, and a net effective rate of VAT payable of 6.12% instead of 18% or any other VAT rate applicable should the yacht be imported in another EU member state.
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