Earlier this year the guidelines governing the place of supply for the leasing of pleasure yachts were updated by the Commissioner for Inland Revenue. The guidelines explain the ways in which the use and enjoyment of pleasure yachts is to be tackled for VAT purposes.
The guidelines prescribe a procedure by which an adjustment on the general application of place of supply regulations is made based on the so-called actual effective use and enjoyment of a pleasure yacht. This is calculated by measuring the time wherein the yacht is used and enjoyed outside EU waters in relation to the overall time wherein the yacht is used and enjoyed (in and outside EU waters).
Actual use and enjoyment is measured by tangible documentation provided by the lessee to the lessor on a continuing basis including logs of travel retained by the master of the yacht as well as GPS/AIS data, amongst other.
This provides an opportunity for superyacht owners to create a legal structure in Malta wherein while enjoying the yacht, VAT is paid in a gradual manner on the lease payments. The VAT is payable in monthly lease payments made by the lessee of the yacht to the lessor – the owner of the yacht. Thus, a lease contract between the parties must be in place prescribing consideration, term and other provisions based on commercial considerations including the market value of the yacht being granted on lease.
The guidelines were amended in that the focus is on actual use and enjoyment of the yacht outside EU waters. Thus, these guidelines remain mostly beneficial for owners of super yachts who wish to use their yachts within the EU, whilst also spending a significant amount of time navigating outside EU waters.
