Malta VAT Treatment of Short-Term Yacht Chartering: New Guidelines Issued

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Subsequent to a number of changes at European level, occurring over the past couple of months, particularly in France and Italy, the Maltese VAT Department has issued new Guidelines for the VAT treatment of short-term yacht chartering. Applicable with immediate effect, these Guidelines pertain to short-term yacht charters (less than 90 days) commencing in Malta. The short-term charter of a yacht is held to constitute a taxable supply of a service, taxable at the standard rate of Malta VAT of 18%. As stipulated by the pertinent Guidelines, the standard VAT rate of 18% is now solely applicable to the deemed portion of the use in EU territorial waters, a yacht makes during charter. Without the novel interpretation, where such yacht is put at the disposal of the customer in Malta and utilised for leisure purposes, Malta VAT chargeable at 18% would have been due on the charter fees charged. Nevertheless, consequent to the VAT Department’s interpretation, the Malta VAT chargeable on the charter is limited to that portion of the use of the yacht within EU territorial waters. VAT at 18% is then applied solely on the established percentage of the charter deemed to be related to the use of the yacht within EU territorial waters.

The Guidelines outline a number of conditions to be met in case of yacht charters commencing in Malta. The place of taxation is the place where the yacht would actually be placed at the disposal of the customer, in this case in Malta. The conditions are the following:

  1. The supplier of the yacht charter ought to be a person registered for VAT in Malta;
  2. The yacht charter contract must indicate the place where the charter commences (i.e. Malta), the charter price and a statement that the yacht shall sail outside EU waters;
  3. Upon application, the supplier of the charter must produce sufficient documentation to identify the yacht with regards to hull number, port of registry, registration number, and any further documentation confirming the size and type of yacht;
  4. Subsequent to the submission of such documents, the applicant shall be informed in writing as to the applicable portion of the charter fee which would be subject to VAT as follows:

 

Yacht Type

% of charter deemed to be taking place in the EU

Computation of VAT

Sailing boats or motor boats   over 24 metres in length 

30%

30% of taxable value X 18%

Sailing boats between 20.01 to   24 metres in length

40%

40% of taxable value X 18%

Motor boats between 16.01 to 24   metres in length 

40%

40% of taxable value X 18%

Sailing boats between 10.01 to   20 metres in length

50%

50% of taxable value X 18%

Motor boats between 12.01 to 16   metres in length

50%

50% of taxable value X 18%

All other boats

100%

100% of taxable value X 18%

 

The supplier of the charter would have the right to claim input tax incurred on the fuelling and provision of the boat provided that these goods would be sold to the client of the charter under a separate contract or provided that they would be invoiced separately from the charter service. The supply of these goods to the charter client would have to be made at the full standard rate of VAT. Furthermore, the supplier of the charter would also be entitled to claim input VAT incurred on fuel purchased for the outward journey of the yacht to its next port of destination after the completion of the charter.

In the event that the owner / operator pays fuelling, provisioning and similar costs on behalf of the client and merely recharges such costs at no mark up (as is typically the case where the client pays an Advance Provisioning Allowance before the charter starts), no input tax may be claimed by the owner / operator and no VAT would be chargeable on the relative claim for reimbursement of such expenses. The supplier of the charter would generally, be entitled to claim input tax incurred on fuel purchased for the outward journey of the yacht to its next port of destination after completion of the charter.