New VAT guidelines on short-term yacht chartering
On the 29th of July 2013, the Maltese VAT Department issued new guidelines for the VAT treatment of short-term yacht chartering. The guidelines are applicable for pleasure and commercial yachts to be used for leisure purposes for a term which is not exceeding 90 days. The place of the taxation is the place where the boat would actually be placed at the disposal of the customer, in this case it must be in Malta.
The new guidelines establish the estimated percentage portion of the charter based on the time that the boat is used within the territorial waters of the EU. The guidelines state that the standard rate of VAT of 18% is applied on the established percentage of the charter deemed to be related to the use of the yacht within EU territorial waters based on the type (motor or sail) and length of the yacht as follows:
|
Yacht Type |
% of charter deemed to be taking place in the EU |
Computation of VAT |
|---|---|---|
|
Sailing boats or motor boats over 24 meters in length |
30% |
30% of taxable value X 18% |
|
Sailing boats between 20.01 to 24 meters in length |
40% |
40% of taxable value X 18% |
|
Motor boats between 16.01 to 24 meters in length |
40% |
40% of taxable value X 18% |
|
Sailing boats between 10.01 to 20 meters in length |
50% |
50% of taxable value X 18% |
|
Motor boats between 12.01 to 16 meters in length |
50% |
50% of taxable value X 18% |
|
All other boats |
100% |
100% of taxable value X 18% |
There are some conditions need to be satisfied:
- The supplier of the yacht charter shall be a person registered for VAT in Malta;
- The yacht charter contract shall indicate the place where the charter commences (i.e. Malta), the charter price and a statement that the yacht shall sail outside EU waters. The VAT Department reserves the right to request proof of any payment in connection with the charter;
- Upon application, the supplier of the charter has to 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;
- Following submission of these documents, and provided that the conditions are met to the satisfaction of the Director General (VAT), the applicant shall be informed in writing regarding the applicable portion of the charter fee which would be subject to VAT;
- Approval must be sought in writing from the VAT Department and each application shall be considered on its own merits.
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. Terms and conditions apply in terms of the law.