The Maltese Value Added Tax Authority has released new guidelines on the taxing of short-term yacht charter contracts.
In Malta, the definition of a short-term yacht charter is an agreement where the owner or operator of a yacht contracts out the use of the vessel either with a crew or on a bare-boat basis for no more than 90 days.
The short-term chartering of a yacht is understood to be the supply of a service and so is taxable at the standard rate of VAT in Malta, which is 18%. However, in certain cases the taxation of this supply falls outside the scope of VAT for the portion of time the yacht is chartered outside the territorial waters of the European Union.
These new guidelines have been released in order to clarify the rules governing the calculation of VAT liability where a luxury charter yacht is used partly outside EU territorial waters and in recognition of the challenges in ascertaining what portion of a charter voyage takes place within, and outside of, EU waters.
They set out to establish the estimated percentage portion of the charter based on the time the yacht is used within the territorial waters of the EU, according to the length of the yacht and its means of propulsion - motor or sailing.
If the yacht charter vacation meets the requirements set out in the guidelines, the following percentage of the charter is deemed to be liable to Maltese VAT:
Sailing yachts or motor yachts over 24 metres long - 30% (an effective rate of 5.4%)
Sailing yachts between 20.01 metres and 24 metres long, and motor yachts between 16.01 metres and 24 metres long - 40% (an effective rate of 7.2%)
Sailing yachts between 10.01 metres and 20 metres long, and motor yachts between 12.01 metres and 16 metres long - 50% (an effective rate of 9%)
All other yachts - 100% (subject to the full 18% VAT rate).
These new guidelines have been released in order to clarify the rules governing the calculation of VAT liability where a luxury charter yacht is used partly outside EU territorial waters...