YachtThe VAT Department has issued guidelines regarding short term charters of a yacht with a crew or bare boat charter basis between the owner and operator and the charterer for a consideration.

The place of short-term hiring of a means of transport is deemed to be the place where the means of transport is actually put at the disposal of the customer and ‘short-term’ means the continuous possession or use of the means of transport throughout a period of not more than 90 days.

A short term charter for leisure purposes gives rise to a standard rate of VAT (18%).

Under these guidelines, subject to a number of conditions stipulated by the guidelines themselves and other conditions that may be imposed, this supply may be taxed according to the portion of the yacht’s use within the territorial waters of the European Union.

Since it is difficult to determine the physical movement of a yacht in order to establish the period that the yacht spends within the territorial waters of the European Union and that it spends outside territorial waters of the European Union, the guidelines provide that an acceptable measure would be the length of the yacht and its method of propulsion.

The guidelines then establish the estimated percentage proportion of the charter, based on the time that the yacht is used within the territorial waters of the European Union. The standard rate of VAT at 18% is applied to the established percentage of the charter deemed to relate to its use within EU territorial waters, as shown in the table below:

Yacht type

% of charter deemed to take 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%Taxable value X 18%

Various documents are to be submitted to the VAT department; including:

– Evidence that the owner or operator of the yacht is registered to VAT in Malta;

– Details of the yacht; and

– A copy of the charterparty.

Other requirements stipulated in the guidelines are to be satisfied; including:

– The supplier of the yacht charter shall be a person or company registered for VAT in Malta;

– The yacht charter contract shall clearly indicate that the charter commences in Malta and shall clearly indicate the charter fee as well as including a statement that it is intended that the yacht shall sail outside EU waters;

– The VAT Department of Malta reserves the right to request proof of any payment made in connection with the charter; and

– 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 the yacht.

Upon application, the applicant would be informed in writing of the applicable proportion of the charter fee that would be subject to VAT. Prior approval must be sought in writing from the VAT department and each application will be considered on a case-by-case basis.

Input tax

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. No input VAT may be claimed by the supplier of the charter if the cost of fuel and other provisions are paid by such supplier on behalf of the client and the cost is merely recharged at no mark up.

Moreover, 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.