Yacht Registration in Malta

For many years Malta has been a leading maritime nation of repute. Besides the islands’ strategic location in the centre of the Mediterranean, the following are main benefits of registering a yacht under the Maltese flag:

  • Reasonable company formation and registration costs;
  • Competitive yacht registration costs;
  • Attractive tax incentives to yachts and superyachts owners encouraging commercial operation;
  • No restrictions on the sale and mortgaging of Maltese registered yachts;
  • Professional maritime administration

VAT Optimisation for Yachts with Malta as Place of Transfer

Under the new Operational Leasing, the guidelines of which have been in force since February 2019 – if the yacht is transferred/delivered to Malta – a yacht can be acquired VAT-free (No Malta VAT) and the owner/user will only have to pay VAT on a pro-rata basis according to the quota attributable to the use of the yacht in EU waters. Furthermore, the yacht can be sold again VAT-free under certain conditions.

The yacht leasing contracts must be drawn up in Malta and their provisions must comply with Maltese and EU regulations and the decisions of the European Court of Justice in respect of operating leases.

The operating lease agreement is entered into between a Maltese limited company (the lessor) and the person who leases the yacht (the lessee). The lessor (the Maltese company) acquires the yacht with the intention of carrying on an economic activity, namely leasing the yacht, and is therefore entitled to deduct input tax on the purchase of the yacht. Thereafter, the lessor enters into a lease agreement with the lessee for use.

There is no minimum or maximum lease term (usually 10 - 15 years) and the parties are free to agree on the terms that best suit their needs and business interests.

We recommend that an analysis is carried out in advance, taking into account the intended use of the yacht. The lessee will in any case have to keep adequate electronic records to regularly prove the actual use of the yacht within/outside the EU territory to the lessor (and the latter to the Maltese Authority).

The Maltese VAT rate of 18% is levied on the monthly or quarterly leasing instalments, depending on the use. This means that no VAT is payable on the part of the lease that relates to the actual use of the yacht in NON-EU waters. Therefore, VAT is levied pro rata on the basis of the effective EU use.

In this regard, the Guidelines provide that for lease payments, VAT is provisionally levied on the basis of the percentage of actual use of the yacht in the EU in the respective previous year.

As with any business, the lessor is expected to make a profit. Therefore, lease payments must be calculated accordingly to ensure the financial viability of the lessor's business and to ensure that business is conducted at arm's length. Income tax is paid on the resulting profits.

A yacht lease may be terminated by the passage of time or in accordance with other contractual provisions. In this case, the yacht reverts to the lessor, who is then free to enter into a new lease or sell the yacht. The lease may also be extended if the parties so agree.

Below we summarise the steps necessary to set up and implement the Malta Operational Yacht lease:

Phase 1: Establishment of the leasing company and transfer of the yacht to Malta.

Step 1
Establish the Malta Leasing Company (after the onboarding and KYC process).

Step 2
Registration of the company for Value Added Tax (VAT) and Corporate Income Tax (CIT) in Malta.

Step 3
Transfer of the yacht to the Malta Leasing Company

Step 4
Registration under Malta flag

Step 5
Transfer of the yacht to Malta

Phase 2: Set up of the operational leasing

Step 6
Initial advice on and preparation of the leasing contract; Preparation and finalisation of the leasing contract

Step 7
Submission of the leasing contract to the VAT Department and follow-up with the authorities

Step 8
Payment of the Initial Yacht Registration Fee. After successful set-up of the Operational Leasing, the yacht can leave Malta and be used by the owner and his family.

The main advantages are:

Clearly defined and straightforward model, based on the principles of EU law;

  • Deferral of VAT due on acquisition during the lease period; corresponding cash flow saving on acquisition.
  • Operating leases are well known to banks; thus, lending to yachts using such a model is easier;
  • Various exit options without the owner having to commit a priori.

Conclusion: The Maltese Flag offers interested yacht fans an efficient and legally secure basis for a VAT-optimised realisation of their dreams.