Antoinette Muscat

VAT Manager, E&S Group

Malta – A Maritime Perspective

Tuesday 09th April 2019

Located along the Mediterranean’s principal shipping routes, Malta has established itself as one of the leading maritime hubs for both the leisure and commercial sectors. In 2018, the Malta Freeport Terminals handled an unprecedented 3.31 million TEU containers and, with its ambitious investment programme, it is expected to increase its capacity in the future years.

The current maritime registry in terms of registered tonnage ranks Malta as the largest Flag in Europe and the sixth worldwide. The luxury superyacht industry further consolidates Malta’s position as one of the leading registry around the globe. Renowned for its strong legal and regulatory framework, Malta proved itself ready to adapt to the industry’s needs and has developed a vast range of facilities and competitive services throughout the years, particularly in the yachting industry.

In February 2019, the Commissioner for Revenue revisited the VAT treatment of pleasure yacht leasing to better reflect EU’s development and practices. The updated guidelines offer yacht owners the possibility of setting up attractive operational lease models, resulting in cash flow advantages and overall VAT optimisation.

The guidelines are based on the principle of ‘use and enjoyment’, whereby Malta VAT at the standard rate of 18 per cent is charged on the portion of the lease covering the actual use and enjoyment of the yacht within EU waters, whereas no VAT is applicable when the yacht is effectively used and enjoyed within non-EU or international waters. The application of such principle therefore implies that the overall VAT incidence shall depend on the whereabouts of the yacht.

In order to apply such VAT treatment, a number of general conditions and anti-abuse measures need to be satisfied, including:

Lessor must be registered for VAT purposes in Malta;

Lessee must be a non-taxable person, in other words the yacht must be used by the lessee for non-business purposes;

A yacht leasing agreement must be entered into between the lessor and the lessee, which agreement must be at arm’s length and presented to the VAT Department;

Written approval on the application of the effective use and enjoyment principle must be obtained from the VAT Department;

Yacht must be in Malta at the beginning of the lease term.Lessor must gather from the lessee reasonable documentary and/or technological data to determine the actual use and enjoyment of the pleasure boat within and outside EU territorial waters.

E&S Group is a multi-disciplinary firm and a licensed corporate services provider which offers all the necessary services for the implementation of the above guidelines, including incorporation of a Malta company, legal, corporate and accounting services.

Our team is also able to assist clients in all matters related to the registration of yachts and ships under the Maltese Flag, whether private or commercial. If you would like to know more, kindly get in touch on