Attard, Stephen: Malta: Reduced 5% VAT Rate on Yachts

The Maltese VAT Act was amended such that a reduced 5% VAT rate will be charged by Malta limitedly up to the 31st March, 2004 in respect of yachts and pleasure boats whose length exceeds 7.5 metres.
Since Malta will become an EU Member State with effect from the 1st May, 2004, the payment of VAT in Malta and the issuance of an appropriate certification to that effect may be an interesting tax planning opportunity for yacht-owners. Obviously, the fiscal position in EU ports (other than Malta) must be examined separately so as to establish the applicable treatment when the yacht calls at such ports after having paid the Maltese VAT at the reduced rate of 5%.

The Maltese authorities will also accept payment of the 5% VAT in respect of yachts which are not physically brought into Malta. One must nonetheless weigh the advantages of not importing the yacht into Malta against any future implications in EU ports. To the extent that the yacht would enter Malta, the internationally-recognised SAD forms duly stamped by the Maltese Customs Department will be made available.

If the yacht is brought into Malta, the Customs officials will inspect the yacht and issue a valuation thereof. Submission of evidence of the purchase-price, date of acquisition and current market value will assist the Customs officials in their valuation.

If the yacht is not brought into Malta, the Maltese authorities will be able to rely on a valuation carried out by certain international valuers approved for such purpose by the Maltese authorities.

The Maltese Customs and VAT Departments will then issue an official Declaration confirming that VAT has been paid on the particular yacht ? this will contain a description of the yacht but not the amount of VAT paid.

Whilst there is no requirement to set up a Maltese company and/or to register the yacht under the Malta flag, there may be advantages to be obtained when the yacht subsequently enters other EU ports if a greater link is established with Malta through a Maltese owning company and Malta flag for the yacht.