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Yacht Registration under the Malta Flag

Registering your yacht under the Malta Flag offers many tax advantages. Registering your yacht in Malta involves setting-up a Malta company which will become the direct owner of the yacht. Therefore, instead of directly owning the yacht, the yacht owner will use a Maltese company to own the yacht on his or her behalf. A Maltese company is a flexible legal entity which is allowed to carry any type of activity, such as yacht chartering, in addition to the ownership of the yacht.
Owing the yacht via a Maltese company enables the yacht owner to enjoy various fiscal incentives including a significant reduction in VAT paid on the acquisition of the yacht and a very beneficial effective rate of tax on the income generated by the Malta company. The beneficial owner of the yacht is also eligible to use our fiduciary services to achieve absolute confidentiality on the ownership of his asset.

Some of the benefits of registring a yacht under the Maltese flag include:

  • No age limits for the registration of a yacht in Malta
  • Low company formation costs
  • Low vessel registration costs
  • Beneficial rate of tax on the income of the Malta company
  • Reduced VAT
  • No need to keep the yacht in Malta
  • Confidentiality on the beneficial ownership of the yacht
  • No restrictions on the nationality of the ship owner
  • No restrictions on the nationality of the master, officers and crew
  • No trading restrictions
  • An effective mortgage system

Requirements for registration


To register your yacht as a commercial vessel under the Malta flag, the following documentation is needed:

  • A Power of Attorney to register the yacht as a commercial vessel under the Malta Flag
  • An Application for registration (which we will provide)
  • Declaration of ownership made before the Registrar (which we will provide)
  • Builder’s certificate (if the yacht is new or has never been registered anywhere previously)
  • If the yacht is over 24m in load line length in terms of Art. 2(8) of the Load Line Convention, an International Tonnage Certificate (ITC 1969) and a Certificate of Survey will be required. (This may be provided by an approved Government Surveyor of Ships in Malta or by a recognized oganisation. If the yacht is under 24m in load line length, a certificate of survey (tonnage measurement) issued by an authorized surveyor will be necessary;
  • International Load Line Certificate will be required for vessels over 24m in load line length
  • A Certificate of Compliance to trade as a commercial yacht following a successful survey in accordance with the Maltese Commercial Yacht Code, 2006
  • Application for a Safe manning Certificate (which we can provide)
  • If over 300 GRT (issued by an authorized surveyor or class) a Radio Certificate will be required. Yachts under 300GRT will have to pass through a Radio inspection carried out by approved Radio Inspector
  • IOPP Certificate (issued by an authorized surveyor or class) will be required for a vsl over 400GRT
  • If vessel is in class, a copy of the Class Certificate will be required
  • A bill of sale (if applicable), evidencing the ownership of the yacht

VAT Finance Leasing Structure


The VAT department in Malta has issued guidelines intended to promote the use of the Maltese jurisdiction for yacht leasing by non-residents. The yacht leasing scheme which aims to reduce the VAT paid on the acquisition of the yacht works as follows:

Step 1
The beneficial owner acquires the yacht via a Malta company. The company is not required any obtain special status or any advance revenue ruling. The main object of the company would be to lease the yacht to the beneficial owner. The Malta should also be registered for VAT purposes and obtain a VAT number from the VAT department.

Step 2
The yacht is leased by the Malta company (lessor) to its beneficial owner (lessee) under a financial lease agreement.

Step 3
The financial lease agreement will stipulate the sale of the yacht at a pre-determined price after the termination of the financial lease period.

VAT Treatment
The lease of the yacht is deemed to be a supply of services. A supply of services is deemed to take place where the person who makes the supply is established. Given that the company would be deemed to be established in Malta, the place of supply would be deemed to be Malta and therefore, the Malta company would have to charge VAT on the income derived under the finance lease. The applicable VAT rate in Malta is 18%. The supply of a lease is taxable according to the deemed use of the yacht in EU territorial waters. Since it is virtually impossible to track the movements of the yacht and thus calculate the deemed usage in EU waters, the VAT department in Malta has issued guidelines which contemplate the deemed usage percentage in EU waters as follows.

Type and length of craft

% of lease subject to VAT

Effective VAT Rate

Sailing boats

Sailing boats over 24 metres in length

30%

4.3%

Sailing boats between 20.01 to 24 metres in length

40%

7.2%

Sailing boats between 10.01 to 20 metres in length

50%

9%

Sailing boats up to 10 metres in length

60%

10.8%

Craft permitted to sail in protected waters only

100%

18%

Motor Boats

Motor boats over 24 metres in length

30%

5.4%

Motor boats between 16.01 to 24 metres in lengt

40%

7.2%

Motor boats between 12.01 to 16 metres in length

50%

9%

Motor boats between 7.51 to 12 metres in length (if registered in the commercial register)

60%

10.8%

Motor boats up to 7.5 metres in length (if registered in the commercial register)

90%

16.2%

Craft permitted to sail in protected waters only

100%

18%



The Malta company would have the right to claim the full amount of VAT paid on the acquisition of the yacht and any expense incurred in the operation of the finance lease (such as legal and accountancy fees).


Example

A motor yacht with a length of 25 metres is acquired by its non-resident beneficial owner via a Maltese company. The cost of the yacht of €10 million and leased to its beneficial owner under a financial lease agreement over a term of 1 year. The motor yacht is sold to the lessee for €500,000. Thereafter the Maltese company is liquidated.

VAT on Initial Contribution

Initial contribution by the lessee (50% of the acquisition value of the yacht) - €5 million

VAT charged on initial contribution = €5 million x 18% x 30%:

€270,000

VAT on monthly instalments

12 monthly instalments of €458,333 each

VAT charged on monthly instalments = €458,333 x 12 x 30% x18%

€297,000

VAT on Sale of Motor Yacht

VAT charged on the sale of motor yacht = €500,000 X 18%:

€90,000

VAT reclaimed back on Expenses

VAT claimed on expenses incurred by the Maltese company: €20,000 X 18%

(€3,600)

Total VAT

€653,400

Total VAT which would have been paid in the absence of finance leasing

€1,800,000

VAT Saving

€1,466,600

 

For more information, kindly contact:

Neville Cutajar - Managing Partner: This email address is being protected from spambots. You need JavaScript enabled to view it.