Vat on Pleasure Yachts

Malta offers a competitive and EU-compliant VAT framework for the leasing of pleasure yachts.

Under a yacht leasing arrangement, the owner (lessor) grants the use of the yacht to a lessee for an agreed period in return for lease payments. Depending on the structure of the agreement, the lessee may also be granted an option to acquire the yacht at the end of the lease.

For VAT purposes, the taxation of yacht leasing is governed by the actual use and enjoyment principle. Accordingly, Maltese VAT is chargeable only on the portion of the lease that relates to the yacht's effective use and enjoyment within EU territorial waters. No Maltese VAT is due on the portion of the lease attributable to use outside EU territorial waters, provided the applicable statutory conditions and documentary requirements are satisfied.

Unlike the previous regime, which relied on deemed percentages based on the yacht's size and method of propulsion, the current rules require the lessor to maintain sufficient documentary and/or technological evidence demonstrating the yacht's actual use within and outside EU territorial waters. Such evidence may include AIS data, GPS records, logbooks, voyage documentation and other supporting records accepted by the Malta Tax and Customs Administration (MTCA).

The VAT treatment of each lease must therefore be determined based on the yacht's actual pattern of use and the requirements set out in the MTCA's published guidelines.

In addition, with effect from 1 January 2024, Malta introduced a 12% reduced VAT rate on the short-term hiring of pleasure boats in qualifying circumstances, in accordance with Council Directive (EU) 2022/542 and Legal Notice 231 of 2023. The reduced rate applies only where the statutory conditions are met and should not be confused with the VAT rules governing long-term yacht leasing.

How We Can Help

Our team can advise on the most appropriate ownership and leasing structure for your pleasure yacht, assist with VAT planning and compliance, liaise with the Malta Tax and Customs Administration where required, and ensure that the necessary documentation is maintained to support the applicable VAT treatment.

Contact us for further information or to discuss your specific requirements.