Yacht EU VAT
The general precepts that apply to the importation of yachts entering EU waters, may be concisely summarised as follows:
Yachts owned by EU resident individual or corporate entities have the right to free movement throughout the EU, provided VAT has been paid on the craft in one of the EU countries. Yacht owners should, irrespective of whether they are navigating in territorial waters of EU member states and when sailing between EU Countries, carry evidence of VAT payment or any exemption thereof at all times.
A VAT-paid yacht will encounter no difficulties in EU waters insofar that the craft is not chartered. Temporary importation relief from VAT is available to yachts which are beneficially owned by non-EU residents insofar that such non-EU residents do not acquire ordinary residence in the EU (interpretation of ordinary residence varies between EU member states but, as a rule of thumb, is often taken to be 183 days).
Yachts owned by non-EU residents and registered outside the EU are entitled to tax-free temporary importation into the EU for a total period of eighteen (18) months. This dispensation applies to the entire EU zone (local customs are afforded the discretion to extend this grace period further if good reason is provided e.g. yacth is left in the care of a boatyard for repair), after which period, the yacht must either exit EU territorial waters or obtain an EU VAT certificate.
EU VAT – Paid Certificate
Although the aforesaid rules are clear cut, many yacht owners experience difficulty with local VAT authorities as to the implementation of the aforesaid EU guidelines for yachts purchased in and imported into EU Waters. The attainment of an EU VAT-Paid Certificate may remain highly elusive or a considerable expense that must be factored in the acquisition of the craft.
The applicable rate of VAT varies wildly within the EU – with peaks of up to 27%. Applying this VAT rate on the value of the craft can therefore have a major impact on the ownership costs and the resale value for the yacht. Some jurisdictions, in particular Malta and Cyprus have come up with innovative yacht leasing schemes that apply a reduced rate of VAT regard being had to the length and the propulsion of the vessel - the underlying rationale being that the bigger the yacht, the more time it may be assumed that it will be outside EU territorial waters. Consequently, a derogation applies from the standard rate of VAT, and VAT is only paid on the proportion of time, in which it is assumed that the yacht shall be in EU territorial waters.
The yacht leasing scheme allows the yacht to be leased to a lessee, who has, the option, if he so elects, to acquire the yacht on the expiration of the lease. The end result allows yacht owners undertaking the yacht leasing scheme to severly mitigate the applicable rate of VAT payable on the yacht and more importantly to obtain an EU VAT-Paid Certificate.
Malta launched the yacht leasing scheme in 2007 effectively reducing the VAT rate to just 5.4% to crafts in excess of twenty-four (24) metres. The scheme still applies today, and has been availed of, by many yacht owners. Similarly, Cyprus has in March 2012, launched its own yacht leasing scheme, the mechanisms of which are to an appreciable extent similar to the ones provided under the Maltese scheme, yet the applicable rate of VAT is even more attractive, with a VAT rate of just 3.4% on the top-end of the scale (crafts in excess of twenty-four (24) metres).
View Yacht Scheme comparison between Malta & Cyprus for a complete understanding of the VAT rate on the Yacht leasing schemes in Malta and Cyprus.
Contact one of our officers in Malta or Cyprus for bespoke VAT Advice and start reaping the full benefits of two onshore, low-tax, reputable, EU jurisdictions. Simply fill in the contact box below or contact us by email on email@example.com or by calling at +356 2338 1500 for a better understanding of the scheme.
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