Malta and Cyprus Yacht Registration - Yacht Schemes Compared

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Applicable Rate of VAT – Sailing Boats

The applicable rate of VAT in Malta for the delivery of pleasure yacht is 18% whereas in Cyprus the applicable rate of VAT is 17%. However, VAT is paid only on the portion of the lease during which the craft is in EU waters. The applicable rate of VAT between the two jurisdictions may be summarised as follows:

Type of yacht (Sailing)	% of lease subject to VAT	Effective rate of VAT (Malta)	Effective rate of VAT (Cyprus)
Sailing boats over 24 metres in length – online calculator *	30% Malta 20% Cyprus	30% of consideration x 18% = 5.4%	20% of consideration x 17% = 3.4%
Sailing boats between 20.01 to 24 metres in length – online calculator *	40% Malta 30% Cyprus	40% of consideration x 18% = 7.2%	30% of consideration x 17% = 5.1%
Sailing boats between 10.01 to 20 metres in length – online calculator *	50% Malta 50% Cyprus	50% of consideration x 18% = 9%	50% of consideration x 17% = 8.5%
Sailing boats up to 10 metres in length – online calculator *	60% Malta 60% Cyprus	60% of consideration x 18% = 10.8%	60% of consideration x 17% = 10.2%
Craft permitted to sail in protected waters only – online calculator *	100% Malta 100% Cyprus	100% of consideration x 18% = 18%	100% of consideration x 17% = 17%

* Note: Please allow a few seconds for the online calculator to load

Applicable rate of VAT – Motor Boats

As with sailing boats, VAT is paid only on the portion of the lease during which the craft is in EU waters. Cyprus and Malta differ not only in the applicable rate of VAT, but also in the length of the craft. Cyprus presents a significant VAT saving for small, motor-propelled crafts, as may be summarised in the following table:

Type of yacht (Motor)	% of lease subject to VAT	Effective rate of VAT (Malta)	Effective rate of VAT (Cyprus)
Motor boats over 24 metres in length – online calculator *	30% Malta 20% Cyprus	30% of consideration x 18% = 5.4%	20% of consideration x 17% = 3.4%
Motor boats between 16.01 to 24 metres in length – online calculator *	40% Malta	40% of consideration x 18% = 7.2%	N/A (see below)
Motor boats between 14.01 to 24 metres in length – online calculator *	30% Cyprus	N/A (see above)	30% of consideration x 17% = 5.1%
Motor boats between 12.01 to 16 metres in length – online calculator *	50% Malta	50% of consideration x 18% = 9%	N/A (see above)
Motor boats between 8.01 to 14 metres in length – online calculator *	50% Cyprus	N/A (see above)	50% of consideration x 17% = 7.5%
Motor boats between 7.51 to 12 metres in length – online calculator *	60% Malta	60% of consideration x 18% = 10.8%	N/A (see above)
Motor boats up to 8 metres in length – online calculator *	60% Cyprus	N/A (see above)	60% of consideration x 17% = 10.2%
Motor boats up to 7.5m metres in length – online calculator *	90% Malta	90% of consideration x 18% = 16.2%	N/A (see above)
Craft permitted to sail in protected waters only – online calculator *	100% Malta 100% Cyprus	100% of consideration x 18% = 18%	100% of consideration x 17% = 17%

* Note: Please allow a few seconds for the online calculator to load

Conditions of Financial Leasing Agreement

Description	Malta	Cyprus
Lessor	Malta Company	Cyprus Company
Lessee	No nationality restrictions	No nationality restrictions
Initial contribution to be paid by lessee (as percentage of vessel)	50%	40%
Periodical payments of lease installments	Monthly	Monthly
Maximum lease period	36 months	48 months
Minimum profit margin by lessor	1%	10%
Minimum rate of interest to accrue to lessor during currency of lease	No set minimum	5%
Final installment of yacht payment (as percentage of original value of the yacht)	1%	5%
Applicable rate of VAT of final instalment of yacht payment	18%	17%

Registration Process

In order to avail oneself of the aforesaid favourable rate for VAT in either Malta and Cyprus, the applicable steps, are as follows:-

(i) Prior Approval from VAT Commissioner;
The applicant should, on submission of relevant details of the craft, apply to the local VAT Department, for a prior confirmation of the applicable rate of VAT.

(ii) Register Company;

Provided that all the necessary know-your-clients are provided, the incorporation of a Maltese or Cypriot Company is a relatively straight-forward process, which may be accomplished in a few working days.

The Company as owner of the craft, must be empowered to operate, charter and manage yachts in its trading objects
(iii) Company applies for VAT;

Following incorporation, the Maltese or Cypriot Company would apply for registration of a VAT number with the relevant VAT Department;

(iv) Company enter into lease agreement;

Following VAT registration, the Maltese or Cypriot Company would enter into a lease agreement with the lessee.

(v) Submission of Lease agreement and supporting documentation to VAT Department;

The Company would submit a copy of the lease agreement, together with the details of the yacht (certification, specification list, surveyor’s valuation, bill of sale if bought new etc;) to the local VAT Department and apply for the applicable rate of VAT.

(vi) VAT Department issues letter of approval
The local VAT Department would, upon satisfaction of the supporting documentation set forth in paragraph (iv) above, issue a letter of approval, confirming the applicable rate of VAT.

Illustration of scheme

Comparative study of Malta and Cyprus schemes based on the following scenario:-

(i) The yacht is worth ten million Euro (€ 10,000,000);

(ii) The yacht has a length of thirty (30) metres;

(iii) The currency of the lease agreement shall be the maximum allowed by law; and

(iv) The Company shall sell the craft to the lessee, at the end of the lease period for a profit (the minimum prescribed by law)

Description	Malta	Cyprus
Initial contribution to be paid by lessee (as percentage of vessel)	EUR 5,000,000	EUR 4,000,000
VAT percentage of initial contribution	5.4%	3.4%
Amount of VAT due on initial contribution (i)	EUR 270,000	EUR 136,000
Outstanding balance during currency of lease agreement	EUR 5,000,000	EUR 6,000,000
Periodical payments of lease installments	Monthly	Monthly
Maximum lease period	36	48
Final installment of yacht payment (as percentage of original value of the yacht)	1%	5%
Amount on final installment (in money value)	EUR 100,000	EUR 500,000
Balance to be paid on initial installment to penultimate installment	EUR 4,900,000	EUR 5,500,000
Monetary value of monthly installment – from initial installment to penultimate installment	EUR 140,000	EUR 117,021
VAT percentage of initial installment to penultimate installment	5.4%	3.4%
Amount of VAT due on initial contribution	EUR 7,560	EUR 3,979
Total amount of VAT from initial installment to penultimate installment (ii)	EUR 264,600	EUR 187,013
Amount on final installment (in money value)	EUR 100,000	EUR 500,000
Applicable rate of VAT of final instalment of yacht payment	18%	17%
Amount of VAT due on final contribution (iii)	EUR 18,000	EUR 85,000
Total Amount of VAT paid Sum total of (i), (ii) and (iii)	EUR 552,600	EUR 408,021
Total VAT saving from standard rate	EUR 1,247,400	EUR 1,291,979

VAT Paid Certificate
When the lessee exercises the option to acquire the craft after the end of the lease, and furnishes evidence thereof (i.e. invoice and the applicable bill of sale), the Maltese or Cypriot VAT Department shall issue a VAT paid certificate attesting that all VAT due has been paid on the craft.

Income Tax Implications for lessor

The Lessor must pay income tax on the trading income derived from the yacht lease scheme and any interest derived therefrom.

The applicable rate of Income Tax may be calculated as follows:

Description	Malta	Cyprus (non-resident company)
Minimum profit margin by lessor (as percentage of consideration)	1%	10%
Minimum profit margin by lessor (money value)	EUR 100,000	EUR 1,000,000
Minimum rate of interest to accrue to lessor during currency of lease (as percentage of consideration)	0%	5%
Minimum rate of interest to accrue to lessor during currency of lease (money value)	EUR 0	EUR 500,000
Corporate Tax Rate (Malta)	35%	0%
Tax credit (shareholder’s refund)	6/7ths of 35%	N/A
Ultimate Tax leakage	EUR 5,000	EUR 0

Contact one of our officers for bespoke VAT Advice and start reaping the full benefits of an onshore, low-tax, reputable, EU jurisdiction. Simply fill in the contact box below or contact us by email on enquiries@fbsmalta.com or by calling at +356 2338 1500