Since it is hard to determine the exact period of time a yacht spends in EU territorial waters Malta has concluded that the VAT rate on leasing of yachts by a Malta company should be reduced by a predetermined percentage depending on the size and means of the yacht.
In Malta the conclusion has come to charge VAT based on the anticipated number of days a year the yacht will be in EU waters. In simple terms: The larger the yacht – the less time it is expected to be spent in EU territory.
For larger yachts the VAT charged is as low as only 5.4%.
To even further take advantage of the Maltese tax system, the owner is basically setting up a company in Malta to purchase the yacht. The yacht is then leased by the company to the owner who is paying a leasing fee. Following a minimum of 3 years leasing the owner can purchase the yacht from the company through a so called lease-purchase agreement at a minimum value of 1.0% of the original purchase price of the yacht.
With careful tax planning, the Tax and VAT rates charged in Malta give the lessee of a yacht owned by a Malta company the option to become the owner of an EU VAT-paid yacht by paying as little as 6-7% on the original value of the yacht in tax and VAT together!.