MALTESE VAT TREATMENT OF AIRCRAFT LEASING
Malta was introduced to the world of aviation through its historical close ties with Great Britain and the first seaplane base in Malta was constructed as early as 1916. Located in the centre of the Mediterranean, with its natural harbours and the skills of its people, Malta is becoming a centre of excellence and offers a whole range of services and facilities for the aviation industry.
Malta has developed a strong legal and regulatory platform, as a full member of the European Union, which has enabled Malta to become a reputable international aircraft register. Malta has developed specific legislation that takes into account the distinctive requirements of the private and commercial aircraft industry and makes registering private and commercial aircraft in Malta an attractive proposition.
Advantages of registering an aircraft in Malta include:
- Private aircraft may be registered in the name of a Malta company as long as its shareholders and directors are citizens of approved jurisdictions
- Private aircraft may also be registered in the name of a Malta Trust or Foundation as long as its beneficiaries are citizens of approved jurisdictions
- Low company/trust/foundation formation and aircraft registration costs
- Attractive commercial and individual tax regime with regard to income from aircraft ownership and/or operation
- A good international reputation
- Availability of a whole range of aviation services including reputable and experienced legal and corporate services supporting registration, management and administration
Maltese VAT TREATMENT OF THE IMPORTATION OF A PRIVATE AIRCRAFT
In addition to the above, the Maltese VAT Department has published a set of guidelines on the VAT treatment of aircraft leasing.
The Department has established that when a Maltese company acquires a private aircraft and leases it to third parties (as a financial lease), VAT is due on the lease at the normal rate of VAT applicable in Malta (ie currently 18%) insofar as this is a supply of a service deemed to be supplied in Malta.
However, on the basis that it is sometimes difficult to trace the movements of aircraft in order to determine the period that the aircraft spends within EU member states’ airspace and the time the aircraft spends outside EU airspace, the Department has published guidelines establishing the estimated percentage of time of the lease the aircraft is used within EU airspace.
Effective VAT rates
The relevant percentages are set according to the range of the aircraft (in kilometres).
|Aircraft by range (km)
||% of lease taking place in EU
||Effective VAT rate
|0 – 2,999
|3,000 – 4,999
|5,000 – 6,999
|7,000 and above
The leasing agreement must be between a lessor established in Malta and registered for VAT in Malta and a lessee also established in Malta (who would not be able to claim input tax in respect of the lease, eg not registered for VAT).
The lease agreement should not exceed 60 months and lease instalments should be payable each month (with VAT paid quarterly).
Prior approval must be sought in writing from the Commissioner for Revenue and each application will be considered on its own merits and certain conditions may be applied. The Commissioner for Revenue may require the lessor to submit details regarding the intended use of the aircraft.
If the lessee may purchase the aircraft at the end of the lease period at his option, if exercised, the Commissioner for Revenue will issue a VAT paid certificate (provided all VAT has been fully paid).
For more information regarding the Maltese VAT treatment of aircraft leasing, please contact Louise Vella or Thomas Jacobsen on firstname.lastname@example.org