In principle, the programme involves a Maltese company purchasing the Yacht for the full value and leasing it to a third party. Third parties can be Maltese or non-Maltese, or even a company.
The supply of services would be provided in Malta, and therefore VAT would be due at the effective rate. The lease agreement will state the following. ‘The lessor’ will give an option to ‘the lessee’ to purchase the Superyacht at a percentage of the original price. One of the conditions is that the company should also make a profit which is usually 8-10%.
Moreover, 50% of the Superyacht value would be taxable in the first VAT period, minus purchase tax on any associated costs (such as maintenance costs and professional fees). Therefore the reduced amount of VAT would be applied, rather than the standard rate of 18%.
So what is the process to reduce the VAT?
Firstly, the Superyacht must arrive in Maltese waters at the beginning of the lease. Secondly, the payment of the initial VAT amount is due after the application process to the VAT department. After that, the VAT department will issue a ‘paid certificate’ allowing the Superyacht to travel freely within EU waters. Finally, the remaining 50% of tax is spread over 12 to 36 months. On completion, all relevant Superyacht VAT would be settled.
IMPORTANT: Temporary Importation Permit
It is important to note that depending on the location of the Yacht before the arrival in Malta; you may need a temporary importation permit. But, this can be collected from another EU member and pass through their national waters before sailing to Malta. It is essential to seek professional guidance before commencing this programme to ensure that all of your bases are covered.