The guidelines regulating the VAT treatment of hiring of pleasure yachts (the “Guidelines”) have been amended on 12/03/2020.

Whilst still based on Article 59a of the EU VAT Directive, the new Guidelines reflect recent EU developments and best market practices.

In terms of the amended Guidelines, the general principle remains that 18% Maltese VAT applies on the leasing of pleasure boats that are deemed to take place in Malta in terms of standard VAT rules. However, where certain conditions are satisfied, the lessor can make use of ‘Use and Enjoyment’ provisions such that the VAT charged would be commensurate with the actual time that the yacht spends within EU territorial waters. Such provisions can only be used when the determination of the actual time within / outside EU territory is possible.

Further guidance is provided in the amended Guidelines on how the VAT returns of the lessor should be adjusted such that the VAT initially charged thereby to the lessee is adjusted to reflect actual use and enjoyment by the lessee after the end of the VAT period.

For more information about the revised guidelines feel free to contact Anthony Pace or Louise Grima.