Malta has one of the largest shipping registry in the European Union and has internationally distinguished itself as a white flag state, thanks to the high standards required by Transport Malta, the authority which regulates the sector. Since the Maltese flag is one of the top flags in the world, this has ensured that the flag of Malta would not become a flag of convenience, and as a result, has helped gain the trust of foreign investors within the Maltese shipping industry. Furthermore, Transport Malta fees are amongst the lowest in the European Union, while the country’s tax system provides considerable fiscal benefits to operators and ship managers. In fact, contrary to what happens in other countries where VAT is applied to the purchase of a yacht, in Malta, VAT is reduced to between 4% – 16%, depending on the size and the weight of the yacht at the time of registration, as yachts can be registered while still under construction. This percentage rate excludes those boats that are only allowed to sail in protected waters.
Malta is an attractive base for the registration of commercial and pleasure yachts, as well as super yachts. There are already over 300 super yacht owners who have chosen Malta as a base for their yachts in order to take advantage of the location of the country and the cost-effective services provided by marinas and ancillary companies, as well as the regime for boat ownership which offers a number of specific incentives to boat owners, as can be seen in the table below.
VAT incentives for sailing boats and motor boats
|Type of Yacht||Length of Yacht||% of lease subject to VAT||VAT reduction||VAT rate|
|Sailing boat||Up to 10 metres||60%||40%||10.8%|
|Sailing boat||Between 10.01 and 20 metres||50%||50%||9%|
|Sailing boat||Between 20.01 and 24 metres||40%||60%||7.2%|
|Sailing boat||Longer than 24 metres||70%||30%||5.4%|
|Motor boat||Between 7.51 and 12 metres
(if registered in the commercial register)
|Motor boat||Between 12.01 and 16 metres||50%||50%||9%|
|Motor boat||Between 16.01 and 24 metres||40%||60%||7.2%|
|Motor boat||Longer than 24 metres||30%||70%||5.4%|
|Motor yacht||Up to 7.51 metres
(if registered in the commercial register)
|Boats allowed to sail in protected waters||Any length||100%||0%||18%|
How to register a yacht in Malta
When registering any type of yacht in Malta, you have to state the purpose of its use such as whether the yacht will be used for private use, for rental purposes, partly private and partly for rental, or strictly rental so as that the relevant authorities will be aware of the full picture when applying for a reduced VAT. This is due to the fact that Maltese companies that purchase yachts are allowed to enter into a lease-sale agreement of their asset with a third party. Moreover, it is also important to state the frequency of use and the months during which the yacht will be sailed.
The Finance Leasing Rules applicable to the lease agreement outlined above can be found in Legal Notice 369 of 2005.
Tax Guide to Leasing of Yachts
Where leasing arrangements of yachts do not fall within the scope of Legal Notice 369 of 2005 and where the aforesaid lease is deemed by the Commissioner for Revenue to be in accordance with guidelines issued by the VAT department from time to time, the Office of the Commissioner for Revenue has decided that in such special case, the following tax treatment is to be adopted for each year for the duration of the lease:
- the lessor is charged to tax only on the annual finance charge, namely the difference between the total lease payments less the capital element divided by the number of years of the lease;
- the lessee is allowed a deduction in respect of the (i) the finance charge; (ii) maintenance; (iii) repairs; and (iv) insurance;
- the lessee is allowed capital allowances in respect of the yacht and the parties may not opt to shift the burden of wear and tear onto the lessor;
- where the lessee exercises an option to purchase the yacht on the termination of the lease, the purchase price received by the lessor shall be considered to be of a capital nature and no tax thereon shall be payable by the lessor.
Our in-house legal team assist our customers throughout the registration process with Transport Malta. As a ship owner or manager, we can help you benefit from the highly affordable registration costs and fees of service charged in Malta, which would result in substantial savings to you or your company.