VAT on Yachts in the EU: Understanding Your Liability and How to Minimise It

Are you a yacht owner who spends a considerable amount of time cruising in the EU or are you an EU resident who owns a yacht? If so, you need to be aware of the value-added tax (VAT) that applies to your vessel. As per EU regulations, yachts that spend more than 6 months a year in the EU or are owned by EU residents or imported into the EU are subject to VAT. The good news is that by registering your yacht in Malta, you could significantly reduce your VAT liability.

Introduction to VAT on Yachts

The VAT liability for yachts depends on several factors, including the length and type of the vessel. Typically, for yachts and super-yachts, the applicable VAT rate ranges from 5% to 10%. However, the effective VAT tax rate can be as low as 5.4% if the yacht is registered in Malta. This makes Malta an attractive jurisdiction for yacht owners who want to minimize their VAT liability.

Benefits of Registering Your Yacht in Malta

Malta is a popular jurisdiction for yacht owners for several reasons. Firstly, Malta offers foreign shareholders the opportunity to claim tax credits, making the effective corporate tax rates 0% for holding companies and 5% for trading companies. Secondly, Malta has signed double tax treaties with over 70 countries to avoid the double taxation of income. This means that there are no withholding taxes on the distribution of dividends to shareholders, no withholding taxes on interest and royalties to non-residents, and no capital duties or wealth taxes.

Understanding Malta's VAT System

Malta's VAT system is straightforward and easy to understand. The VAT rate in Malta is 18%, and the VAT system is based on the EU VAT Directive. Malta is a full member of the EU, and as such, it is required to implement the EU VAT Directive. This means that yachts registered in Malta are subject to the same VAT rules as yachts registered in any other EU member state.

How to Minimise Your VAT Liability

There are several ways to minimize your VAT liability when owning a yacht in the EU. One of the most effective ways is to register your yacht in Malta. By doing so, you can benefit from Malta's lower VAT rates and favourable tax regime. Additionally, you can take advantage of the various VAT planning strategies that are available in Malta, such as the leasing or chartering of your yacht.

Conclusion

In conclusion, owning a yacht in the EU comes with its own set of challenges, including VAT liability. However, by registering your yacht in Malta, you can significantly reduce your VAT liability and take advantage of Malta's favourable tax regime. Whether you are a yacht owner or a business owner, Malta's VAT system and tax regime offer an excellent opportunity to minimize your tax liabilities and maximize your profits. If you have any questions about VAT on yachts in the EU or how to minimize your VAT liability, don't hesitate to contact our friendly dedicated team for advice.

Shearwater Yachting are well placed to advise you on your best way forward, please get in touch with your enquiry.