Posted on 21 March 2019

Update to Malta’s Use & Enjoyment Rules for Yacht Leasing

Malta has updated its Use & Enjoyment Rules for the leasing of pleasure yachts.

Malta has consistently offered practical and timely solutions for yacht owners. However, in early 2018, the European Commission put forth infringement procedures against Malta, Cyprus and Greece, claiming the island nations failed to levy the correct amount of Value-Added Tax (VAT) on the provision of yachts.

Many in the industry anticipated Malta’s reaction to be pragmatic and sensible enough to ensure the country returns to good favor with the Commission regarding these structures. As such, on February 28th, 2019, Maltese VAT authorities issued new guidelines relating to the lease of pleasure yachts by a lessor to a lessee, further clarifying the manner in which VAT is levied on the leasing of pleasure yachts at each chargeable event.

What has changed?

Article 59a of the VAT Directive allows Member States to tax the use and enjoyment of services, therefore including the lease of a pleasure craft, for the time that the service is effectively used and enjoyed within European territorial waters.

Use and enjoyment

Previously, at the date of each chargeable event, the extent to which a pleasure boat was deemed to be effectively in EU territorial waters was established depending on the vessels’ length with larger vessels enjoying a greater VAT reduction than smaller ones as it was perceived that larger vessels travel for longer periods outside EU territorial waters.

The new rules take into consideration the effective use and enjoyment of a vessel by first calculating the “preliminary ratio” based on the actual use and enjoyment of the vessel within the first tax period that it is leased by the lessee from the lessor.

This ratio will be used for the first annual tax period, after which the lessor will assess the lessee’s technical data and determine the “actual effective use and enjoyment” ratio. An adjustment, whether against or in favor of the lessor, will be made in the subsequent VAT return.

The lessor will collect technical data from the lessee to determine the actual use and enjoyment ratio by the lessee throughout the term of the lease.


For more information on the above, please contact Andrea Debattista.


Andrea Debattista
Senior Manager
+356 7903 1988