Malta Sets Sail for Savings: New 12% VAT Rate for Superyacht Charters

The most recent development for VAT and tax on superyachts in Malta is the introduction of a special 12% VAT rate for charters commencing in the region. This change, implemented by the Malta tax authorities through Legal Notice 231 of 2023 titled the Value Added Tax Act (Amendment of Eight Schedule) Regulations, 2023, came into effect on January 1st of this year. Subject to certain conditions, charters can benefit from this reduced 12% rate, which is significantly lower than the standard 18% Malta VAT rate.

The Malta tax department also published guidelines alongside the Legal Notice to assist the yachting industry in applying and interpreting these regulations.

Furthermore, Transport Malta recently issued a Port Notice clarifying that visiting yachts calling at Malta to begin a charter operation, berth/moor, or receive services (as long as their usual operations and navigation occur outside Maltese territorial waters) are exempt from the Commercial Vessels Regulations. However, these yachts must provide a copy of their registration document indicating commercial status and, if applicable, a valid license or permit for commercial operation as required by their flag state.

Conditions for the Special VAT Rate:

To qualify for the reduced 12% VAT rate, a yacht charter must meet the following main conditions:

• The place of hiring (the location where the yacht is made available to the charterer) must be in Malta.
• The charter must be conducted under a charter party agreement with a specified term.
• The total charter period for a particular yacht or similar yachts cannot exceed 5 weeks (35 days) within the previous twelve (12) months ending on the start date of the current charter period.

The guidelines further clarify that when a taxable person provides mixed supplies, including goods and services subject to different VAT treatments, these supplies may constitute a single composite supply for VAT purposes. In such cases, the applicable VAT treatment for this single composite supply is the same as the treatment applied to the principal component of that supply. Therefore, the principal component – the charter itself – would be subject to the 12% special VAT rate if it meets the above conditions.

Following this, the guidelines explain that supplies eligible for the 12% VAT rate are those typically made available during a charter. Supplies provided upon specific request from the charterer, non-consumable goods, or goods not available when placing the yacht at the charterer's disposal are not considered part of a single composite supply and cannot benefit from the 12% VAT rate.

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