Malta is today one of the most popular jurisdictions for yacht registration. A solid legal framework providing security for financiers, attractive incentives to yacht owners and operators, and a strong maritime tradition stemming from its geographical location in the middle of the Mediterranean, have all contributed to Malta becoming the second largest maritime flag in Europe and the eight largest in the world.
All kinds of sea going vessels, from large cruise liners and super tankers to private and commercial yachts, may register under the Maltese Flag; which is widely known and respected by Port Authorities across the world.
Financiers of sea vessels take comfort from the fact that their rights are adequately protected under Maltese legislation. Depending on their intended use, yachts can be registered under the Malta Flag either as a private pleasure yacht or as a commercial yacht.
Companies operating yachts on a commercial basis, such as chartering, may benefit from various fiscal advantages.
In terms of the Merchant Shipping Act, the registration of pleasure yachts is normally done in two stages namely, the Provisional Registration followed by the Permanent Registration.
For Provisional Registration of a yacht, certain basic documentation would need to be presented to the Merchant Shipping Directorate following which a provisional certificate of registration would be issued.
Provisional Registration lasts for six months during which time other documents would need to be presented for Permanent Registration.
Yachts used on a commercial basis are registered as commercial yachts with the Maltese Commercial Yacht Register.
The registration of a commercial yacht is similar to that of pleasure yachts, however, the vessel must additionally comply with the requirements of the Commercial Yacht Code (‘the Code’) or equivalent standard.
The Code applies to commercial yachts that do not carry cargo, do not carry more than 12 passengers and are operated by the owner or the body corporate owning
the vessel for commercial use. Yachts are categorised under three distinct classes depending on size and gross tonnage and for each class the Code stipulates a level of safety standards corresponding to size and gross tonnage.
Commercial yachts navigating on the high seas and carrying passengers for reward are exempt from VAT on supplies like maintenance costs, chartering, fuelling, provisioning, supplies for the direct needs of the vessels and passenger/crew assistance.
Furthermore commercial yachts may take advantage of the low effective income tax rate of 5%. Any foreign income tax suffered on such a yacht’s commercial operations would be available as a credit against the Maltese income tax so that the effective Maltese tax could even be reduced to 0%.
Back in 2005, the VAT Department issued guidelines on the VAT treatment of the long-term leasing of yachts by a Malta company. In terms of the guidelines the overall VAT incidence incurred on the long-term leasing of a pleasure yacht can be reduced substantially depending on the use of the yacht within or outside EU waters.
Similarly the Maltese VAT incidence on the short-term chartering of yachts used for leisure purposes, commencing in Malta, may be limited to the portion of the use that the yacht is deemed to make within the territorial waters of the EU.
© 2020 KPMG, a Malta civil partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
KPMG International Cooperative (“KPMG International”) is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.