EU accuses Cyprus, Greece and Malta of yacht “tax evasion”
The EU has sent letters of formal notice to Cyprus, Greece and Malta alleging that they have not been charging the correct amount of Value-Added Tax (VAT) on yachts.
All three countries offer leasing schemes. They now have two months to respond to the EU.
“In order to achieve fair taxation we need to take action wherever necessary to combat VAT evasion,” said Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs Union. “We cannot allow this type of favourable tax treatment granted to private boats, which also distorts competition in the maritime sector. Such practices violate EU law and must come to an end.”
The EU has said that it is addressing the issue because of the “Paradise Papers” leaks. “The Paradise Papers revealed widespread VAT evasion in the yacht sector, facilitated by national rules which do not comply with EU law,” said a statement from the European Commission.
The Commission says that it does not agree with estimates made to calculate VAT on larger yachts. These assume that larger yachts spend more time outside EU waters. It also does not agree with the leasing of a yacht being classified as a service rather than a good.
“The language being used by EU commissioner Pierre Moscovici leaves no room for doubt. The European Commission believes that Cyprus, Greece and Malta have facilitated VAT evasion by endorsing these arrangements” said Philip Munn, VAT partner at audit, tax and consulting firm RSM.