Maltese yachting community rejects EU VAT claims

Malta Maritime Forum to support Maritime Industry

Photo credit: CSB Group

The Maltese yachting community has hit back at EU suggestions that the country’s tax rules on superyacht leasing are “suspect” and need to be changed.

European tax commissioner Pierre Moscovici says he has written to the government of Malta about how it applies value added tax (VAT) to superyachts, asking for the rules to be changed. He has threatened “extremely heavy financial sanctions” if action isn’t taken.

But the Maltese government and now four maritime and yachting organisations on the island have insisted that the scheme to give superyachts preferential tax treatment was agreed with the EU back in 2009 – and hasn’t changed since then – and follows similar rules to ones applied in  other EU member states, including France and Italy.

Moscovici was speaking to French TV station BFM TV in the wake of the Paradise Papers leak of millions of documents from legal firm Appleby, which has been the subject of media coverage around the world over the past few weeks. The papers detail how wealthy individuals and corporations avoid paying tax.

He highlighted the Isle of Man, a British crown dependency where private jet owners are exempt from paying VAT if their aircraft is used for business purposes, and Malta, where owners of yachts longer than 23 metres pay a reduced VAT rate of 5.4% on the grounds that they are used mostly in international waters.

He told BFM TV he had written to the British and Maltese governments, asking for the rules to be changed to help the EU stamp out tax avoidance. He said: “There are practices that we have reason to think are suspect. I asked that the rules be changed and, if they aren’t, the European Commission will launch an infringement procedure that can bear extremely heavy financial sanctions.”

But the Maltese government said that the island’s VAT arrangement for superyachts had been reported to the European Commission in 2009, and nothing had changed since then. “Malta uses a similar treatment and a predetermined schedule used in many EU member states, including France, Italy, Greece and Cyprus,” a spokesman for the Office of the Prime Minister was reported in the Times of Malta as saying on Friday.

Now the Malta Maritime Law Association, the Malta Maritime Forum, the yachting trade section of the Malta Chamber of Commerce, Enterprise and Industry, and the Super Yacht Industry Network Malta have released a joint statement, emphasising the fact that the country’s rules are based on EU ones and are not unusual within the EU.

According to the organisations, Malta’s guidelines on applying VAT to yacht leasing are based on the principle of effective use and enjoyment contained in article 59a of the VAT directive that allows EU member states to limit the VAT payable on services that are used and enjoyed within the EU.

“No changes to the application of this principle have been effected since communications were made to the European Commission on the VAT treatment of long term hire of pleasure yachts, way back in 2009,” they say.

They also say that Malta’s application of the rule is based on how other EU member states, particularly France and Italy, apply it.

“It is thanks to this that numerous yacht owners have been encouraged to bring their yachts within the European Union and pay VAT on such yachts rather than opt to not pay any VAT by retaining the yachts outside EU waters,” they say. “The presence of these yachts in the EU in turn means further increased maritime activity for all those throughout Europe involved in marine-related services ranging from general suppliers to yachts to technical services to wintering services.”

The Maltese VAT rules had “assisted with the creation of a flourishing EU-based yachting industry” in line with the EU’s vision for the industry.

“The yachting industry is one of several other marine related activities in Malta including our ship and yacht repair, tug and supply services, maritime flag, transhipment and a host of others. Malta is an ideally positioned yachting destination in its own right, straddling western and eastern Mediterranean cruising grounds. It has a large domestic market and a substantial international market. Together these markets contribute significantly to the country’s and to Europe’s maritime dimension.

“It is vital that the EU authorities continue to recognise and encourage this contribution in line with the EU maritime policy.”

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