Against the backdrop of preparations by the industry to reconvene at the much-anticipated Cannes and Monaco Yacht Shows after the pandemic-imposed hiatus of the past two years, Malta has continued to build and improve on the solid solutions that are available to owners of private and commercial yachts.

The onset of the pandemic in fact coincided with several key advantageous developments affecting the registration and importation of commercial yachts and also the structuring of operating leases subject to Maltese law.

These have served clients to good stead over the past months where sales and purchases have reached unprecedented heights as clients have taken to the seas in pursuit of privacy, enjoyment, and safety.

A.    Updated VAT Guidelines Relating to the Leasing of Pleasure Yachts

On the 12th March 2020, the authorities published revised VAT Guidelines on the leasing of pleasure yachts, followed by the welcome news of the EU Commission’s formal withdrawal of its action against Malta regarding yacht leasing in October 2020.

While the general principle is that full taxation in Malta is applicable where the place of supply of the lease is determined to be Malta, the Guidelines provide for a method of adjustment based on the actual effective use and enjoyment of a pleasure yacht within and outside EU waters, calculated by reference to the period of time when the pleasure yacht is used and enjoyed outside EU territorial waters.

For the purpose of applying the Guidelines, the Lessee (the person/entity leasing the yacht) is to provide the Lessor (the Maltese company owning the yacht) with data to determine the actual effective use and enjoyment by the Lessee of the pleasure yacht during the lease period. This would consist in yacht’s logs, marina confirmations and invoices, GPS/AIS positioning logs and so on and so forth.

These Guidelines would find their application within the context of Operating Leases set up under Maltese law, which would be formulated in accordance with best practices to ensure compliance with EU interpretations and ECJ Judgements. The resultant models offer flexibility to owners in deferring VAT on the acquisition of the yacht while enabling the application of clear principles to the manner in which VAT is chargeable to the Lessee during the lease period based on the actual use of the yacht.

B.     Streamlined importation procedures

Malta has for many years offered efficient and attractive procedures for the importation of commercial yachts that are intended to be brought into free circulation within the EU so as to enable them to carry out their chartering season in the Med.  The following measures have further strengthened the existing procedures, resulting in the importation of yachts into the EU via Malta increasingly featuring as the favoured option of international advisors and owners alike:

1. Where a commercial yacht is imported by a Maltese owning entity, removal of the requirement of the importing entity to set up a bank guarantee to enable the deferment of VAT on importation.  
2. Where a commercial yacht is imported by a non-EU owning entity, reduction in the amount of the bank guarantee required to allow deferent of VAT on importation to the equivalent of 0.75% of the value of the yacht which would be subject to a cap of one million Euro (€1,000,000).

C.     Launch of a New Passenger Yacht Code

The new Passenger Yacht Code (PYC) was launched by the Merchant Shipping Directorate of Transport Malta on the 24th May 2021, addressing industry demands spurred by the continued growth in size of commercial yachts.

Prior to the entry into force of the PYC, commercial yachts registered under the Malta flag and carrying more than 12 passengers were required to satisfy more onerous requirements similar to those applicable to passenger ships since they fell outside the scope of the Malta Commercial Yacht Code.

Recognising the need for a code which specifically caters for larger commercial yachts carrying more than 12 passengers, the Maltese Registry has designed a code that caters for passenger yachts carrying more than 12 passengers and up to 36 passengers, not more than 200 persons and that are engaged on international voyages.

D.    Revised Commercial Yacht Code

Also launched by the Merchant Shipping Directorate earlier this year, the revised Commercial Yacht Code 2020 updates and replaces the 2015 Commercial Yacht Code. The amendments and additions introduced by the Code largely seek to enhance the safety aspects of commercial yachting as well as to cater for the particular technological market demands of the industry – all this in conformity with safety and international regulations and standards. The revised Code is built on the substantial experience garnered by the Malta registry as a leading yachting flag and the technical and commercial advice obtained from consultations with builders, refit yards, classifications societies and industry stakeholders. The main aim remains that of a greener and safer commercial yacht fleet for the Malta flag.

 E.     Commercial Yacht – Pleasure Yacht Changeover Guidelines

The Merchant Directorate has also published new Guidelines relating to the procedures and requirements for the switching of yachts from commercial to pleasure registration and vice versa. Considering the increased demand for flexibility by owners in the use of their yachts, these latest guidelines offer welcome clarity and efficiency to owners and operators in approaching the registry with requests of this nature. The Guidelines provide that subject to the necessary survey and certification regime and applicable conditions being in place,  there is no limit to the number of changes and their duration.

The yachting market has proven to not only be resilient but to be capable of thriving in the most challenging of times. With a strong array of legal tools and logistical services at hand, Malta’s prime location and excellent collaboration with the authorities, we cannot but look forward to continuing servicing owners with in-depth technical, practical and legal knowledge of this unique industry.

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