Change in place of supply rules affects the Maltese leasing structure

22 Apr 2013

2 min read

The 2013 amendments to the VAT legislation brought about changes to the place of supply rules in relation to long-term leases of yachts (leases for more than 90 days) to a non-taxable person.

Prior to the 2013 amendments the place of supply of a long-term lease to a non-taxable person was the place where the supplier (lessor) was established if the customer was a non-taxable person acting as such.

With effect from 1 January 2013 the place of supply of a long-term hire to a non-taxable person shall be the place where the customer is established, except for pleasure boats where the place of supply will be where the vessel is put at the disposal of the customer if the supplier has an establishment there.

In implementing the yacht leasing structure, prior to the 2013 amendments there was the possibility of the yacht coming to Malta to put into place the importation formalities either at the beginning of the lease or at the time when the lessee exercises his purchase option in terms of the lease agreement.

With the 2013 amendments this option may no longer be availed of and in order for Maltese VAT Rules to apply it is important that the yacht comes to Malta at the commencement of the lease when the yacht is put at the disposal of the lessee. If the yacht is put at the disposal of the lessee in another jurisdiction, the VAT rules of such jurisdiction may be applicable resulting in the payment of VAT at a higher rate from that which would be applied in Malta.

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