Onward Supply Relief
Onward Supply Relief
Onward Supply Relief (“OSR”) is a procedure which allows individuals relief from the payment of Value Added Tax (“VAT”) on the importation of goods into Malta from a Third Country, when such goods are intended for consignment to another European Union (“EU”) Member State.
This procedure is based on the 6th EC VAT Directive (Directive 2006/112/EC) and provided for in Chapter 406 of the Laws of Malta, the Value Added Tax Act, 1998.
The OSR – An Attractive Solution
The OSR is particularly an attractive solution when yachts are imported into the EU due to the fact that the consignee, being a taxable person acting as such and therefore identified for VAT purposes in the Member State of final destination, would only be required to account for the transaction as an intra-community acquisition of goods, effectively resulting in the cash outflow of VAT not being required.
The OSR Effect
The OSR provisions allow for the relief from the payment of VAT due on the importation of goods from third countries when the place of first destination is Malta, to the extent that the goods are intended for a subsequent dispatch to another Member State as an intra-community supply following their release into free circulation as authorised by Maltese Customs. VAT would then be paid or accounted for in the Member State of the final destination.
The OSR provisions are an effective tool to relief from immediate payment of VAT on import, whilst achieving the objective of having the yacht released into free circulation with the EU territory.
The OSR Conditions
Maltese law provides individuals clear and effective requirements for the application of OSR to take place. In this regard, an individual who is importing the yacht into Malta will be asked to submit, amongst others, the following documentation to the Maltese VAT Department upon the arrival of the yacht:
- Certificate of yacht registration;
- A certified copy of the main passport page of the individual importing the yacht;
- A Bill of Sale issued by the supplier from outside the EU indicating the individual importing the yacht as the purchaser; and
- A Bill of Sale issued by the individual importing the yacht to a taxable person or entity established in another EU Member State, clearly identifying the VAT identification number.
Furthermore, in order for Maltese Customs to authorise the OSR procedure on the yacht, a bank guarantee, in their favour, amounting to 10% of the VAT due on the vessel will be required. The guarantee will be released upon presentation of documentary evidence that the yacht has sailed to another EU Member State and that VAT has been paid or accounted for in the country of the consignee.
Once these documents have been submitted to the Maltese VAT Department and the guarantee has been issued in favour of the Maltese Customs, the yacht will be released into free circulation in EU waters.