13, St. Isidore Lane, Zejtun ZTN 2261, MALTA
Maritime Consultancy & Marine Surveying
Capt. Reuben Lanfranco, BA (Crim), M. Jur (Int. Law), LLM (IMLI)
Capt. Reuben Lanfranco, BA (Crim), M. Jur (Int. Law), LLM (IMLI)
Advantages of registering a yacht under the Maltese Flag:
1. No restrictions on the nationality of the ship owner
2. Low company formation and ship registration costs
3. No restrictions on the nationality of the master, officers and crew
4. No restrictions or taxation on the sale or transfer of shares of a company owning Maltese registered ships
5. No restrictions or taxation on the sale and mortgaging of Maltese registered ships
Any vessel can be registered under the Maltese Flag and recent changes to the law have made it possible for all citizens of an EU Member State, and a Company registered anywhere in the world to own a Maltese registered vessel without the requirement of setting up a Company in Malta.
Notwithstanding that a company is not strictly necessary by law, the set up and registration of a company to own the yacht, whenever this is required, are also inexpensive, and the advantages of reduced personal liability, and the anonymity offered by the ownership of a yacht through a company generally attract owners to go for this option. The transfer of shares within the Company owning the yacht is also exempt from taxation, and likewise a Maltese company owning a Maltese registered yacht is not taxed on the sale and mortgage of such yacht. The first step in registering a vessel under the Maltese Flag is provisional registration which lasts 6 months, during which all necessary documentation must be provided. The vessel will subsequently be permanently registered.
Private Yacht Registration
Documentation required for Provisional Registration of a Private Yacht:
- Power of Attorney
- Application form including relevant yacht details
Documentation required for Permanent Registration of a Private Yacht:
- Yacht Survey
- Original Bill of Sale
- Original CE Marking Certificate
- Builder's Certificate
- Radio installation and License Application to be filled in by surveyor
- Carving and Marking (provided by Transport Malta, Merchant Shipping directorate upon provisional registration) to be signed by Surveyor and returned to Transport Malta
- Certificate of Cancellation (when vessel has been registered in a different registry)
- Declaration that yacht has not been registered elsewhere (when applicable)
- Returning of the Provisional Certificate
Commercial Yacht Registration
Documentation required for Provisional Registration of a Commercial Vessel:
- Power of Attorney
- Application (including all yacht details)
- Compliance with Commercial Yacht Survey (for operational provisional)
- Load Line Certificate and International Tonnage Certificate (if vessel exceeds 24 meters)
Documentation required for Permanent Registration of a Commercial Vessel:
- Yacht Survey
- Original Bill of Sale
- Original CE Marking Certificate
- Builder's Certificate
- Radio installation and License Application to be filled in by surveyor
- Carving and Marking (provided by the Transport Malta Ports & Yachting Directorate upon provisional registration) to be signed by Surveyor and returned to Transport Malta
- Certificate of Cancellation (when vessel has been registered in a different registry)
- Declaration that yacht has not been registered elsewhere (when applicable)
- Returning of the Provisional Certificate
VAT Payment
At Maltese law, for the purpose of VAT, the lease of the yacht is considered a supply of services with the right of deduction of input VAT by the lessor, where such right applies. This supply of services is taxable according to the use of the craft, attributed within the territorial waters of the European Union (EU), provided that the lessor is a Maltese company (including a commercial bank) which is leasing the craft to any Maltese or non-Maltese person or company.
The guidelines issued by the Maltese VAT Department establish the estimated percentage portion of the lease based on the time that the craft is used within the territorial waters of the EU. These percentages are set according to the length of the craft and its means of propulsion (power or sailing).
The standard rate of VAT of 18% is only applied on the established percentage of the lease, deemed to be related to the use of the craft in EU territorial waters. The minimum rate is paid on a yacht of 24 meters or bigger, where the 'vatable' portion is established at 30% with an effective rate of VAT and tax of between 5.4 and 6.2 per cent.
A financial leasing agreement is drawn up between a Maltese company and any Maltese or foreign person or company. Prior to the set up, approval is sought in writing from the Commissioner of VAT who is to confirm the rate applicable according to the use in EU territorial waters (depending on the size and propulsion of the craft), as well as the acceptability of the value of the craft as declared. For this purpose a valuation certificate of the craft is submitted with the application for approval.
Payments are divided into two phases - An initial contribution is paid by the lessee to the lessor amounting to 50% of the value of the craft. Subsequently, Lease instalments are paid every month by the lessee to the lessor, and the law (guidelines) requires that the lease agreement should not exceed 36 months.
Furthermore, the lessor is expected to make a profit from the leasing agreement over and above the value of the boat, and the purchase value at the end of the lease agreement must not be less than 1% of the original value of the craft, and this will is subject to the standard rate of VAT at 18%
If the lessee opts to purchase the craft at the end of the lease, a VAT paid certificate is issued to the lessee provided that all VAT due has been paid.
Guidelines Regarding VAT Treatment of Yacht Leasing
What is a leasing agreement of a pleasure boat?
A leasing agreement of a pleasure boat is an agreement whereby the lessor (the owner of a boat) contracts the use of the boat to the lessee (the person who leases the boat) in return for a consideration. In addition, at the end of the lease period, the lessee may opt to purchase the boat at a percentage of the original price. The final purchase is strictly an option which may be exercised at the end of the lease for a separate consideration.
How is the leasing agreement treated for VAT purposes?
For the purpose of VAT, the lease of the boat is a supply of services with the right of deduction of input VAT by the lessor, where the right of input VAT applies. This supply of services is taxable according to the use of the boat, attributed within the territorial waters of the European Union (EU), provided that the lessor is a Maltese company which is leasing the boat to any Maltese or non-Maltese person or company.
How is the use of boat within EU territorial waters calculated?
It is very difficult to trail the movements of pleasure boat in order to determine the period that the boat spends within the territorial waters of the EU and the time it spends outside the EU. In this regard, these guidelines establish the estimated percentage portion of the lease based on the time that the boat is used within the territorial waters of the EU. These percentages are set according to the length of the boat and its means of propulsion (power or sailing). The standard rate of VAT of 18% is applied on the established percentage of the lease, deemed to be related to the use of the boat in EU territorial waters.
The table below indicates the established percentage portions according to the type of boat:
In order to apply these guidelines the following conditions shall apply:
- The leasing agreement shall be between a Maltese company and any Maltese or foreign person or company.
- The Lease instalments shall be payable every month for a period of not more than 36 months.
- Prior approval shall be sought in writing from the Commissioner of VAT and each application will be considered on its own merits and certain conditions may be applied. Moreover the Commissioner of VAT may require the lessor to submit details regarding the use of the boat.
International Owner & Resident Agent
In line with regulations published in 2003, it is possible for an international owner to own a Maltese ship or a share therein. It is also possible for a foreign company to act as the bareboat charterer of a Maltese flagged vessel through the concept of the "international owner".
The "International Owner" is defined as a foreign corporate body or other entity which enjoys to the satisfaction of the Registrar-General legal personality in terms of the law under which it has been established and which has satisfied the Registrar-General that it can and will ensure due observance of the laws of Malta relating to merchant shipping.
An International Owner in whose name a ship has been registered in Malta under the Merchant Shipping Act shall be deemed to have submitted to the jurisdiction of the Maltese Courts for any action in connection with the ship while so registered under the Malta Flag.
An International Owner must appoint in writing a Resident Agent in Malta to act on its behalf as required according to law and an International Owner must ensure that it has at all times a validly appointed Resident Agent. The Resident Agent must be habitually resident in Malta, and must satisfy the Registrar-General that he is a person capable of carrying out the functions of Resident Agent.
The principal functions of the Resident Agent are:
- to act as a channel of communication between the International Owner and the Maltese Government and Authorities;
- to sign and file documents, declarations and forms on behalf of the International Owner as required according to law;
- to act as the judicial representative of the International Owner for judicial proceedings in Malta;
- to act as the service agent for the notification of any official notice upon the International Owner.
Please contact us on info@maritimeconsultant.eu if you require advise on the procedure and documents required for the International Owner to be registered with the Registrar of Shipping and for us to be appointed as your company's Resident Agent.
