Guidelines on reduced 12% VAT Rate on yacht charters commencing in Malta

In terms of Legal Notice 231 of 2023, which amended the Eighth Schedule of the Maltese VAT Act (Cap 406 of the Laws of Malta), a reduced VAT rate of 12% shall apply to the yacht charters commencing in Malta. On 29^th January 2024, the Malta Tax and Customs Administration issued guidelines for the application of the reduced 12% VAT rate on the chartering of yachts.

This reduced VAT rate applies where the yacht is put at the disposal of the customer in Malta and has come into effect in respect of services which became chargeable for VAT on or after 1^st January 2024.

In order to benefit from the reduced 12% VAT rate, the main requirements are the following:

1. A charter agreement is entered into between the lessor and the lessee.
2. The agreement is entered into for any term which, when added to the term of previous charter/s by the same lessee within the 12 months preceding the lease, does not exceed 35 days.
3. The lessee takes physical possession of the yacht in Malta.

The Guidelines provide a number of hypothetical examples to enable interested parties to determine whether they are eligible to benefit from the reduced 12% VAT rate. These guidelines are accessible through the following link.

Should you require any assistance or advice in connection with the applicability of the Guidelines, please do not hesitate to contact DF Advocates on dfca@dfadvocates.com for guidance.