Yacht Leasing Scheme Developments – Reduced VAT on charters conducted in Greece
On 8th of March, 2018, the European Commission has initiated infringement procedures by formally providing relevant notices to Cyprus and Malta concerning the Yacht Leasing Scheme and to Greece regarding the application of reduced VAT rates on charters.
The European Commission has decided to deal with VAT evasion within the yachting industry, in conjunction with national rules that do not comply and are more advantageous in respect to the EU laws.
In regard to this matter the French Commissioner of Financial Affairs Pierre Moscovici has stated the following; “In order to achieve fair taxation on all activities throughout the EU zone, we need to take action wherever necessary to tackle VAT evasion. We cannot allow this type of favourable tax treatment granted to private yachts, which also distorts competition in the maritime sector. Such practices violate EU law and must come to an end”.
The infringement procedures have been initiated specifically regarding the Leasing Scheme provided by Cyprus and Malta. In such leasing schemes, which are used when purchasing a yacht through a leasing agreement, the actual owner has the same role both as lessor who purchases the yacht and as lessee, who will use the yacht for a specific time period against several installments, retaining the option to buy the yacht at the end of the leasing period. Thus the final owner of the yacht considers that the VAT on the hull value is paid. The VAT rate in Malta is currently 18% but this can be reduced by up to 70% to 5,6% should the yacht navigate in international waters and has a LoA over than 24 meters. In Cyprus, the VAT rate is 19% but this can be reduced by up to 80% to 3,8% if the yacht navigates in international waters and has a LoA over than 24 meters. These two above tax evasion structures are backed up by relevant VAT Certificates, issued by the competent authorities of these countries. Malta and Cyprus now have now two months to respond to such allegations of the European Commission.
The European Commission has not sent any relevant notice to Italy or France, probably because these leasing schemes are quite different from the above-mentioned Cypriot and Maltese schemes, by means that there is a Bank Institution acting as the Lessor, as per the requirements of EU Directive regarding Leasing Schemes, there is proper evaluation of the yachts purchase price and documented proof of due payment of the yacht's VAT.
Regarding Greece, European Commission has expressed its concerns regarding the VAT calculation on charter fees and the reduce of VAT rate depending on the waters (High Seas, Local Coasting etc) where the vessel navigates. The Minister of Finance has already responded, to such allegations of the European Commission in writing.