The tax treatment on yacht leasing with particular reference to Malta

Abstract

Purpose: The objectives of this study focused on the classification of the leasing transaction by including recent court cases and all the conditions that will have an effect on this classification. Moreover, the study focused on comparing Malta’s leasing solution with other European jurisdictions taking into consideration recent amendments that may have helped Malta’s leasing solution into being a more attractive one. Design: In pursuit of these objectives, semi-structured interviews were conducted with tax practitioners and lawyers both locally and in Cyprus. Due to the sensitivity of the subject matter, a number of interviewees and a representative from the VAT department refused to participate in the study. Findings: Findings indicated that continuous amendments to the leasing solution are being implemented so that Malta remains competitive in this sector. The VAT department is making sure in keeping a close relationship with local service providers so that any amendments in the solution are well explained. It was also noted that the two professions apply different accounting treatments for such transactions. Conclusion: As for the tax practitioners the substance comes over the form while the lawyers believe that the form comes over the substance in these forms of transactions. Moreover, when taking everything into consideration, presently Malta is the European jurisdiction that is offering the most beneficial solution when navigating to Western Europe but continuous monitoring is vital as more innovative solutions are being implemented. Value: It is hoped that this study pinpoints the areas where progress still needs to be made with regards to the Maltese leasing solution. Recommendations to this effect by this study include more professional marketability on the solution, lengthen the leasing period, add an additional VAT registration number for the lessee in a B2C transaction and an in-depth evaluation on amending the effective VAT rate on yacht leasing.