When a yacht is purchased in Europe, VAT is due on the purchase price. In principle VAT should be paid in the country where the yacht becomes part of the economic traffic - usually the place where it is delivered. For individuals, the yacht is given VAT-paid status once the VAT has been paid, after which it cannot be recovered. Should a yacht be purchased by a company, however, the VAT might be able to be recovered in the company’s tax declaration. The key question is whether this is justified when a yacht is used primarily for personal use and not for corporate activities!
In recent years, the tax authorities have paid more attention to the correct observation and application of VAT regulations in the yachting industry. This was necessary as not everyone observed and applied these regulations as they should. Moreover, regulations that were previously easy to apply can no longer be realised in the current market and with regard to the increasing VAT harmonisation within the EU. This includes the cross-border lease that since the start of the 1990s was often applied in the car and yacht lease sectors.
Many yacht owners have heard that it is possible to save VAT when purchasing a yacht. To find out what the options are, how it works and the do’s and don’ts of yachts and VAT, Ciris Capital is available to provide in dependent information on all the options.
Saving VAT with legal financial lease methods
The Italian, French and Maltese governments all issued guidelines for how VAT should be applied when leasing a yacht, resulting in the French, Italian and Maltese lease methods. The basis for all these methods is that the government concerned offers lease companies reductions on the VAT they have to pay on the lease terms. In addition to lower VAT costs, the guidelines ensure that the remaining VAT can be paid in stages during the lease term (delayed VAT) instead of on delivery (as is the case when purchasing without leasing). The idea behind offering VAT discounts is that it is very likely that the yacht will be outside European waters for a large part of the year.
The reductions offered by the Maltese and Italian leases depend on the length and type of yacht. The French lease applies the same discount percentage for all yachts. Depending on the chosen lease method, the yacht also needs to be partially externally financed. The various lease methods have different lease conditions, which we are happy to discuss with you in detail so as to determine which method is available and/or most suitable to you.
For all the abovementioned lease methods, the yacht should be leased for a term that is determined beforehand. You have the right to purchase the yacht for the contracted percentage of the original price. As lessee you insure the yacht and arrange its maintenance and berth.
A financial lease to save VAT can in principle be applied to yachts without a ‘VAT paid’ status, such as new yachts, yachts entering European waters from outside the EU, and yachts on which the VAT has yet to be paid because they are owned by an (offshore) company.
Ciris Capital mediates and provides its network and knowledge in the field of yacht leasing. We work with renowned international parties, provide you with a custom-made solution, and bring you into contact with the most suitable party on the market for the implementation and application of your chosen lease method. In many cases it will result in paying VAT, while on other occasions it can also result in savings.