PN Leader Adrian Delia has described the European Commission’s recent decision to initiate infringement proceedings against Malta over the use of Value-Added Tax on the provision of yachts as “attacks against the country”, calling for regulatory structures to protect the industry’s reputation and build on what already has been achieved, after a visit to the Grand Harbour Marina in Birgu.

On 8 March, the European Commission sent letters of formal notice to Malta, Cyprus and Greece for not levying the correct amount of Value-Added Tax on the provision of yachts.

Specifically, the infringement procedures launched concern the reduced VAT base for the lease of yachts – a general VAT scheme provided by the countries. While current EU VAT rules allow Member States not to tax the supply of a service where the effective use and enjoyment of the product is outside the EU, they do not allow for a general flat-rate reduction without proof of the place of actual use. 

Malta, Cyprus and Greece have established guidelines according to which the larger the boat is, the less the lease is estimated to take place in EU waters, a rule which greatly reduces the applicable VAT rate.

There are also concerns about the incorrect taxation in Cyprus and Malta of purchases of yachts by means of what is known as 'lease-purchase'. 

The Cypriot and Maltese laws currently classify the leasing of a yacht as a supply of a service rather than a good. This results in VAT only being levied at the standard rate on a minor amount of the real cost price of the craft once the yacht has finally been bought, the rest is taxed as the supply of a service and at a greatly reduced rate.

The Yachting Services Trade Section within the Malta Chamber of Commerce, Enterprise and Industry, the Malta Maritime Law Association, the Malta Maritime Forum and the Super Yacht Industry Network Malta have issued a press releasing insisting that the infringement procedure is discriminatory, after countries like France and Italy were not sent notices despite applying the same principle under the VAT directive.

“Malta Yacht lease structures have always been set up in line with EU laws,  based on practices tried and tested in the other Member States as explained by the Malta Guidelines,” the four entities said. 

Delia said that Grand Harbour Marina was evidence of a specialised industry that benefited all sectors and provided a superior service on the global market.

“Historically we have used the sea as a tool to generate investment. The industry has enormous potential to generate tourism and investment of the highest quality,” he said.

He did note that there were some issues with the marina itself with a number of buildings remaining empty and incomplete after a number of years.