Yacht Registration in Malta

For many years Malta has been a leading maritime nation of repute. Besides the islands’ strategic location in the centre of the Mediterranean, the following are main benefits of registering a yacht under the Maltese flag:

  • Efficient company formation and reasonable incorporation costs;
  • Straightforward yacht registration process under the Malta Flag;
  • Excellent berthing facilities;
  • Attractive tax and VAT incentives to yachts and superyachts;
  • No restrictions on the sale and mortgaging of Maltese registered yachts;
  • Professional maritime administration;

Under the Malta Flag two different kinds of registration are to be differentiated:

  • The registration of a private yacht under the operational Yacht Leasing Scheme
  • The commercial Yacht Registration of a yacht/superyacht for commercial use

A. Malta Yacht Leasing for Private Yachts

A specific VAT treatment is in place in Malta for pleasure yachts intended for private use, for which an operational yacht leasing is established, as detailed below.

VAT Optimisation for Private Pleasure Yachts with Malta as Place of Transfer

Under the Operational Leasing Scheme, the guidelines of which have been in force since February 2019 – under the condition that the yacht is transferred/delivered to Malta – a yacht can be acquired VAT-free (No Malta VAT) and the owner/user will only have to pay VAT on a pro-rata basis according to the quota attributable to the use of the yacht in EU waters. Furthermore, the yacht can be sold again VAT-free under certain conditions.

The yacht leasing contracts must be drawn up in Malta and their provisions must comply with Maltese and EU regulations and the decisions of the European Court of Justice in respect of operating leases.

The operational lease agreement is entered into between a Maltese limited company (the lessor) and the person who leases the yacht (the lessee). The lessor (the Maltese company) acquires the yacht with the intention of carrying on an economic activity, namely leasing the yacht, and is therefore entitled to deduct input tax on the purchase of the yacht. Thereafter, the lessor enters into a lease agreement with the lessee for use.

There is no minimum or maximum lease term (usually 10 - 15 years) and the parties are free to agree on the terms that best suit their needs and business interests.

We recommend that an analysis is carried out in advance, taking into account the intended use of the yacht. The lessee will in any case have to keep adequate electronic records to regularly prove the actual use of the yacht within/outside the EU territory to the lessor (and the latter to the Maltese Authority).

The Maltese VAT rate of 18% is levied on the monthly or quarterly leasing instalments, depending on the use. This means that no VAT is payable on the part of the lease that relates to the actual use of the yacht in non-EU waters. Therefore, VAT is levied pro rata on the basis of the effective EU use.

In this regard, the Guidelines provide that for lease payments, VAT is provisionally levied on the basis of the percentage of actual use of the yacht in the EU in the respective previous year.

As with any business, the lessor is expected to make a profit. Therefore, lease payments must be calculated accordingly to ensure the financial viability of the lessor's business and to ensure that business is conducted at arm's length. Income tax is paid on the resulting profits.

A yacht lease may be terminated by the passage of time or in accordance with other contractual provisions. In this case, the yacht reverts to the lessor, who is then free to enter into a new lease or sell the yacht. The lease may also be extended if the parties so agree.

Below we summarise the steps necessary to set up and implement the Malta Operational Yacht lease:

Phase 1: Establishment of the leasing company and transfer of the yacht to Malta.

Step 1
Establish the Malta Leasing Company (after the onboarding and KYC process).

Step 2
Registration of the company for Value Added Tax (VAT) and Corporate Income Tax (CIT) in Malta.

Step 3
Transfer of the yacht to the Malta Leasing Company

Step 4
Registration under Malta flag

Step 5
Transfer of the yacht to Malta

Phase 2: Set up of the operational leasing

Step 6
Initial advice on and preparation of the leasing contract;
Preparation and finalisation of the leasing contract

Step 7
Submission of the leasing contract to the VAT Department and follow-up with the authorities

Step 8
Payment of the Initial Yacht Registration Fee;
After successful set-up of the Operational Leasing, the yacht can leave Malta and be used by the owner and his family.

The main advantages are:

Clearly defined and straightforward model, based on the principles of EU law;

  • Deferral of VAT due on acquisition during the lease period; corresponding cash flow saving on acquisition.
  • Operating leases are well known to banks; thus, lending to yachts using such a model is easier;
  • Various exit options without the owner having to commit a priori.

B. Malta Commercial Yacht Registration

The Malta Commercial Yacht Code 2020 (CYC) considers a commercial registered yacht as a yacht of

  • 15 metres in overall length or more,
  • But having not more than 3000 gross tonnes of weight, and
  • Which does not carry cargo,
  • And does not carry more than 12 passengers,
  • Is operated by the owner or body corporate owning the yacht for commercial use.

1. Classes of Yachts

3 classes of commercial Yachts are to be distinguished:

  • Yachts in commercial use of not less than 15 metres in length but not more than 24 metres in length (Category 1);
  • Superyachts in commercial use of more than 24 metres in length and less than 500 gross tonnes (Category 2);
  • Superyachts in commercial use of more than 24 metres in length and 500 gross tonnes and over, but less than 3000 gross tonnes (Category 3).

2. The Commercial Yacht Registration Process

The Yacht registration process under the Malta Flag is divided into two stages:

The Provisional Registration of a Yacht under the Malta Flag

  • Assuming that the Yacht’s owner is to be a Malta registered entity, the company is required to submit its Memorandum & Articles with the Registrar of Shipping together with the application for registration based on the Yacht’s specifications.
  • When the company has acquired the Yacht, the Bill of Sale will be filed together with a Declaration of Ownership.
  • The Yacht needs to undergo an initial pre-registration survey, performed by an approved Government surveyor or by a recognised international classification society.
  • This survey and the respective Certificate of Survey are mandatory and the basis for verification and confirmation by the Maltese Maritime Authority that the Yacht complies with the Malta Yacht Code legislation and its requirements.
  • Given that the Yacht is over 24 meters of length,
    1. An International Tonnage Certificate
      Any other (international) Certificates, required in accordance with international rules, such as
      A declaration pertaining to the yacht’s anti- fouling system in accordance with the International Convention on the Control of Harmful Anti-Fouling Systems on Ships is to be completed and submitted to Transport Malta.
      A radio License Application Certificate
      A Minimum Safe Manning Certificate (proper crewing)
  • The applicable Transport Malta Fees for the Provisional Registration have to be affected.
  • Finally: A License in the country where the commercial yachting operations will be undertaken (if required), e.g., in Spain.

The Provisional Registration remains valid for a period of six months, which can be further extended by another six months. An extension of the Provisional Registration normally takes place for a period of three months, followed by a further two months and finally a one-month period.

The Permanent Yacht Registration

Once all requirements have been fulfilled, checked and confirmed by Transport Malta, a Certificate of Compliance to Trade enabling the operational registration is issued by the Maltese Maritime Authority, attesting that the yacht can operate as a commercial yacht.

The Compliance Certificate to trade as a commercial yacht is renewable every five years.

The Certificate of Registration as well as the Radio Certificate (if applicable) are renewable on a yearly basis on the anniversary date of the registration.

In the case that the yacht is above 24 metres in length an annual survey needs to be carried out by an approved Government surveyor or a recognised international classification society (for Category 2 or 3 yachts).

3. The 5 Tax Benefits of the Malta Commercial Yacht Registration

  • (1) Yachts intended for commercial use may opt for a VAT deferment on the importation as follows: Obtaining a VAT deferment on the importation of the commercial yacht by a Maltese owning entity having a Maltese VAT registration; without needing to set up a bank guarantee (as previously required); this means that there is a VAT exemption for the purchase of a Yacht, if the place of supply of the vessel is Malta.
  • (2) The company owning the Commercial Yacht is exempt from income tax on any income resulting from the operation of such yachts, e.g., of charter revenues.
  • (3) To benefit from such favourable exemption, an annual Malta tonnage tax based on the gross tonnage of the commercial yacht is payable, and the annual registration fee of Transport Malta needs to be duly paid.
  • (4) There is no capital gains tax or stamp duty on the transfer of shares in a shipping company
  • (5) Malta Double taxation treaties apply for profits from the operation of the vessel, such as charter fees, meaning that such profits are only taxable in the Contracting State in which the place of effective management is situated, regularly Malta. As an example: Malta has a reciprocal tax agreement with Spain which would allow the company to be exempt from non-resident income tax on charter income which is currently charged at 24% in Spain, should the yacht carry out its chartering in Spain.