Four maritime and yachting organisations have insisted that Malta’s VAT rules on yacht leasing are in line with EU directives and based on similar models adopted by France and Italy.
They were reacting after Brussels threatened to launch infringement procedures against Malta that could even translate into heavy financial sanctions. Even if such a process was set in motion it would take years for fines to be imposed because the case would have to go before the European Court of Justice first.
European Taxation Commissioner Pierre Moscovici last week said he had raised the issue with both the UK and Malta.
According to him, some of Malta’s practices are “suspect”.
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“I asked that the rules be changed and, if they aren’t, the European Commission will launch an infringement procedure that can bear extremely heavy financial sanctions,” he said.
According to Brussels, the practice of slashing the VAT rate on bigger ships on grounds they are used mostly in international waters is suspicious as it could give rise to tax avoidance.
Under this arrangement, owners of yachts longer than 23 metres pay a reduced VAT rate of 5.4 per cent instead of 18 per cent if the vessels are used for leasing.
However, Malta’s yachting community strongly denied such claims and was quick to point out that even France, where Mr Moscovici himself served as finance minister, had a similar system in place.
The point was made in a joint statement issued yesterday by the Malta Maritime Law Association, the Malta Maritime Forum, the Yachting Trade Section within the Malta Chamber of Commerce, Enterprise and Industry and the Super Yacht Industry Network Malta.
They noted that no changes in the application of the principle of ‘use and enjoyment’ of article 59A of the VAT Directive had been made since 2009.
Malta’s VAT treatment of the leasing of pleasure yachts on the basis of the effective use and enjoyment principles in the VAT Directive was based on the similar application of this principle by other Member States, in particular France and Italy, they said.
They noted that, thanks to such arrangement, numerous yacht owners had been encouraged to bring their vessels within the EU and, consequently, pay VAT, rather than keep them out of EU waters and pay nothing.
In turn, this was having a positive economic ripple effect, the yachting community remarked.
They highlighted the fact that a flourishing European Union-based yachting industry was very much in line with the vision of the first Green Paper on an European Union maritime policy issued in 2006.