The official publication of guidelines on the way superyachts pay VAT has brought an end to the threat of action by the European Commission, with the yachting industry breathing a sigh of relief that it is back to business.

The European Commission had sent official warnings a year ago over yachting VAT regimes in Malta, Greece and Cyprus, and later to France and Italy.

It had given Malta notice of infringement proceedings, objecting to the way in which only a percentage of the full VAT rate was charged, depending on the percentage of time that a yacht spent in EU waters. This was seen as offering a tax advantage to the island.

However, the industry and government had come together to protest a few months later, with a detailed reply sent in November 2018  being favourably received by the Commission.

Responding in December, the Commission said that the case against Malta would be dropped once the guidelines were officially published. This was done on March 1, with the case against Malta now closed.

How Malta had reached a compromise

Finance Minister Edward Scicluna explained on Wednesday that, in a nutshell, Malta had compromised on the percentages being charged, allowing for them to be changed retroactively depending on the actual time that the yacht had spent in or out of EU waters.

“The Commission picked on Malta in a very public way. I am very proud of the way that the industry and government came together to make arguments in a proper manner and to protect us from unfair criticism,” he said, adding that this was one of the few sector where Malta did have natural resources to maximise.

“We are open for business with the industry now reassured.”

'Our calculations will prove to be right'

A spokesman for the Malta Chamber of Commerce, Enterprise and Industry’s Yachting Services Business Section said that it was confident that time would vindicate Malta’s initial regime.

“The percentages of VAT charged through our legislation were based on very detailed studies – which were never published – about the activity of superyachts, which travel considerably over a season. And the larger the yacht, the more they tend to travel.

Malta has over 750 yachts over 24m on its flag registry. File photo.

“We are quite convinced that once the information is gathered on their actual activity, it will show that our original percentages were quite accurate,” he told the Times of Malta.

Addressing the press conference, the head of the section, Alison Vassallo, said that there were more than 750 yachts longer than 24 metres registered in Malta.

Malta’s VAT regime had been adopted over 10 years ago and has been one of the various factors which resulted in the growth of the sector, which – according to a study conducted by EY on behalf of the chamber – generates over €100 million worth of value-added, over and above the tax revenue and direct income from the maritime registration.

Malta currently has the world’s largest flag registry for yachts over 24 metres.