Hiring a pleasure boat will be subject to a reduced 12 per cent VAT rate as of January 1, following a legal notice published on Friday.
The legal notice stipulates that a reduced level of consumption tax will be applied to four items within the finance, tourism and cosmetics sectors as of January 1, 2024.
These four items are:
- Custody and management of securities;
- Management of credit and credit guarantees by a person or body other than those who granted the credit;
- Hiring of a pleasure boat for no longer than five weeks;
- Services consisting of the care of the human body.
The rates for these items are currently a standard 18% but will see a drop of six percentage points at the start of the new year.
Why the reductions?
The legal notice follows an EU Council directive allowing member states to slash VAT rates to a minimum of 12% for services that other member states have obtained exemptions for.
Malta chose these four items as the government believes they will have the greatest impact on local purchases, Finance Minister Clyde Caruana said when contacted.
Most other items on the list were either already subject to reduced VAT rates or not relevant to the local scene, he said.
Reducing VAT on the hiring of pleasure boats may not seem to be of benefit to the local economy, which is heaving under the strain of a large annual deficit.
But Caruana argued that the reduction would help boost Malta's tourism competitiveness by allowing operators to reduce prices for activities such as jet ski rides.
Reducing the VAT rate on services related to care for the human body will primarily impact cosmetic surgeries, as medical operations due to health concerns are already subject to reduced or zero VAT.
Aesthetic procedures have gained recent popularity among the Maltese and in January Times of Malta reported that there are plans to have VAT added to cosmetic procedures, in a first for Maltese doctors. They will now be able to limit that increase to 12 per cent.