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home / VAT on chartering: EU prompts Malta and UK for some rules adjustment
The European Commission challenged the Maltese VAT rules on Yachts and private jets. According to Pierre Moscovici, the Commissioner for Economic and Financial Affairs, an infringement procedure may follow if these rules are not changed (update – March 8th: EU confirms that the infringement procedure against Malta, Greece and Cyprus, concerning incorrect application of VAT on chartering in those countries, is already initiated).
Malta has a VAT leasing scheme that allows individuals to use an HP leasing agreement in order to purchase a boat with a significant reduction of VAT charged. This reduction is granted on the grounds that the boat is used in international waters during the lease period, so the instalments are partially out of the scope of the VAT.
In boat chartering activities, where the boat spends part of the time outside the EU waters, members states may allow a reduction of the taxable base on which VAT is charged. This mechanism also exists in France and Italy, but different conditions apply in each country. On the contrary, Spain requires chartering companies to account for full amount of VAT on chartering fee.
The ECJ recently gave a landmark decision concerning the VAT treatment of specific leasing agreements. This case has an impact on VAT leasing schemes currently applicable to yachts. Malta already announced small changes to their scheme on the basis of the MBFS case.
Mercedes-Benz Financial Services UK Ltd (MBFS) case concerned an offering where Mercedes would give the option of buying a car under a hire purchase agreement. The question is whether a lease agreement with the ´option´ of buying a car should be considered a supply of services under the normal leasing VAT rules or a supply of goods under the hire purchase VAT rules. The Commission explained that in order to be considered a supply of goods, the agreement requires certainty that at the end of the term the title of the goods will pass to the client.
The ECJ case also introduced several tests to determine when these agreements are considered as supplies of goods or supplies of services. In view of these test, Malta has updated its current VAT leasing scheme with effect from December 2017. These rules will only apply to schemes agreed after this date.
Marosa offers a one-stop solution for all VAT compliance obligations of chartering companies in Europe. We will take care of your VAT registrations, VAT returns and usual VAT questions related to chartering activities with a single approach and a comparative view of different VAT rules in each country. Contact us to know more about these services.