Malta Aircraft Leasing
Malta is developing aviation as a major economic sector of the Maltese economy. As a result the island is keen to encourage the ownership of private and/or corporately operated business jet or turbine aircraft through local companies.
One of the principal initiatives designed to encourage the ownership of aircraft through Maltese companies has been the introduction of specific fiscal conditions to enable the leasing of aircraft from Malta.
These conditions are governed by a set of guidelines titled ‘Guidelines Regarding VAT Treatment Of Aircraft Leasing ‘ issued by the Maltese Department of VAT.
The guidelines enable a Maltese company to purchase a private and/or corporately operated business jet and to lease that aircraft to a Maltese based aircraft operator (lessor) for a commercial consideration and in turn benefit from the deferment of VAT on the acquisition cost of the aircraft and enjoy the payment of VAT on the aircraft lease itself at the prevailing Maltese VAT rate only on a percentage of the lease value calculated by a pre-determined amount of time flown in the airspace of the EU.
The guidelines appreciate that it is very difficult to predetermine the actual flight activity of an aircraft in order to determine the period that the aircraft is used within the airspace of the EU and the time that it is used outside the EU. The flight activity split between time flown in and out of EU airspace is therefore predetermined on the range of the aircraft as follows:
A key benefit of the Malta aircraft leasing system is that VAT chargeable on the lease of an aircraft is pre-determined by the VAT Department of Malta based on the range of the aircraft concerned on the following basis:
|Aircraft range (km)||Community use %||Effective VAT rate*|
*The effective VAT rate is based on the current Malta standard VAT rate of 18%
At the end of the lease period the guidelines allow for the operator that is leasing the aircraft to opt for the purchase the aircraft at a percentage of the original cost. The final purchase is strictly an option which may be exercised by the lessee for a separate consideration. If at the end of the lease the lessee exercises the option to purchase the aircraft, a VAT paid certificate will be issued for the aircraft by the VAT Department of Malta will be issued provided that all the VAT due has been fully paid.
This results in an aircraft that is fully VAT paid in Europe.
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