European Tax Commission sends an additional letter of formal notice to Malta for not levying the correct amount of Value Added Tax on yachts

On the 12th February 2020 the European Tax Commission decided to send an additional letter of formal notice to Malta for using an incorrect method of calculating VAT on the lease of yachts.

In their monthly overview of policy decisions the Commission stated:

“Following an initial letter of formal notice on 8 March 2018, Malta modified its legislation in order to align it with the necessary requirements under EU law. These new national rules are, however, still not completely in line with EU law. Maltese legislation currently uses a distance-based method when calculating the effective use and enjoyment of a yacht outside the EU. EU rules do not allow such a method to be used but require the use of a time-based method. The Commission is now sending a complementary letter of formal notice to Malta in order to ensure full compliance with EU law. Without a satisfactory response within 2 months, the Commission may decide to address a reasoned opinion to Malta.”

This latest development underlines the uncertainty of any arrangements, schemes or mechanism established in Malta (or elsewhere) for the reduced payment or deferral of VAT on yachts .   

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