Yacht VAT Scheme

The Cyprus VAT Authorities have launched new guidelines on VAT payments applicable under a Yacht Leasing Scheme.

As a result, effective VAT rates can be reduced to as little as 3.4% of the initial value of a yacht. This is lower than if the yacht had been registered in other favoured jurisdictions, including Malta. Under the Scheme, a Cypriot company can purchase a yacht and enter into a lease-sale agreement for the yacht with a third-party lessee – an individual or company irrespective of their location. Since this is a service deemed to be supplied in Cyprus, VAT is due on the lease at the normal rates of VAT in Cyprus – currently 17% – but is payable only on that portion of the lease which the yacht spends in EU waters.

To avoid the difficulty of establishing the exact length of stay in EU waters, the VAT Authorities have issued their own percentage scales based upon “presumed” lengths of stay for different types and lengths of yacht. Motor and sailing boats over 24-metres in length are deemed to spend only 20% of their time in EU waters (compared to 30% under the Malta equivalent scheme) to give an effective VAT rate of 3.4%, while motor boats below 8-metres and sailing boats below 10-metres are deemed to spend 60%, giving an effective VAT rate of 10.2%.

The VAT Authorities have now simplified the whole procedure:

1. The yacht does not need to come to Cyprus

2. The lease period must not exceed of 48 months.

3. Initially two Cyprus companies were needed, now the scheme can work only with one company:
· The yacht can be ‘purchased’ by a Cyprus company (preferably a dormant company) by means of a loan given to it from the owner (say a BVI company).
· The Cyprus company then leases back the yacht to the BVI company. The scheme can be applied quickly (i.e. the lease period can be shortened to say one month) and the yacht will effectively end up from where it originated without needing to change the registration.
· The VAT is paid by the Cyprus company which has to register for VAT
· It is necessary for the yacht to have the T2L certificate i.e. a certification that it was manufactured in the EU

4. The VAT Authorities examine each individual case on application and it is not possible to provide any definite VAT figures before actual application as the yacht needs to be valued, etc. There is now no need for an official valuation. All is required is some indication of the value from say yacht magazines comparing it with yachts of similar type and age

If we are provided with a rough estimate of the value of the yacht/sailing boat we can give you an estimate of the VAT payable and costs involved.