Following the issuance of a Legal Notice at the end of 2023, Malta's Vat regulations on the hiring of pleasure boats have recently been tweaked through the amendment of the Eighth Schedule of the VAT Act (Chapter 406, Laws of Malta). This amendment, which came into effect on the 1st January 2024, has reduced the Vat rate applicable on hiring of pleasure boats from 18% to 12%.
To explain these changes and their implementation, the Commissioner for Tax & Customs (CfTC) has issued comprehensive guidelines on the application of the newly introduced rules, as per the provisions outlined in Legal Notice 231 of 2023.
The 12% reduced VAT rate applies to pleasure boat rentals if the cumulative term, when added to any previous hiring within the past twelve months, does not exceed a period of five weeks, which is further stipulated as equivalent to thirty-five days. In cases where the rental surpasses this period, the reduced rate will apply only to the initial segment with the remaining term subject to the standard 18% VAT rate. Lessor responsibility lies in accurately apportioning the taxable value based on the duration of the respective periods of hire.
For short-term hiring (up to ninety days), the place of supply is considered to be the place where the pleasure boat is made available to the customer. Conversely, for non-short-term hiring, (more than ninety days) the place of supply is considered to be the place where the customer is established, has a permanent address, or usually resides.
These guidelines offer clarity on the application of the 12% VAT rate on pleasure boat rentals in Malta. Businesses involved in this activity are encouraged to acquaint themselves with these guidelines to ensure compliance with the new VAT regulations and avoid the risk of infringement which can lead to stiff penalties.
Documentation links:
- Guidelines for the application of the 12% VAT rate on the hiring of pleasure boats
- Legal Notice 231 of 2023
- VAT Rates Directive (Council Directive (EU) 2022/542 of 5 April2022)
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