Guidelines For VAT Exemption On Scheduled Sea Transport Of Passengers

The Commissioner for Tax and Customs has published guidelines in terms of Article 75(2) of the VAT Act which determine how the VAT exemption contained in item 11 paragraph (b) of Part One of the Fifth Schedule to the VAT Act may be applied.

Pursuant to item 11(b) of Part One of the Fifth Schedule to the VAT Act a zero VAT rate applies to the supply of:

"scheduled inter-island sea transport of passengers by authorized carriers and other scheduled sea transport of passengers recognized as such by the Commissioner.

For avoidance of doubt "scheduled inter-island sea transport of passengers" shall mean scheduled transport of passengers between the islands of Malta and Gozo".

The Commissioner will recognise services for the purpose of applying this zero VAT rate that meet the following conditions:

1. The sea passenger transport service must operate on a pre-determined schedule and on a fixed route established by the operator in relation to which the Operator obtains an approval by the Authority for Transport in Malta in terms of S.L. 499.23 (Commercial Vehicles Regulations).
2. The fixed route shall specify a specific embarkation and disembarkation point within that fixed route which must include at least two different embarkation points. The route should not have any stop-overs or deviations outside the established route.
3. Vessels providing the service need to be registered and licensed in terms of the Ports and Shipping Act, (Cap 352).
4. A schedule must list exact times and dates for any routes and shall be made publicly available online by the service provider at least three months in advance of the date of the service.
5. The service provider must ensure the public schedule is kept updated.

The recognition by the Commissioner of other scheduled passenger transport services in terms of these guidelines shall apply if the VAT on such services becomes chargeable on or after 1st August 2024.

The zero VAT rate shall not apply in the event of any service not meeting the above conditions.

The following services shall not be recognized for the purpose of the application of this zero VAT rate.

• Services consisting of excursions by vessels where the main purpose is to provide tours, cruises or sightseeing trips;
• Services where the vessel is available for use by the customer at a disembarkation point for more than thirty minutes, including for storage of any personal objects by customers on board the vessel;
• Services where only the customer who departs from one embarkation point can use the service in other embarkation points;
• On-demand sea passenger transport services;
• The hiring of vessels with crew or otherwise.

Any scheduled passenger transport services outside the established schedules and routes as approved will not be eligible for this zero VAT rate.

Supplies of food and beverages provided on board vessels during a scheduled passenger transport service will not be treated as a single composite supply with the transport service. These will be treated as separate supplies for VAT purposes irrespective of whether they form part of the transport service consideration or are included in a service package.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.