BDO Yachting and marine services

YACHTING ANDMARINE SERVICES

MARCH 2014

BDO Malta provides its customers with a one stop shop for a variety of services within the maritime sector. With years of experience in accounting, auditing and both direct and indirect taxation consultancy, merged with a professional team fully conversant in national maritime regulations, we are confident that BDO Malta is the ideal choice for all those seeking maritime services.

MARCH 2014 | YACHTING AND MARINE SERVICES | 1

INTRODUCTION

• Registration of vessels under the Maltese flag

• Formation of shipping companies in Malta

• Accounts preparation

• Year-end accounts and financial reporting

• Handling of bank accounts, petty cash & credit card management

• Executing wire transfers or cheques for payment of invoices

• Payment of crew salaries

• Managing charter contracts

• Arranging for an insurance cover for both yacht and crew

• Handling of claims relating to yacht and crew

• Planning maintenance schedules

Maritime services offered by BDO

MARCH 2014 | Yachting and Marine services | 2

• An internationally accepted & reputable jurisdiction within the European Union

• A safe, secure and pleasant Mediterranean lifestyle

• Malta’s geographical strategic location, being within a 3-hour direct flight from Europe’s major financial centers

• Competitive vessel registration and tonnage tax fees

• Progressive reduction in the registration and tonnage taxes for younger vessels

• Attractive incentives for owners, registered charterers and financiers of Maltese vessels, both over 1000 Net Tons and also for smaller ships

• No restrictions imposed on the nationality of the shareholders and directors of Maltese companies

• No restrictions imposed on the nationality of master, officers and crew

• No restrictions on the sale and mortgaging of Maltese vessels

• Entitlement of non-resident individuals to various levels of tax refunds, based on Malta’s full imputation system of taxation

• Attractive tax incentives for yacht owners, encouraging commercial operations

• VAT incentives on the acquisition, chartering and bunkering of commercial yachts

VAT TREATMENT OF YACHT LEASING

A lessor has the right to deduct input tax (VAT) on the purchase of a yacht, once the yacht is used for economic activity, i.e. the leasing of the yacht.

The supply of yacht leasing services is taxable in Malta based on the use of the boat within the territorial waters of the European Union (EU).

As a result of the technical difficulties involved in tracking the movements of such yachts, which is necessary to determine the time period spent both within and beyond the EU’s territorial waters, Malta’s VAT department has published guidelines to set out the deemed percentage portion of the leasing used within the EU’s territorial waters. These percentages depend on the type and length of the boat. The VAT department’s percentages for the various types of yachts when used in EU territorial waters are presented in the table graphs on the next page:

About the Malta Flag

Due to its strategic and central position within the major Mediterranean sea route, Malta offers a wide range of international maritime services including an active and reputable International Ship Register which currently ranks as one of the largest merchant flags in Europe, as well as having an eighth worldwide ranking.BDO Malta can offer a wide range of services to the international shipping and yachting community.Be it yacht, super-yacht, cruise liner or cargo vessel, even if previously registered under another jurisdiction, these can all be registered under the Malta flag provided that they are wholly owned by Maltese citizens or shipping companies registered in Malta.International owners may also register vessels under the Malta flag provided that they appoint a resident agent in Malta. No restrictions on the nationality of shareholders and directors are imposed when forming a Maltese shipping company.

Moreover, Malta is committed to enhancing further expansions as an international maritime service centre. This is manifested by the maritime hub plan, a continuous development of what already is a sophisticated legal and financial regime and also by the country’s huge investments in infrastructural services.The Malta flag ensures peace of mind for registered yacht owners and yacht management companies and, thus, it is this very sense of security that makes the Malta flag an ever more attractive proposition.

WHO MAY REGISTER A VESSEL?

• Maltese citizens

• Corporate bodies established under and subject to the laws of Malta

• Corporate bodies established outside Malta, appointing a Maltese agent representing them locally


� UP TO 7.5M � 7.5-12M � 12-16M � 16-24M � OVER 24M

VAT

SAV

ING

(%)

VAT SAVING (%) ON LEASING A SAILING YACHT

0 10 20 30 40 50 60 70 80 90 100

70 %

60 %

50 %

40 %

OVER 24 20-24 10-20 UP TO 10 LENGTH IN (M)

CHARTERING A SAILING YACHT

05

101520253035404550556065707580859095

100

70%

60%

50%

40%

10.8%9%7.2%5.4%

� VAT SAVING (%)

� EFFECTIVE VAT RATE (%)

� UP TO 7.5M � 7.5-12M � 12-16M � 16-24M � OVER 24M

VAT

SAV

ING

(%)

VAT SAVING (%) ON LEASING MOTOR YACHT

0 10 20 30 40 50 60 70

70 %

60 %

50 %

40 %

10 %

80 90 100

OVER 24 16-24 12-16 7.5-12 UP TO 7.5

CHARTERING A MOTOR YACHT

05

101520253035404550556065707580859095

100

70%

60%

50%

40%

10.8% 10%9%7.2%5.4%

16.2%

� VAT SAVING (%)


LENGTH IN (M)

For example a yacht that is over 24 metres long is only considered to be in EU territorial waters for 30% of the time, so for 70% of the time it is assumed that it is being operated outside EU territorial waters. As a result, Maltese VAT is only applicable on 30% of the lease payment, i.e. VAT payable is 30% X 18% X value of lease payment ( effective VAT rate of 5.4%).

Furthermore, to qualify for this VAT treatment, the following conditions must be met:

• The lease must be between a Maltese company and a Maltese or foreign person or company. In other words, the lessor must be a Maltese company

• The lease payments must be made monthly and the lease period must not exceed 36 months

• Prior approval from the Director General (DG VAT) is required, and each application is considered on its own merits, so conditions may apply. Moreover, the DG VAT may require the lessor to submit details regarding use of vessel.

VAT PAID CERTIFICATEIf the terms of a lease agreement give the lessee the option of purchasing the yacht at the end of the lease and the lessee decides to exercise this right, the Maltese authorities will issue a VAT paid certificate for the lessee, as long as all VAT due has been paid and the purchase price is at least 1% of the vessel’s original value.


VAT TREATMENT OF SHORT- TERM YACHT CHARTERINGDefinition of a short-term charter agreement of a yachtA short-term charter of a yacht is defined as an agreement under which the yacht owner/operator contracts the use of the yacht for reward, whether with a crew or on a bare boat basis, for a maximum of 90 days.

TREATMENT OF CHARTER AGREEMENT FOR VAT PURPOSESFor VAT purposes, the short-term charter of a yacht for leisure purposes is a supply of a service that is taxable at the standard 18% VAT rate. The place of taxation is where the yacht is placed at the disposal of the customer, in this case in Malta. Subject to certain conditions, the taxation of this supply is limited to that portion of the use of the yacht within the territorial waters of the EU.

INPUT TAXThe supplier of the charter has the right to claim input tax incurred on the fuelling and provision of the boat, provided these goods are sold to the client under a separate contract, or provided they are invoiced separately from the charter service. The supply of these goods to the charter client is made at the full standard 18% VAT rate. Furthermore, the supplier of the charter is also entitled to claim input VAT incurred on fuel purchased for the outward journey of the yacht to its next port of destination after completion of the charter. Terms and conditions apply depending on the applicable locale and on EU VAT laws. In accordance with the guidelines related to the percentage of a lease deemed to take place within the EU, the VAT department has established percentages it deems as standard for the use of short-term chartered yachts within EU territorial waters. As shown in the table graphs in the next page, the percentages depend on the type and length of the boat.


OVER 24 20-24 10-20 UP TO 10 LENGTH IN (M)

CHARTERING A SAILING YACHT

05

101520253035404550556065707580859095

100

70%

60%

50%

40%

10.8%9%7.2%5.4%

� VAT SAVING (%)


OVER 24 16-24 12-16 7.5-12 UP TO 7.5

CHARTERING A MOTOR YACHT

05

101520253035404550556065707580859095

100

70%

60%

50%

40%

10.8% 10%9%7.2%5.4%

16.2%

� VAT SAVING (%)


LENGTH IN (M)

SHIPPING ORGANISATIONSTo qualify for the VAT treatment of short-term yacht chartering, based on the percentages outlined above, the following conditions must be met:

• The supplier of the yacht charter must be a person registered for VAT in Malta

• The yacht charter contract must indicate all of the following: that the charter commences in Malta, the charter price and a statement indicating whether the yacht will sail outside EU waters

• Prior approval from the DG VAT is required and each application is considered on its own merits. The supplier of the charter must produce sufficient documentation to identify the yacht with regard to hull number, port of registry, registration number, and any further documentation confirming the size and type of yacht

No stamp duty or any other tax is chargeable on

• Vessel registration

• Vessel transfer

• Mortgage registration

• Ship owners and ship management companies can benefit

from the tonnage tax system and are free to leave the system at any time

• Non-resident employees and/or officers of licensed shipping organisations, as well as the shipping organisation itself, are not subject to social security contributions

• Income derived from a licensed shipping organisation’s activities* is exempt from income tax, provided separate accounts are kept and all tonnage taxes and annual registration fees are duly paid

*Shipping activities refer to the international carriage of goods and passengers by sea and such related services

SHIP MANAGEMENTA ship management company is a shipping organisation which handles the technical and/or crew management of a vessel.

Ship management refers to:

• Technical management

• Crew management

• Commercial management

The benefits that are available to shipping organisations, for owning and/or operating vessels, are also applicable to ship management companies, provided relevant annual tonnage taxes are duly paid.


BDO Malta Tower Gate PlaceTal-Qroqq StreetMsida MSD 1703Malta

Tel no. (+356) 2131 3060Fax no. (+356) 2131 3064

[email protected]

This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained herein without obtaining specific professional advice. Please contact the appropriate BDO Member Firm to discuss these matters in the context of your particular circumstances. Neither the BDO network, nor the BDO Member Firms or their partners, employees or agents accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.

BDO is an international network of public accounting firms, the BDO Member Firms, which perform professional services under the name of BDO. Each BDO Member Firm is a member of BDO International Limited, a UK company limited by guarantee that is the governing entity of the international BDO network. Service provision within the BDO network is coordinated by Brussels Worldwide Services BVBA, a limited liability company incorporated in Belgium with its statutory seat in Brussels.

Each of BDO International Limited, Brussels Worldwide Services BVBA and the member firms of the BDO network is a separate legal entity and has no liability for another such entity’s acts or omissions. Nothing in the arrangements or rules of the BDO network shall constitute or imply an agency relationship or a partnership between BDO International Limited, Brussels Worldwide Services BVBA and/ or the member firms of the BDO network.

BDO Malta, a Maltese civil partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO Consult Limited and BDO Services Limited are companies registered in Malta and form part of the BDO Malta group.

BDO is the brand name for the BDO network and for each of the BDO Member Firms.

CONTACTFor more details please contact:

BDO Yachting and marine services

Law

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