BREAKING: Final destination for yacht leasing schemes?

“Such practices violate EU law and must come to an end”.

With this strongly worded statement, the EU Commissioner for Economic and Financial Affairs, Taxation and Customs Union, Pierre Moscovici, may well have sounded the death knell for the long-term viability of lease-purchase schemes available to private yacht purchasers in Cyprus and, most notably, Malta. The European Commission has on 8 March 2018 sent letters of formal notice to Malta, Cyprus (and also Greece) for not levying what they consider to be the correct amount of VAT in respect of yacht lease and lease-purchase. The three Member States have two months in which to respond formally to the arguments put forward by the Commission.

It seems that the publication of the Paradise Papers has thrust yacht leasing and its favourable VAT treatment in some Member State into the spotlight and the Commission clearly does not like what it sees. As Moscovici comments, “we cannot allow this type of favourable tax treatment granted to private boats, which distorts competition in the maritime sector”. The Commission’s stance will not surprise many in the industry, and indeed many will be surprised that the Commission has not acted until now. It now remains to be seen what happens next, and the yachting industry will be watching how matters unfold over the coming months.

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