EU Commission sent letters of formal notice to Cyprus, Greece and Malta for not levying the correct amount of VAT on yachts

The European Commission decided on Thursday to send letters of formal notice to Cyprus, Greece and Malta for not levying the correct amount of Value-Added Tax (VAT) on the provision of yachts.

In detail, the infringement procedures launched today concern:

A reduced VAT base for the lease of yachts – a general VAT scheme provided by Cyprus, Greece and Malta. While current EU VAT rules allow Member States not to tax the supply of a service where the effective use and enjoyment of the product is outside the EU, they do not allow for a general flat-rate reduction without proof of the place of actual use. Malta, Cyprus and Greece have established guidelines according to which the larger the boat is, the less the lease is estimated to take place in EU waters, a rule which greatly reduces the applicable VAT rate.

Διαφημιστική καταχώρηση
Διαφημιστική καταχώρηση

The incorrect taxation in Cyprus and Malta of purchases of yachts by means of what is known as ‘lease-purchase’. The Cypriot and Maltese laws currently classify the leasing of a yacht as a supply of a service rather than a good. This results in VAT only being levied at the standard rate on a minor amount of the real cost price of the craft once the yacht has finally been bought, the rest being taxed as the supply of a service and at a greatly reduced rate.

The three Member States now have two months to respond to the arguments put forward by the Commission. If they do not act within those two months, the Commission may send a reasoned opinion to their authorities.

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