Cyprus Yacht leasing scheme; VAT as low as 2.42%
European Union, Flags, Legal, News, Sports, Taxation, Yachting — By admin on April 25, 2016 at 6:58 AM
From Christodoulos G. Vassiliades & Co LLC :
The guidelines issued by the Cypriot VAT authorities with regards to the registration of yachts, simple to comprehend and apply, make Cyprus one of the most attractive jurisdictions in the EU in this area, reducing the effective VAT rate for yacht registration to as low as 2.42%, through the use of the Yacht Leasing scheme.
General
This special regime applies to yachts owned by a Cyprus company which are leased to physical or legal persons. The purpose of this scheme is to determine the percentage of time a yacht spends within the EU based on the yacht size and type and apply VAT according to this percentage.
Interpretation of the term “leasing a yacht” and VAT treatment
For the purpose of this scheme a yacht lease agreement is an agreement under which the lessor, being
the owner of the yacht, for a certain consideration, contracts the use of the yacht (leases the yacht)
to the lessee. For Cypriot VAT purposes the lease of a yacht is subject to the standard VAT Rate (19%) to the extent that the leased yacht is used within EU waters.
However, further to the Yacht leasing scheme, there is no longer need to keep records (log books) as to the time the yacht is used within the EU. Instead, the relevant percentage will be calculated based on the yacht’s size and type (motor or sailing boats), in the manner indicated below:
Motor boats
| Boat Length | % use within EU | VAT charge |
| Longer than 65 meters | 10% | 2.42% |
| Between 45, 01 and 65 meters | 15% | 3.40% |
| Between 24, 01 and 45 meters | 20% | 4.37% |
| Between 14, 01 and 24 meters | 30% | 6.31% |
| Between 8, 01 and 14 meters | 50% | 10, 21% |
| Up to 8 meters | 60% | 12, 16% |
| Yachts only allowed to be used within protected waters | 100% | 19% |
Sailing boats
| Boat Length | % use within EU | VAT charge |
| Longer than 65 meters | 10% | 2.42% |
| Between 45, 01 and 65 meters | 15% | 3.40% |
| Between 24, 01 and 45 meters | 20% | 4.37% |
| Between 20, 01 and 24 meters | 30% | 6.31% |
| Between 10, 01 and 20 meters | 50% | 10, 21% |
| Up to 10 meters | 60% | 12, 16% |
In order for the Yacht scheme to apply ALL of the following conditions need to be met:
- A lease agreement must exist between a Cyprus company and any legal or natural person, irrespective of origin.
- The yacht should sail in Cyprus waters within one month from the commencement of the lease agreement.
- The initial contribution from the lessee to the lessor must be at least 40% of the yacht’s value.
- Lease payments are required to be monthly and the lease period cannot exceed 48 months.
- The lessor is expected to make a total profit from the lease agreement of at least 5% of the yacht’s original value. In the year the lease agreement commences the total amount of lease payments on which VAT is calculated is increased by half of the calculated profit.
- The lessee may purchase the yacht at the end of the lease period and the final instalment which results to the transfer of the ownership of the yacht to the lessee cannot be less than 2.5% of the yacht’s value and is subject to the standard VAT rate (19%).
- In order for the above percentages to apply a prior written approval from the VAT Commissioner is required. Thus, an application must be filed to the VAT Authorities accompanied by the lease agreement and documentation supporting the purchase price/value of the yacht.
