Four maritime and yachting organisations have insisted that Malta’s VAT rules on yacht leasing are in line with EU directives and based on similar models adopted by France and Italy, according to a Times of Malta report.

A joint statement was issued yesterday by the Malta Maritime Law Association, the Malta Maritime Forum, the Yachting Trade Section within the Malta Chamber of Commerce, Enterprise and Industry and the Super Yacht Industry Network Malta.

The reaction comes just days after the European Commission told the UK and Malta to change their VAT rules on yachts or face possible financial sanctions.

According to Pierre Moscovici, EU Commissioner for Taxation, some of Malta’s practices are “suspect”.

Speaking to Parliament last week, Maltese Prime Minister Joseph Muscat said the VAT rules were approved years ago by the European Union. “Malta is not a tax haven and vigorously rejects the label of tax haven,” Muscat said.

Malta’s decision to cut the VAT rate on superyachts was taken because they are mostly used in international waters, according to an EU official.

Malta’s VAT treatment of the leasing of pleasure yachts on the basis of the “effective use and enjoyment” principles in article 59A of the VAT Directive is said to be based on the similar application of this principle by other Member States, in particular France and Italy.

Numerous yacht owners have therefore been encouraged to bring their vessels within the EU and, consequently, pay VAT, rather than keep them out of EU waters and pay nothing.

In turn, this was having a positive economic ripple effect, the yachting community remarked.