VAT on yachts, Europe launches proceedings against 3 member countries

Yacht in Malta

Tax evasion through VAT fraud on yachts. The European Commission is launching proceedings against 3 Member States following the revelations of the"Paradise Papers".

Cyprus, Malta and Greece in the commission's sights

The European Commission has announced the opening of infringement proceedings against Cyprus, Greece and Malta. It concerns the incorrect collection of VAT on yachts in these European Union countries. The three states have two months to respond to the charges.

Abusive leasing and charter

The committee said it was particularly interested in the reduced VAT rates applied by the countries in question to yachts used for charter. "While EU VAT rules allow member states not to tax a service whose actual use takes place outside the EU, they do not allow a general reduced rate without proof of actual place of use," the statement said. "Malta, Cyprus and Greece have established guidelines that the larger the vessel, the less use is considered to take place in European waters, a rule which greatly reduces the applicable VAT

Similarly, in Malta and Cyprus, the classification of leasing as a supply of a service and not as a supply of a good reduces the VAT charged.

Distortion of competition

The European Commissioner for Economic and Financial Affairs, Pierre Moscovici of France, stressed the consequences for the EU maritime economy. "We cannot allow this kind of favourable tax treatment for private vessels, which is also a distortion of competition in the maritime sector. Such practices violate European laws and must stop."

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