VAT News

EU-Infringement proceedings issued regarding VAT treatment of yachts

This week, the European Commission ("EC") has issued infringement proceedings to Cyprus, Greece and Malta regarding the VAT treatment applicable to yacht transactions in their territories.

For some time, the VAT treatment surrounding the purchase and leasing of yachts has been evolving in order to reduce levels of VAT evasion, however these proceedings aim to amend the VAT treatment applied in these 3 EU member states. The focus of the proceedings is two-fold:

Firstly, the EC has addressed the issue of the reduced VAT base applied to leases based primarily on the size of the yacht. The EC believes the level of proof required to apply such reduced rates is not being met.

Secondly, and in respect of Cyprus and Malta only, the EC believes that the incorrect VAT treatment is being applied to lease-purchase transactions, and that as these are incorrectly classified as supplies of services rather than goods, vastly reduced levels of VAT are being collected.

All 3 member states have 2 months to respond to the proceedings. Failure to do so will result in a reasoned opinion being issued.

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