Cyprus introduced a Yacht Leasing Scheme which, inter alia, has VAT benefits for prospective owners (or new owners) of yachts that wish to use them in European waters.
The Cyprus Yacht Leasing Scheme is in many ways similar to arrangements offered by other European countries but is considered one of the most attractive Yacht Leasing schemes within the EU.
Under the VAT on Yacht Leasing Scheme Regulations, only a percentage of the lease value should be subject to Cyprus’ standard VAT rate of 19%. The variable VAT percentage is based on length, type of yacht (motor or sailing) and the yacht’s percentage of use within EU territorial waters.
In order for a taxable person and its yacht to be afforded the Leasing Scheme, there must be a Leasing Agreement in place. A Leasing Agreement is an agreement whereby the lessor (the owner of the yacht) contracts the use of the yacht to the lessee (the person who leases the yacht in return for a consideration.
Total Leasing Consideration
The total Leasing Agreement consideration shall equal at least 105% of the value of the yacht. This assumes a profit of at least 5% for the Lessor. Such consideration consists of the Advance Payment and the Monthly Instalments.
Option to Purchase
The Leasing Agreement may provide for an option to purchase the yacht which equals to 4% of the value of the yacht. Such an option payment is chargeable with VAT at the normal rate.
The prior approval of the Tax Commissioner needs to be obtained for the application of the Yacht Leasing in each case. Such approval will cover the acceptability of the initial value of the yacht and the applicable percentage of use within EU waters on the basis of which VAT will be applied.
The Lessee may be either a company or a natural person of whatever domicile or residence. The Lessor shall be a Cyprus Registered Company. With the proper structuring the Lessor may avoid being a Cyprus Resident and therefore not subjected to any corporate tax in Cyprus.
The Leasing Agreement shall provide for an advance payment of 40% of the total lease consideration. Such an advance is chargeable with VAT at the rate of presumed use of the yacht in the EU.
EU VAT Clearance Certificate
On the occasion of the final exercise of the option at the expiration of the Leasing Agreement the Cyprus Customs and VAT office will issue a VAT & Customs Clearance certificate applicable in all EU Countries.
The yacht shall sail in Cyprus territorial waters at the latest one (1) month after the leasing agreement takes effect. An extension may be obtained for the yacht to sail in Cyprus at least once before the expiration of the leasing agreement.
- Cyprus Yacht Registration
- EU Customs Clearance (through Cyprus Yacht Lease)
- Cyprus VAT Administration
- EU Yacht VAT Clearance (through Cyprus Yacht Lease)
- Cyprus Company Registration & Administration