Brussels infringement proceedings against Malta are baseless, Casa says

Brussel's tax infringement proceedings against Malta are baseless, Nationalist MEP David Casa said.

In a statement, Casa said that the manner in which Malta charges VAT on the provision of yachts is in complete conformity with EU laws.

Yesterday, The European Commission sent Malta a letter of formal notice – a first ‘warning’ in Brussels-speak – for not levying the correct amount of VAT on the provision of yachts.

The infringement procedure was over Malta’s use of a reduced VAT rate for the lease of yachts. The same warning was sent to Greece and Cyprus, two other maritime states with large ship registries.

The incorrect taxation of purchases of yachts in Malta happens in what is known as a ‘lease-purchase’, which is classified as the supply of a service, and not of a good.

This means VAT is only levied at the standard rate on a minor amount of the real cost price of the craft once the yacht has finally been bought, the rest being taxed as the supply of a service and at a greatly reduced rate.

Casa said that after liaising with Dr Alison Vassallo, who chairs the Yachting Section within the Malta Chamber of Commerce, he has submitted parliamentary questions to European Commissioner Pierre Moscovici and will continue to monitor developments very closely to ensure that the interests of the yachting industry within the wider context of the EU Maritime dimension are protected.

In the parliamentary question, Casa said that Malta charges VAT on the amount of time the yacht is used with EU waters on the basis of the principle of effective use and enjoyment contained in the VAT directive, a principle applied in Fance and other countries.

“In recent years the EU Commission has accepted that the French apply the use and enjoyment principle in the case of the rental of pleasure yachts. Why is the Commission taking action against Malta, Cyprus and Greece on this point if it is an accepted principle?” he asked.

“In addition the Commission is questioning the classification by Malta of the leasing of a yacht as a supply of a service when France and others also classify yacht leasing in such a manner and as mentioned above in the case of France, apply a reduction of 50%. Why is this being done with respect to Malta and Cyprus?”

Finance Minister Edward Scicluna welcomed Casa's remarks but could not help pointing out that the lack of a united front in Malta would only strengthen the resolve of competing jurisdictions to target the island.

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