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News & Knowledge

Cyprus – An attractive EU Yacht Scheme

6th November 2017

Dixcart Management (Cyrpus) Limited

The Cyprus VAT Department has issued various guidelines (2012, 2014 and 2015) which have made Cyprus one of the most attractive jurisdictions for yacht registration in the European Union. MSI's member firm Dixcart Management (Cyprus) Limited in Cyprus provides further information.

Guidelines Issued in 2015

  • In April 2015 the Cyprus VAT Department issued a new circular reducing the applicable VAT payable on yacht lease payments to as low as 1.9%.

The reduced rates were made applicable to yachts (motor and sailing boats) over 45 metres in length, with those over 65 metres enjoying the 1.9% VAT rate on lease payments.

Definitions and the Process

A Yacht Leasing Agreement is an agreement where the lessor (owner of the yacht) enters into a contract with the lessee (the person who leases the yacht) to use the yacht for a consideration.

The lessee may also choose to purchase the yacht at a price which is a percentage of the initial value of the yacht. The purchase is strictly an option which the lessee may exercise at the end of the lease period.

Generally lease instalments are paid into a Cyprus bank account. However a Cypriot company (owner and lessee) can choose to open and operate bank accounts anywhere in the world.

VAT Treatment of the Lease Agreement

For VAT purposes the leasing of a yacht constitutes the supply of a service with the right to an input VAT deduction, in accordance with provisions of the Cyprus VAT legislation.

The supply of a service constitutes a taxable transaction, subject to the standard VAT rate (currently 19% in Cyprus) but only to the extent that the leased yacht is used in the territorial waters of the European Union (EU). An essential condition of the Yacht Scheme is that the lessor must be a company registered in Cyprus. The lessee on the other hand can be a legal or physical entity resident anywhere in the world.

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