Cyprus has recently introduced a leasing scheme for yachts and superyachts, whereby a yacht may be leased by a Cyprus company (lessor) to a third party (lessee) who may be any person or company regardless of country of residence or incorporation.
The “Special Yacht Leasing Scheme” of the Cypriot Tax authorities, constitutes Cyprus the most attractive jurisdiction in the EU in this area, as it can potentially reduce the effective VAT rate payable to register a yacht to as low as 2.42% of the initial value of the pleasure yacht.
What Is The Yachts & Superyachts Leasing Scheme
The regime applies to yachts registered to a Cyprus company and then leased to physical or legal persons. The VAT rate depends on the type and size of the yacht and most importantly is imposed only on a percentage of the lease value and not on the overall value of the yacht.
Depending on the size of the yacht concerned, the effective rate of VAT will vary from 1.90% to 11.4% of the lease value. The variable VAT percentage is based on length, type of yacht (motor or sailing) and the time of use within EU territorial waters as a percentage
Info About The Lease
For the purpose of this scheme a lease agreement is an agreement enter into between the owner of a yacht and the lessee. Effectively the owner gives the right to the lessee to use its yacht.
The Lease is a transaction subject to VAT, taxable at the basic VAT rate of 19% but only to the extent that the leased yacht is used within the EU territorial waters.
However according to the scheme, there is no need to keep records as to the time the yacht is actually used within the EU territorial waters. The relevant percentage is calculated based on certain fixed presumptions i.e. the yacht’s length and type (see table below).
Boat Type | Boat Length | % of deemed time spent within EU | VAT Charge |
---|---|---|---|
Motor Boats | Above 65 meters | 10% | 1.9% |
45.01 – 65 meters | 15% | 2.85% | |
24.01 – 45 meters | 20% | 3.8% | |
14.01 – 24 meters | 30% | 5.7% | |
8.01 – 14 meters | 50% | 9.5% | |
8 meters and below | 60% | 11.4% | |
Sailing Boats | Above 65 meters | 10% | 1.9% |
45.01 – 65 meters | 15% | 2.85% | |
24.01 – 45 meters | 20% | 3.8% | |
20.01 – 24 meters | 30% | 5.7% | |
10.01 – 20 meters | 50% | 9.5% | |
10 meters and below | 60% | 11.4% |
The scheme provides for the following conditions to be met:
- A lease agreement must exist between a Cyprus company and an individual or legal person, whereby the lessee is granted the option to purchase the yacht at a discount of the original price at the end of the lease.
- The yacht must sail to Cyprus within one month from the commencement of the Lease. Any extension on the above time limit may be allowed only by the Commissioner.
- An initial payment amounting to at least 40% of the value of the yacht must be paid by the lessee to the lessor at the commencement of the lease agreement including the corresponding VAT amount.
- The lease instalments shall be payable monthly, and the lease agreement shall not exceed the threshold of 48 months.
- The lessor is expected to make a total profit from the leasing agreement of at least 5% on the initial value of the yacht.
- For the above percentages to apply a prior written approval from the VAT Commissioner is required. The Commissioner must approve the value of the yacht and the applicable percentage on which VAT is chargeable according to the use of the yacht in EU territorial waters.
How can CX Financia help?
Through a client-centric approach, we aim to simplify the yacht leasing process, leaving you to focus on your business core activities.
Our full suite of corporate services includes:
- Consultation on the “Special Yacht Leasing Scheme”
To find out how we can help you with your yacht or superyacht leasing.