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Reduced VAT for Yacht Leasing in Cyprus
Purchasing and leasing yachts in Cyprus was subject to a 17% rate. However, a number of questions arose as regards situations where yachts are used outside EU territorial waters and also complications and disputes surrounding the use of yachts within the EU. In order to clarify this grey area of VAT regulation, the Cyprus VAT Authorities issued a circular on 9 March 2012. The circular defines what a 'lease agreement' is and it states that it is to be interpreted as an agreement whereby the lessor contracts with a lessee for using a yacht for consideration. Taxand Cyprus takes a look at the circular to see how its contents will affect taxpayers in Cyprus.
Leasing a yacht is considered as a provision of service and therefore a taxable transaction where the VAT legislation gives the right to deduct input tax. The fundamental requirement is that the lessor must be a company registered with the Registrar of Companies whereas there is no restriction as regards the location of the lessee.
With the new amendments to the regulations there is no obligation to keep records as regards the place of movement of the yacht so as to calculate the use of the yacht within EU territorial waters. Conversely, an advanced estimation is made for the time for which the yacht is used within EU territorial waters. The percentage of use within the EU is estimated according to the yacht size and the method of traffic.
Taxand Cyprus discusses the issue in greater detail
This is certainly a good development for yacht owners and yacht leasing companies as it will provide substantial relief to their businesses. However taxpayers must note that the VAT Commissioner reserves the right to ask for any additional information to be submitted.
Your Taxand contact for further queries is:
T. +357 22 699 222