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EU action on VAT on yachts

Recent news articles reported on the European Commission’s infringement proceedings against Cyprus, Greece and Malta for not levying the correct amount of VAT on the provision of yachts.

Having been kick-started by the Paradise Papers, the EU Commission is looking seriously at the way some EU countries have been operating VAT on the purchase of yachts. This has resulted in these infringement proceedings being taken against Malta, Cyprus and Greece. These countries all provide officially-backed schemes or systems that enable a significantly reduced amount of VAT to be paid on the purchase of a yacht (usually through a lease-type mechanism), on the underlying basis that it is presumed that to some extent the use and enjoyment will be outside EU waters.

If the EU are successful in closing down these mechanisms, it could be a mixed blessing for the UK; on the one hand there has been a view that these provided unfair competition to the disadvantage of UK suppliers and distributors, with customers looking to purchase from Med-based operators – but on the other hand, the ability to significantly reduce VAT also provided a useful incentive and flexibility used by UK businesses to promote sales from the UK by way of signposting.

Overall I think the news will be welcomed as paving the way for a more level playing field, but we will need to watch this space…

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