Further to Legal Notice 231 of 2023, the Malta Tax & Customs Authority (‘MTCA’) issued guidance on the interpretation of the application of the 12% VAT rate on several services, including the hiring of a pleasure boat to a person according to an agreement for any term or part of a term that, when added to the term of a previous hiring, of the same goods or of other goods of the same kind, to the said person during the previous twelve (12) months ending on the date of the beginning of the existing hiring, does not exceed five (5) weeks.  This applies to services becoming chargeable on or after 1st January 2024. 

These guidelines shall apply only in respect of assessing the VAT treatment of supplies taking place in Malta from a Maltese VAT perspective.

A short-term hire is considered to be the hiring of a pleasure boat for not more than 90 days. The place of supply, where VAT applies, is where the pleasure boat is actually put at the disposal of the customer. 

For long-term hires, more than 90 days, the place of supply is where the customer is established, has a permanent address, or resides. 

VAT Rates

Where the place of supply of the hiring of a pleasure boat takes place in Malta, the VAT rate applicable shall be 12%.  For this to apply, the hiring cannot exceed 5 weeks to the same customer during the previous 12 months ending on the date of the beginning of the existing hiring i.e. a total of 35 days.

By way of an example:-  Company A hires a pleasure boat to Mr Z for a 2 week term from 3rd July 2024 to 16th July 2024. During the previous 12 months ending on the date of the start of the existing hiring, being 3rd July 2024, therefore referring to the period 4th July 2023 up to 3rd July 2024, neither that pleasure boat nor any other pleasure boat was hired by Company A to Mr Z. In so far as the place of supply of said hiring would be Malta, the 12% reduced rate would apply.

If the term exceeds 5 weeks, the reduced rate of 12% would only to the first part of that term.  The default rate of 18% would be applicable to the remaining term. 

By way of an example:- Company D hires a pleasure boat to Mr W for a 2 week term from 3rd July 2024 to 16th July 2024. During the previous 12 months ending on the date of the start of the existing hiring, being 3rd July 2024, therefore referring to the period 4th July 2023 up to 3rd July 2024, that pleasure boat was also rented by Company D to Mr W for a 4 week term from 7th September 2024 to 5th October 2024. When added together these terms exceed 5 weeks, in so far as the place of supply of the hirings covering such terms would be Malta, the 12% reduced rate would apply to the hirings covering the term from 3rd July 2024 to 16th July 2024 (2 weeks) and part of the term from 7th September 2024 to 27th September 2024 (3 weeks). The hiring covering the remaining part of the term from 28th September 2024 to 5th October 2024 would be subject to the default rate of 18% VAT.

Exceptions

The 12% rate does not apply to certain provisions, such as seating or space provided with other passengers. 

Only items that are usually included during the boat rental can be considered part of a composite supply. Items that are not provided when delivering the boat to the customer or goods that are not consumable are excluded from the composite supply.