The VAT Department in Malta has issued guidelines relating to aircraft leasing. The guidelines which are based on the current yacht leasing measures, seek to mitigate the VAT impact on the purchase of an aircraft and its engines.
The guidelines would apply to aircrafts used privately which are not registered under a local operator Air Operator Certificate and which would be automatically entitled to a VAT exemption upon importation into Malta.
The mitigation measure applies by virtue of the adoption of a leasing arrangement which is entered into by the owner of an aircraft and its lessee. Both the owner and the lessee would need to be Maltese registered entities. VAT at the standard Maltese rate is levied on the deemed usage of the aircraft in the European Union. This deemed usage is determined pursuant to an automatically generated calculation of such usage based on MTOM and range amongst others. At the end of the lease period, the aircraft should be transferred to the lessee at a nominal value and upon the exercise of a purchase option by the lessee. A VAT Paid Certificate will be issued once all processes are completed.
The larger the MTOM and the range of the aircraft, the lesser is the percentage of the deemed usage in the European Union, which would ultimately result in less VAT being paid on the aircraft and it engines.
By way of example:
- A Bombardier Global 5000 – would be subject to a deemed usage of approx. 32% in the European Union, which would ultimately result in a final VAT output of 5.76%; This rate would apply to similar types of aircraft in this category.
- A Learjet 40XR – would be subject to a deemed usage of approx. 69% in the European Union, which would ultimately result in a final VAT output of 12.42%; This rate would apply to similar types of aircraft in this category.
The following is a link to the automatic deemed usage calculator:
All input details would need to be obtained from the Aircraft Flight Manuals.
Please free to contact Mamo TCV Advocates should you wish to obtain more details on the adoption of this measure.
Originally published November 2012
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.