YACHTING

Cyprus yachting has experienced rapid growth in the past few years mainly due to the geographical location of the island, the favourable tax regime and the business growth the country has experienced especially in the services section.

Yacht Owners based in Cyprus can enjoy the enviable quality of life of a developed and modern EU state from the new, state of the art yacht marina that will be ready to welcome its first yachts end 2012. Simultaneously, Yacht owners are offered the opportunity to facilitate their business activities within an efficient legal and accounting services framework or explore new business opportunities via Cyprus’ liberal FDI status and its beneficial tax regime.

 

  • Registration of Yachts under Cyprus Flag

Yacht registration in Cyprus is regulated by the Merchant Shipping (Registration of Ships, Sales and Mortgages) Law of 1963, as amended from time to time (the “Law”). The Law does not make a special reference to yachts as such, but to small vessels or recreational crafts.

In accordance with the “Law” recreational crafts may be registered in the Register of Cyprus Ships. These vessels are permitted to sail in both national and international waters.

Recreational crafts may also be registered in the Register of Small Vessels according to the provisions of the Emergency Powers (Control of Small Vessels) Regulations of 1955. These vessels are only permitted to sail in Cyprus territorial waters.

HSS Shipping Services can assist clients register their yachts under the Cyprus flag and enjoy one of the most competitive registration and annual fees regime internationally.

 

  • The Cyprus Yacht Leasing scheme

 

In March 2012, Cyprus VAT department issued new guidelines thereby introducing an advantageous leasing scheme for pleasure yachts in Cyprus. The new scheme seeks to benefit yacht owners allowing them significant tax savings on the lease payments and the final purchase price if they opt to purchase the yacht at the end of the lease agreement.

 

The new model is based on the assumption that the larger the yacht the more time it will spend navigating outside EU territorial waters. In this respect the 18% Cyprus VAT rate will only apply to the period the Yacht is confined within the EU territorial waters. Depending on the type and size of the yacht predetermined percentages of the VAT rate will apply without the need to keep any kind of record proving the navigation of the yacht in and out of the EU territorial waters.

The VAT department has published one table for motor yachts and one for sailing yachts determining the percentage of VAT payable under a lease agreement depending on the assumed percentage of use within EU territorial waters based on the yacht’s length.

In this respect, a yacht owner may pay a VAT rate as low as 3.4% which is lower than the 5.4% of similar VAT models offered by some of Cyprus main yachting competitors.

 

Motor Yachts

   
     

Length

% of use within EU

VAT calculation

Over 24 meters

20%

20% of 18%

14.01 to 24 meters

30%

30% of 18%

8.01 to 14 meters

50%

50% of 18%

Up to 8 meters

60%

60% of 18%

Yacht only licenced to be used within Cyprus waters

100%

100%

     

Sailing Yachts

   
     

Length

% of use within EU

VAT calculation

Over 24 meters

20%

20% of 18%

14.01 to 24 meters

30%

30% of 18%

8.01 to 14 meters

50%

50% of 18%

Up to 8 meters

60%

60% of 18%

Yacht only licensed to be used within Cyprus waters

100%

100%

 

 

Conditions for the new VAT scheme to apply

  1. There must be a financial leasing agreement between a lessor which must be a Cyprus company and a lessee that can be of any origin. 
  2. An initial contribution of 40% of the yacht’s value must be paid by the lessee to the lessor.
  3. The yacht must be brought to Cyprus territorial waters within a month from the commencement of the agreement.
  4. Monthly lease payments have to be made from the lessee to the lessor for a lease duration that may not exceed 48 months.
  5. A total profit of 10% of the value of the yacht must be generated by the lessor from the lease agreement. This will be subject to 12.5% Cyprus corporate tax.
  6. Approval must be sought by the Cyprus VAT commissioner confirming the applicable VAT rate and accepting the declared value of the yacht.
  7. At the end of the lease agreement the final contribution must be over 5% of the value of the yacht. This will be subject to the standard VAT rate of 18%.

 

HSS Shipping Services can advise and assist clients who are interested in enrolling in the Cyprus Yacht Leasing Scheme.