• Jo Vanbelle

EU challenges yacht tax exemption in Cyprus, Malta and Greece

On 8 March the EU Commission sent formal notice letters to Cyprus, Greece, and Malta regarding the correct application of value-added tax (VAT).The infringement procedure concerns the reduced VAT rate for the lease of yachts.

According to the Commission, there is missing proof of a non-EU based use of the services and products, which is necessary when EU Countries want to apply tax exemptions and reductions to their normal VAT rate.

Instead, the non-compliant jurisdictions established guidelines that presume that the use of large boats would take place mainly outside European waters.

The Commission is also challenging the incorrect taxation in Cyprus and Malta of acquisition of yachts through "lease-purchase" strategies, which would classify as a supply of service instead of a good. The consequence is a lower taxation, which has been directly challenged by the Commission.

The concerns of the EU institutions regard the possible distortion of competition that such practices could create.

The three states have two months to respond. If they fail to do so, the Commission can proceed with a reasoned opinion directed to their authorities, and could eventually refer the cases to the European Court of Justice.

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#taxexemption #EUcommission

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