Cyprus operates one of the most attractive VAT on yachts regimes in the EU with the possibility of reducing the VAT payable to 3.4% as opposed to the 17% rate normally applicable in Cyprus through the Cyprus VAT yachts leasing scheme.
EU VAT, which applies throughout all the member states of the EU, is a form of consumption tax system. While all member states, upon acceding to the EU, are obliged to introduce VAT, a standard rate is fixed by each member state. In most cases, Cyprus charges VAT at a rate of 17%. However, as a consequence of the Cyprus VAT Yacht leasing scheme, the effective VAT payments on yachts can be as low as 3.4% of the initial value of the yacht.
Eligibility for the Cyprus VAT Yacht Leasing Scheme
Eligibility to the Cyprus VAT Yacht leasing scheme is limited to the fulfilment of a set of requirements set by the Cypriot authorities, namely that:
- A lease agreement is signed between a Cyprus company and an individual or other company
- The lease period does not exceed 48 months
- The Yacht arrives in Cyprus within one month from the date of the lease agreement.
- Upon commencement of the lease agreement, the lessee pays the lessor an initial payment amounting to at least 40% of the value of the yacht
- Lease payments are issued on a monthly basis
- The Lessor makes a total profit from the leasing set-up of at least 10% on the initial value of the yacht
- The lessee may purchase the yacht at the end of the lease agreement for a final consideration of not less than 5% of the value of the yacht
- Prior approval of the Cypriot VAT Commissioner is obtained for the application of the Cyprus VAT yacht leasing set-up and the rate applicable
Cyprus VAT Yacht Leasing Scheme – the Applicable Rates
Based on the practical difficulty of authorities to trail the movement of yachts to determine exactly the time spent in the territorial waters of the EU in the course of the lease agreement, the Cypriot VAT Leasing Guidelines provide that VAT will only be applied to part of the lease consideration. This percentage depends on the length of the yacht, the type of the yacht and the presumed length of use of the yacht in EU waters.
| MOTOR YACHTS |
| Length of yacht (in metres) |
Percentage of use within EU waters |
Effective VAT rate |
| 24+ |
20% |
3.4% |
| 14.01 – 24 |
30% |
5.1% |
| 8.01 – 14 |
50% |
8.5% |
| Less than 8 |
60% |
10.2% |
| Boats allowed to sale only within protected waters |
100% |
17% |
Cyprus operates one of the most attractive VAT on yachts regimes in the EU with the possibility of reducing the VAT payable to 3.4% as opposed to the 17% rate normally applicable in Cyprus through the Cyprus VAT yachts leasing scheme.
EU VAT, which applies throughout all the member states of the EU, is a form of consumption tax system. While all member states, upon acceding to the EU, are obliged to introduce VAT, a standard rate is fixed by each member state. In most cases, Cyprus charges VAT at a rate of 17%. However, as a consequence of the Cyprus VAT Yacht leasing scheme, the effective VAT payments on yachts can be as low as 3.4% of the initial value of the yacht.
Eligibility for the Cyprus VAT Yacht Leasing Scheme
Eligibility to the Cyprus VAT Yacht leasing scheme is limited to the fulfilment of a set of requirements set by the Cypriot authorities, namely that:
- A lease agreement is signed between a Cyprus company and an individual or other company
- The lease period does not exceed 48 months
- The Yacht arrives in Cyprus within one month from the date of the lease agreement.
- Upon commencement of the lease agreement, the lessee pays the lessor an initial payment amounting to at least 40% of the value of the yacht
- Lease payments are issued on a monthly basis
- The Lessor makes a total profit from the leasing set-up of at least 10% on the initial value of the yacht
- The lessee may purchase the yacht at the end of the lease agreement for a final consideration of not less than 5% of the value of the yacht
- Prior approval of the Cypriot VAT Commissioner is obtained for the application of the Cyprus VAT yacht leasing set-up and the rate applicable
Cyprus VAT Yacht Leasing Scheme – the Applicable Rates
Based on the practical difficulty of authorities to trail the movement of yachts to determine exactly the time spent in the territorial waters of the EU in the course of the lease agreement, the Cypriot VAT Leasing Guidelines provide that VAT will only be applied to part of the lease consideration. This percentage depends on the length of the yacht, the type of the yacht and the presumed length of use of the yacht in EU waters.
| MOTOR YACHTS |
| Length of yacht (in metres) |
Percentage of use within EU waters |
Effective VAT rate |
| 24+ |
20% |
3.4% |
| 14.01 – 24 |
30% |
5.1% |
| 8.01 – 14 |
50% |
8.5% |
| Less than 8 |
60% |
10.2% |
| Boats allowed to sale only within protected waters |
100% |
17% |