In October 2019, the Cyprus Tax Department issued Interpretative Circular no. 238 (‘’the Circular’’), implementing new procedures for the registration in the VAT Registry, of legal entities that operate in the sector of leasing of recreational boats (yachts) (‘’Yachts’’) in Cyprus.
According to the Circular, the following provisions are introduced:
- Persons (legal entities), purporting to be engaged in the business of leasing Yachts can be registered in the VAT Registry, only if sufficient evidence is provided to support actual exercise of such activity.
- In order to determine the place of supply of these services, and specifically where the supply is supposed to take place outside the EU, the provisions of paragraph 3 (short-term leasing) and paragraph 14A (long-term leasing) of the Thirteenth Schedule of the Cypriot VAT Law of 2000 (Law 95(I)/2000), as amended, shall apply. The aforementioned provisions correspond to the implementation of article 59a of the VAT Directive 2006/112/EC. The lessor is therefore obliged to maintain detailed information on the basis of which the percentage of use and exploitation of the Yacht, inside and outside the EU can be established. This is based on data to be confirmed by a deck book and / or electronic boat navigation system.
- Upon the registration of such person (legal entity), in the VAT Registry, the tax authorities, may, for the purposes of public revenue protection, demand the payment of the full amount of VAT corresponding to the value of the Yacht either at the time of its acquisition and / or its introduction in the Republic. The tax authorities may proceed to appropriate adjustments when adequate data to confirm the use of the vessel outside the EU is presented to them.
- Any adjustments may only be made upon the tax authorities determining that the Yacht, is actually used for commercial purposes. The lessor, is obliged for this purpose, to maintain a deck book or an electronic boat recording system.
- Furthermore, in no case can any entry be made in the VAT register on the basis of predetermined percentages in relation to the use and operation of a Yacht inside or outside the EU.
The aforementioned provisions of the Circular are in compliance with the European and Cypriot Law and most importantly are approved by the European Commission.