Thinking of basing boat in Limassol

[Bertramdriver]

I'm depressed I was thinking of basing my boat in Limassol once we've finished our circumcision (SWMBO term) and returning to the eastern med. trouble is all of the Cypriots will be locating north so we could be stuck in a ghost town.

 

[pmyatt]

I'm depressed I was thinking of basing my boat in Limassol once we've finished our circumcision (SWMBO term) and returning to the eastern med. trouble is all of the Cypriots will be locating north so we could be stuck in a ghost town.

We left Cyprus in 2009; it was full even then! I think you will have great difficulty getting a mooring, even with the new Limassol Marina.

 

[Bertramdriver]

We left Cyprus in 2009; it was full even then! I think you will have great difficulty getting a mooring, even with the new Limassol Marina.

Life changes and a 38% tax on resident boats has probably emptied every Russian sub-oligarch out of even Limissol Marina.
Any reader out in Cyprus to bring us up to date?

 

[rivonia]

You could of course leave it in Karpaz Gate Marina. They are offering very good deals at the moment and there is plenty of room.

 

[pmyatt]

Life changes and a 38% tax on resident boats has probably emptied every Russian sub-oligarch out of even Limissol Marina.
Any reader out in Cyprus to bring us up to date?

Where did the 38% tax come from - has it actually happened or is it just rumoured?

 

[Bertramdriver]

Picked it up from Limassol Newspaper 20% tax plus vat. Not sure if it's enacted yet. Suggest you check internet

 

[cmedsailor]

I suggest you read the following. Mergel and her friends have already caused a huge damage to the island. Let's not cause more with wrong rumours.



The Cypriot VAT Department has recently published guidelines on the VAT Treatment of yacht leasing schemes applicable to pleasure yachts, thereby allowing yacht owners to benefit from the most attractive VAT regime within the EU during the currency of the lease agreement, and, at the end of the leasing scheme when they exercise the option to acquire the craft, acquire an EU VAT paid certificate on the pleasure yacht.

Closely modeled around a similar VAT scheme in use in Malta, the Cyprus Yacht Registration Scheme, represents however, a marked improvement on the Maltese scheme. Not only does it allow for lower levels of VAT, as low as 3.4% compared to Malta’s 5.4%, but also softer lease repayments over a maximum of four (4) years in lieu of Malta’s three (3).

Furthermore, the benefits to the Cypriot yacht leasing scheme, may, through the use of Cyprus non-resident companies (which are afforded tax exempt status) - further reading below - be further extended to the lessor, thereby ensuring significant tax savings for both contractual parties to the yacht leasing agreement.

Yacht Leasing Agreement
In order to avail oneself of the advantageous VAT scheme, a financial leasing agreement must be entered into by a lessor and a lessee, whereby the lessee is granted the option to purchase the sea-craft at the end of the lease.

On pain of nullity, the lessor must be a Cyprus-registered entity and the owner of the craft being made subject to the yacht leasing agreement. The craft may be brought either directly from the owner or if the craft is new, directly from the yacht-builder. Cyprus imposes no nationality restrictions on the lessee which may be a physical or legal person.

Applicable Rate of VAT
The Cypriot yacht leasing scheme hinges on the assumption that pleasure yachts may sail freely outside territorial waters, and that the larger the craft, the less time, the less time the craft shall be confined to EU waters. By analogy, the same reasoning has been extended to yacht leasing.

In March 2012, the Cyprus VAT Department issued clear guidelines setting the deemed proportion that the craft shall be deemed to be in EU waters. For the purposes of the scheme, a distinction is made on the propulsion of the pleasure yachts – crafts divided broadly into sailing and motor-powered crafts. The applicable rate of VAT is therefore calculated as a percentage of to the normal rate of VAT, which as of March 2012, is of 17%. The VAT rates may be summarised in the table below:
Sailing Yachts

Type of yacht (Sailing) % of lease subject to VAT Effective rate of VAT (Cyprus)
Sailing boats over 24 metres in length - online calculator 20% Cyprus 20% of consideration x 17% = 3.4%
Sailing boats between 20.01 to 24 metres in length - >online calculator 30% Cyprus 30% of consideration x 17% = 5.1%
Sailing boats between 10.01 to 20 metres in length - online calculator 50% Cyprus 50% of consideration x 17% = 8.5%
Sailing boats up to 10 metres in length - online calculator 60% Cyprus 60% of consideration x 17% = 10.2%
Craft permitted to sail in protected waters only - online calculator 100% Cyprus 100% of consideration x 17% = 17%
Motor Yachts

As with sailing boats, VAT is paid only on the portion of the lease during which the motor craft is in EU waters. The Cypriot yacht leasing scheme allows for a significant VAT saving for small, motor-propelled crafts, as set forth in the following table:

Type of yacht (Motor) % of lease subject to VAT Effective rate of VAT (Cyprus)
Motor boats over 24 metres in length - online calculator 20% Cyprus 20% of consideration x 17% = 3.4%
Motor boats between 14.01 to 24 metres in length - online calculator 30% Cyprus 30% of consideration x 17% = 5.1%
Motor boats between 8.01 to 14 metres in length - online calculator 50% Cyprus 50% of consideration x 17% = 7.5%
Motor boats up to 8 metres in length - online calculator 60% Cyprus 60% of consideration x 17% = 10.2%
Craft permitted to sail in protected waters only - online calculator 100% Cyprus 100% of consideration x 17% = 17%
Conditions of Financial Leasing Agreement

With the expertise of our in-house shipping department, availing oneself of this exceptionally advantageous VAT regime becomes a relatively easy and streamlined process.

The financial leasing agreement is characterized by the following set of rules:

(i) The financial leasing must be between a Cyprus Company (lessor) and a lessee (no nationality restrictions);

Anonymity of both parties to the agreement is possible through the use of corporate holdings structures and/ or nominee shareholding

(ii) The Lessee must pay the Lessor an initial contribution amounting to at least forty percent (40%) of the value of the craft;

(iii) The Yacht must be in Cypriot territorial waters within one (1) month from the commencement of the lease agreement.* The Commissioner of VAT, enjoys discretion to allow an extension of this period, provided that, such extension shall not, exceed the currency of the yacht leasing agreement.

(iv) The lease contributions shall be payable monthly – the applicable rate of VAT on these contributionss shall also be calculated in accordance with Table 1.1 and Table 1.2 above.;

(v) The duration of the lease agreement shall not exceed forty-eight (48) months;

(vi) The lessor is expected to derive a profit from the lease agreement in excess of the value of the craft.* The profit margin shall be of not less than ten percent (10%) of the value of the craft;

(vii) In addition to the profit set forth in recital (v) above, the lessee, shall as compensation of the protracted payments paid to the lessor during the currency of the agreement, pay the lessor, interest equivalent to not less than five percent (5%) of the value of the craft;

(viii) Upon exercising the option to acquire the yacht, the purchase value at the last contribution of the lease shall not be less than five percent (5%) of the original value of the craft. This final contribution shall be subject to a standard rate of VAT at 17%

Description Cyprus
Lessor Cyprus Company
Lessee No nationality restrictions
Initial contribution to be paid by lessee (as percentage of vessel) 40%
Periodical payments of lease installments Monthly
Maximum lease period 48 months
Minimum profit margin by lessor 10%
Minimum rate of interest to accrue to lessor during currency of lease 5%
Final installment of yacht payment (as percentage of original value of the yacht) 5%
Applicable rate of VAT of final instalment of yacht payment 17%
Registration Process

The procedure for the approval of the aforesaid VAT scheme is subject to the following procedure:-

(i) Prior Approval from Cypriot VAT Commissioner;
The applicant should, on submission of relevant details of the craft, including inter alia certification and survey of the vessel, bill of sale, and such other documentary evidence as may be requested, submit an application in writing to the Cypriot VAT Department, for a prior confirmation of the applicable rate of VAT.

(ii) Register Cypriot Company;

Following the approval of the Cypriot VAT commissioner, the applicant must incorporate a Cyprus company, which company must have as its main trading objects, the power to operate, charter and manage yachts. The drafting of the Memorandum and Articles of Association shall be entrusted to our in-house legal counsel, to ensure compliance with the aforesaid requirements.

(iii) Cypriot company applies for VAT;

Following incorporation of the Cyprus holding company, a process that is typically expedited in five (5) working days, the Cypriot Company would apply for registration of a VAT number with the Cyprus VAT Department* - this is a swift procedure, normally carried out in two (2) working days.

(iv) Cypriot company enter into lease agreement;

Having obtained its VAT number, the Cypriot Company shall execute the lease agreement with the lessee.

(v) Submission of Lease agreement and supporting documentation to VAT Department;

The Cypriot company shall then submit a copy of the lease agreement, together with the details of the yacht (certification, specification list, surveyor’s valuation, bill of sale if bought new etc to the Cyprus VAT Department, which shall issue a written issuance of the applicable rate of VAT.

(vi) VAT Department issues letter of approval
Following the comprehensive and satisfactory submission of the supporting documentation set forth in paragraph (v) above, the Cyprus VAT Department shall issue a letter of approval, confirming the applicable rate of VAT.

Working Example

The advantages of the Yacht Leasing Scheme can provide very attractive VAT savings for even the smallest craft, provided this such craft is not confined, by means of its class or designation, to sailing within territorial waters.** The VAT savings become even more significant if the craft is a sizeable vessel, as shall be illustrated in this textbook example:

(i) A motor propelled super-yacht* worth twenty million Euro (€ 20,000,000);

(ii) The yacht has a length of thirty (30) metres;

(iii) The currency of the lease agreement shall be of 48 months; and


Notes
As of the commencement date of the contract, the lessee pays 40% of the value of the craft (i.e. 40% of € 20,000,000 = € 8,000,000, with the balance (€ 12,000,000) shall be re-payable over forty-eight (48) months.*

The applicable rate of VAT, based on a vessel of this sisze, is 20% of standard rate (i.e* 20% of 17% = 3.4%)

 

[macd]

I Googled this with various permutations of Cyprus/tax/vat/boat/etc in response to Rivonia's thread: http://www.ybw.com/forums/showthread.php?354535-Tax-on-Yachts

The only applicable hits I could find were the leasing scheme cmedsailor explains above, plus an article beginning: Shock horror has set in among Cyprus boat owners as it became clear that the Finance Ministry is serious about plans to put a 38% tax on the value of pleasure craft
http://www.tax-news.com/news/Cyprus_Tax_On_Boats_Will_Empty_Marinas_Say_Owners____10754.html

The article was published a decade ago. It also seemed to say that the (presumably unimplemented) scheme would apply only to owners of duty free yachts and those wishing to import yachts or buy one locally...The tax affects all owners who are in the country for more than 185 days a year and are therefore considered resident.

If there's anything substantively suggesting the exhumation of the 2003 scheme, let's have chapter and verse rather than airy references to newspaper articles.