K.P.S. Services Ltd
The Cyprus Yacht Leasing Scheme
K.P.S. Services Limited extensive knowledge and experience in yacht registration within the Cyprus Jurisdiction allows the clients to answer all their dilemmas and questions in making a correct and informed choice in registering their yacht under the Cyprus flag.
As per guidance issued by the Cyprus VAT authorities yachts owned by a Cyprus Company and leased to physical or legal persons may be allowed to be under the reduced effective VAT rate of as low as 2.42% via the use of the Cyprus Yacht Leasing Scheme. This Scheme has transformed Cyprus as one of the most attractive jurisdictions for yacht registration within the EU.
Cyprus Yacht Leasing Scheme
A yacht lease agreement is defined as an agreement whereby the lessor (the Cyprus Company being the owner of the yacht) contracts the use of the yacht to the lessee (the legal or natural person who leases the yacht) in return for a consideration.
As long as the yacht is used within EU waters the lease agreement shall be subject to the standard rate of VAT being 19% without the need to keep records (i.e. log books) for time spent in EU waters.
It should be noted that at the end of the underlying lease period, the lessee may choose to purchase the yacht at a fraction of the original price. This kind of purchase is strictly an option which may be exercised by the lessee for a separate consideration.
Conditions for benefiting the Cyprus Yacht Leasing Scheme
IThe Cyprus scheme will apply only if ALL of the following conditions are met:
A lease agreement must exist between a Cyprus company and any legal or natural person, irrespective or origin
The yacht should sail in Cyprus waters within one month from the commencement of the lease agreement
The initial contribution from the lessee to the lessor must be at least 40% of the yacht’s value
Lease payments are required to be monthly and the lease period cannot exceed 48 months
The lessor is expected to make a total profit from the lease agreement at least 5% of the yacht’s original value. In the year the lease agreement commences the total amount of lease payments on which VAT is calculated is increased by half of the calculated profit
The lessee may purchase the yacht at the end of the lease period and the final instalment which results to the transfer of the ownership of the yacht to the lessee cannot be less than 2.5% of the yacht’s value and is subject to the standard VAT rate (19%)
In order for the above percentages to apply a prior written approval from the VAT Commissioner is required. Thus, an application must be filed to the VAT Authorities accompanied by the lease agreement and documentation supporting the purchase price/value of the yacht