VAT Department – Aircraft Leasing Guide

The VAT Department has issued new guidelines which supersede those published in 2012 for the regulation of VAT over aircraft leasing.

These guidelines apply to leasing agreements with a leasing period of up to 60 months and with monthly lease payment instalments, between parties who are established and registered for VAT purposes in Malta and who cannot claim input tax on the lease, who obtain prior approval in writing from the VAT Department.

Lease agreements which satisfy the above conditions are subject to VAT at the standard rate of 18% applied a percentage of the lease, established by an expert technical study, and related to use of the aircraft in European Union airspace.

The expert technical study has established the deemed percentage of use in the EU for VAT purposes as follows::

Aircraft type by Range (KM)        % of lease taking place in the EU              Computation of VAT

0 – 2,999                                                        60%                                                  60% of consideration X 18% 3,000 – 4,999                                                      50%                                                  50% of consideration X 18% 5,000 – 6,999                                                       40%                                                  40% of consideration X 18% 7,000 – upwards                                          30%                                                  30% of consideration X 18%’
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