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Cyprus Yacht Leasing Scheme for VAT

The Cyprus Yacht Leasing Scheme for VAT

Navigating the intricacies of maritime law and VAT regulations can be challenging, particularly for those considering yacht leasing in Cyprus. Our law firm is here to simplify the process, offering comprehensive legal services tailored to the Cyprus Yacht Leasing Scheme. From understanding the tiered VAT rates to preparing lease agreements and liaising with the VAT Commissioner, we provide expert guidance every step of the way. Our goal is to ensure you fully benefit from the Scheme while enjoying your passion for yachting in the beautiful Mediterranean waters.

Introduction to the Cyprus Yacht Leasing Scheme

The Republic of Cyprus, with its strategic location in the Mediterranean Sea, its robust legal framework, and a favourable tax system, has long been an attractive destination for yacht owners. In recent years, the island nation has been gaining popularity among the maritime community due to its innovative approach towards VAT (Value Added Tax) on yacht leasing – known as the Cyprus Yacht Leasing Scheme. This scheme, implemented by the Cyprus government, offers a practical way to significantly reduce VAT on yacht leasing, providing an attractive incentive for yacht owners and potential buyers.

Understanding the Cyprus Yacht Leasing Scheme

Introduced in 2012, the Cyprus Yacht Leasing Scheme is based on the principle that the larger the yacht, the less time it is likely to spend in EU waters, owing to its ability to undertake longer voyages. Therefore, instead of charging the standard VAT rate on the full value of the yacht lease, the scheme applies a ‘deemed’ percentage of lease time spent within EU waters. This ‘deemed’ percentage varies according to the length and means of propulsion of the yacht, leading to a potential significant reduction in VAT.

The Scheme’s VAT Rates

The VAT rates under this scheme depend on the type and size of the yacht.

  1. For yachts over 24 meters long, regardless of whether they are sail or motor yachts, the rate is set at a deemed use within EU waters of 20%, resulting in an effective VAT rate of 3.4%.
  2. For motor yachts between 14.01 and 24 meters, the rate is set at 30%, resulting in an effective VAT rate of 5.1%.
  3. For sailing yachts between 20.01 and 24 meters, and motor yachts between 8.01 and 14 meters, the rate is set at 40%, resulting in an effective VAT rate of 6.8%.
  4. The highest rates apply to sailing yachts between 10.01 and 20 meters, and motor yachts up to 8 meters, which are set at a deemed usage of 60% and 50% respectively, resulting in effective VAT rates of 10.2% and 8.5%.

The Lease Agreement

To benefit from this scheme, a lease agreement must be entered into between a Cyprus company and any individual or company, regardless of their place of establishment or residence. This agreement must be approved by the Cyprus VAT Commissioner, and the lessor is required to make an initial payment of at least 40% of the yacht’s value.

Once the lease agreement is in place and the initial payment is made, the lessor is required to pay VAT on the lease instalments at the effective VAT rates mentioned above, on a quarterly basis.

The Option to Purchase

At the end of the lease period, the lessee may opt to purchase the yacht at a final instalment. This final payment is also subject to VAT, but only at the standard Cyprus VAT rate of 19%. However, this payment is calculated on the residual value of the yacht, which can be as low as 2.5% of the initial value of the yacht, further enhancing the attractiveness of the scheme.


The Cyprus Yacht Leasing Scheme is a smart and practical VAT solution for yacht owners, offering significant savings and making yacht leasing in Cyprus a very attractive proposition. However, it is crucial for potential lessees to seek professional advice in order to ensure all the conditions are met and the scheme is properly implemented. With the right guidance, yacht owners can enjoy the beautiful waters of the Mediterranean while benefiting from a favourable tax environment.

The Cyprus Yacht Leasing Scheme is anexcellent example of the innovative tax solutions available within the European Union, aimed at promoting maritime activities and boosting the maritime economy. By capitalising on these opportunities, yacht owners can enjoy their passion for the sea while minimising their tax obligations.

Cyprus Yacht Leasing Services

Navigate the Cyprus Yacht Leasing Scheme with ease with our expert legal services. From understanding VAT rates to setting up lease agreements, we provide comprehensive support for yacht leasing in Cyprus.

Our law firm offers a wide range of services tailored to assist clients with the Cyprus Yacht Leasing Scheme. Our services include:

  • Consultation and Advice: We provide expert advice on the Cyprus Yacht Leasing Scheme, helping clients understand how it can benefit them, explaining the tiered VAT rates, and offering guidance on how to comply with the requirements.
  • Lease Agreement Preparation: We prepare and review lease agreements in accordance with Cyprus law and the specifications of the Yacht Leasing Scheme. Our expert team ensures that all documents meet legal standards and are optimized for the benefit of our clients.
  • Liaising with the VAT Commissioner: We handle all communication with the VAT Commissioner, ensuring that the lease agreement gets approved smoothly. We also assist in making the initial payment and handle all VAT obligations on a quarterly basis.
  • Option to Purchase Services: If a client decides to purchase the yacht at the end of the lease period, we facilitate the process, making sure that the final payment and transfer of ownership are handled correctly and efficiently.
  • Ongoing Legal Support: We provide continuous legal support throughout the lease period, addressing any changes in the VAT rates or other regulations related to the Cyprus Yacht Leasing Scheme.
  • Representation in Disputes: In case of any disputes or issues arising from the lease agreement or the application of the Yacht Leasing Scheme, we represent our clients’ interests effectively, drawing on our extensive knowledge of Cyprus maritime and tax law.

Our goal is to provide a seamless experience for our clients in managing their yacht leasing activities in Cyprus, ensuring that they can fully enjoy the benefits of the Cyprus Yacht Leasing Scheme.

Please note that every client’s situation is unique, and our services will be personalised according to specific needs and circumstances. Feel free to get in touch with us for a comprehensive discussion on how we can assist you.

Cyprus Yacht Leasing Scheme for VAT

See how our lawyers can help you with matters relating to the Cyprus Yacht Leasing Scheme.