After targeting Malta, Brussels now admits it is probing all member states over VAT on luxury yachts

After first targeting Malta, Cyprus and Greece over their VAT regime for luxury yachts, the European Commission has widened its investigation to include all member states

European Commissioner Pierre Moscovici
European Commissioner Pierre Moscovici

The European Commission has widened its investigation into the VAT regimes for luxury yachts to include all member states.

The admission was made by European Taxation Commissioner Pierre Moscovici in a reply to a question tabled by Labour MEP Miriam Dalli.

The European Commission opened infringement proceedings against Malta on 8 March, eliciting claims of unfair targeting of a member state by the former French finance minister. France and Italy also have similar VAT regimes.

Dalli asked the commission why it had only targeted Malta, Cyprus and Greece when other member states like France and Italy, also had similar arrangements.

Similar questions were tabled by Nationalist MEP David Casa.

Finance Minister Edward Scicluna had said Malta’s VAT regime on luxury yachts was modelled on Italy’s and had been approved by the commission. He had criticised the commission's actions as an attempt to bully small countries.

In his reply, Moscovici said the Paradise Papers, a leaked email cache from the Bermuda-based law firm Appleby, had revealed widespread tax evasion in the yachting sector that was facilitated by “national rules that did not conform with EU law”.

Moscovici said this situation could create serious distortions in the market and this is what prompted the commission to act against the three countries.

However, he also admitted the investigation would also include other member states.

Owners of yachts longer than 23 metres pay a reduced VAT rate of 5.4% in Malta. That rate is charged instead of 18% if the vessels are used for leasing. The reduced VAT rate is based on the estimated time the superyachts spend in EU waters. France adopts a flat 50% cut in VAT rates, while Italy has a regime that is like Malta's.

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