​Where leasing arrangements of yachts do not fall within the scope of Legal Notice 369 of 2005 and where the aforesaid lease is deemed by the Commissioner for Revenue to be in accordance with guidelines issued by the VAT department from time to time, the Office of the Commissioner for Revenue has decided that in such special case, the following tax treatment is to be adopted for each year for the duration of the lease:
- the lessor is charged to tax only on the annual finance charge, namely the difference between the total lease payments less the capital element divided by the number of years of the lease;
- the lessee is allowed a deduction in respect of the (i) the finance charge; (ii) maintenance; (iii) repairs; and (iv) insurance;
- the lessee is allowed capital allowances in respect of the yacht and the parties may not opt to shift the burden of wear and tear onto the lessor;
- where the lessee exercises an option to purchase the yacht on the termination of the lease, the purchase price received by the lessor shall be considered to be of a capital nature and no tax thereon shall be payable by the lessor.