TAX evasion is a common phenomenon even under the VAT regime. And EU is no exception. The latest scam relates to the yatch sector. The European Commission has opened infringement procedures against three member States namely, Malta, Greece and Cyprus for not levying the correct amount of VAT on yacht purchases.

According to the Commission, while current EU VAT rules allow members not to tax the supply of a service where the effective use and enjoyment of the product is outside the EU, they do not allow for a general flat-rate reduction without proof of the place of actual use. Malta, Cyprus, and Greece have established guidelines according to which the larger the boat is, the less the lease is estimated to take place in EU waters - a rule that greatly reduces the applicable VAT rate.

The three member States now have two months to respond to the arguments put forward by the Commission. If they do not act within those two months, the Commission may send a reasoned opinion to their authorities.