In 2017 and 2018, millions of dollars were lost in the flood of fake offerings leading to ICO exit scams which resulted in the blockchain technology gaining negative reputation. This eventually led to credibility damages of the cryptocurrencies and blockchain.

The main reasons why companies choose ICOs over other forms of funding include;​

1. Through an ICO, money can be raised without losing any of the company's ownership as backers do not receive any of the company's shares.
2. ICOs offers entrepreneurs an alternative to the rigourous processes involved in raising funds. Since such process do not have to undergo the standardized processes and have little to no regulations in certain countries, fundraising is made as easy as launching a website.
   

The success of an ICO company is measured by meeting a certain fundraising target within a specified timeframe. If the target is met, the campaign is considered successful and vise versa.
However, when the ICO campaign is successful, the fundraising startup then moves on to the execution stage of the project. Here, backers now wait for the value of their tokens to rise or skyrocket.

Having gone through the cons of ICOs, one might ask whether investing in ICO is safe or not. It is worth noting that the chances of return on investment appear to be very slim even though the legitimacy of an ICO can be proved.

Considering that the blockchain technology is still in its teething process, and the fact that ICOs regulations are far from being comprehensive, investing in an ICO campaign still remains a great risk.

With the practical adoption of blockchain technology remaining low, blockchain startups are still struggling to succeed. This gives no guarantee that your tokens will ever amount to anything despite having invested in a promising project with a whole team of reliable people behind it. The failure of many legitimate projects are a result of not having enough understanding of the technology and what it can do for the customers. It is therefore advisable to do thorough research on the business model, product and even the team behind the startup before investing in an ICO. This way, the risk can be minimized.

As all other form of investments, the value and successful redemption of the tokens can never be guaranteed. It is for this reason that ICOs are to be selected with extreme caution and risk-assessed without ignoring any red-flags.

​For further information regarding ICOs and respective VFA legislation contact us by following the link.

Being at the centre of the Mediterranean surrounded by crystal blue waters, Malta has been the number one berthing country for pleasure yachts for a number of years. This is mainly attributable for a number of factors, including Article 59A of the VAT directive.

Article 59A of the VAT Directive allows individuals to pay VAT on the lease of a yacht depending on the percentage and effective use within European waters. The new guidelines provide a concise point-of-reference and a clear mechanism in identifying and computing such use. This directive allows individuals who wish to own a pleasure yacht to reduce the VAT element from 18%, the standard VAT rate in Malta, to an effective 6.12% dependent on the percentage use in EU territorial waters. The process and method of such reduction in VAT rate is outlined in detail here. 

However, such guidelines issued are specific for the leasing element of the structure.

The brief overview of the new guidelines is outlined below;

• For short-term leases, the yacht has to be physically in Malta at the commencement of the lease, whereas for​ long-term leases, the lessor has to be established in Malta i.e. ordinary resident and/or domiciled.
• For leases where the yacht is to be effectively used 100% outside EU territorial waters, the lessor  shall not take into account the expected effective use and enjoyment of the pleasure boat by the lessee and shall apply VAT as follows;
  
  • Should the lease commence at least 30 days before the end of the first tax (VAT) period in which such lease commences, the full VAT is to be charged to the lessee for the first tax period. For understanding purposes, should the tax period be January to March, and the lease commences on 15th February, the total VAT to be charged is 18% on the lease amount for February and March.
  • Should the lease commence less than 30 days before the end of the first tax (VAT) period in which such lease commences, the full VAT is to be charged to the lessee for the first and second tax period accordingly. For understanding purposes, should the tax period be January to March, and the lease commences on 15th March, the total VAT to be charged is 18% on the lease amount for March, as well as 18% on the lease amount for the second tax periods i.e. April, May and June. The latter are to be declared in the VAT return of the second tax period respectively.
• Following the lapse of the first tax period in the first case, and the second tax period in the second case, the lessor is to obtain from the lessee reasonable documentation and technological data so as to determine the actual effective use of the yacht in EU and outside EU territorial waters.
• From such data, a 'Preliminary ratio' is to be acquired by dividing the actual effective use in EU territorial waters by the total actual effective use of the pleasure craft in and outside EU territorial waters, thus obtaining the effective use of the craft in EU territorial waters for the said period.
• One has to note that such preliminary ratio is only applicable for the first twelve months of the lease, and in case of shorter leases, for the total duration of the lease.
• A Provisional Output Tax for that period is to be computed by multiplying the lease amounts by the preliminary ratio by the standard VAT rate i.e. 18%. Any VAT over-payments made by the lessor for the first, and second tax periods where applicable, may be deducted from the total output VAT for the tax period mentioned earlier. For understanding purposes, should upon calculation of the preliminary ratio following the first (and second, if applicable) tax period, the VAT attributable to use in EU territorial waters, be far less than the VAT charged in the first (and second if applicable) tax period, such over-payment(s) may be deducted from the total VAT output of that tax period.
• For long-term leases, such ratio is to be re-computed annually by the lessor by requesting the relevant documentation and technological data and dividing the effective use in EU territorial waters by the total actual effective use outside and inside EU territorial waters of the preceding 12-month period. This is to be labelled the 'Actual ratio'. Such Actual ratio (the 'Benchmark ratio') will serve as the 'Temporary ratio' for the provisional effective use for the forthcoming twelve month-period, and therefore the basis on which the provisional output tax is to be computed for the forthcoming twelve-month period.

Such guidelines may be accessed from the document listed here-under.

For further information regarding VAT on pleasure crafts and how you can benefit from such legislation, you can contact us  by following the link, and one of our tax experts will get back to you shortly.