France : VAT on Yacht Charters - The Latest

The European Commission has today formally issued a judgement against the criteria used by France for the application of the exemption to VAT on commercial vessels deemed to operate on the high seas.

The Commission observed that although the employment of a permanent professional crew, ability to navigate the high seas and a commercial registration are traits apparent in commercial vessels operating on the high seas, these criteria are also apparent in vessels engaged in commercial activity solely in French waters.

The judgement can be viewed online here: ARRÊT DE LA COUR (dixième chambre) 

This decision was already widely anticipated by the yachting community and is the latest decision in the long running saga between the EU and France.

The announcement that was more widely hoped for by the yachting industry today was whether the EU would accept France's plans with respect to their new procedures for the VAT treatment of charter yachts operating in their waters.

Crucially it was hoped that there would be an approval to the rate of VAT to be applied to the charter of yachts in French waters.

We understand that France's proposal to the EU provides for a reduced rate of VAT to be charged in an effort to be sympathetic to the yacht charter industry and thereby limit damage to the significant economic benefits that it brings to the country's Mediterranean coastline.

It was hoped that this decision would have been announced today as part of the EU's almost monthly consolidated announcement of decisions taken on open infringement cases

Tom Becker of Oceanskies spoke with the EU commission this morning and was advised that no news on the matter would be expected until the next planned infringement announcement on the 25th April.

Until any decision is published the yacht charter industry remains in a state of uncertainty with regard to the treatment of VAT not only on charters originating in French waters this season but also the treatment of VAT on the value of the charter yachts operating in French waters.

Given such uncertainty, the general state of the economy and the introduction of further regulatory burden on commercial yacht in the form of Maritime Labour Convention (MLC) compliance it is perhaps no surprise that we are seeing a growth in enquiries from owners wishing to de-commercialise their yachts ahead of the season and convert to private registration in the main by taking advantage of either a Maltese leasing arrangement or temporary admission depending on their individual circumstances.

For further information please do not hesitate to contact us.

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