VAT will apply to yacht charters starting in France with effect from the 15th July, 2013.
The announcement was formally made yesterday evening, the 25th June, 2013 by the French Direction de la Législation Fiscale (DLF) through the issue of an official bulletin.
A copy of the bulletin can be downloaded here:
TVA - Locations de bateaux à des fins de voyages d'agrément - Jurisprudence (CJUE, aff n° C-116_10, Bacino Charter Company SA du 22 décembre 2010)
The announcement formally brings to an end the French Commercial Exemption (FCE) rules previously applied to the charter of commercially registered yachts. These rules had been laid down by a customs administrative note (“Bulletin Officiel des Douanes” n°6603, dated 24th June, 2004) which enabled commercially operated yachts to be imported into France at a zero rate of VAT and for subsequent charter activities originating in French ports to be supplied without VAT being charged. Further advantages included the ability for commercial yachts to take on duty free fuel and benefit from tax free supplies.
Unfortunately for the commercial yacht charter market the FCE regime was challenged as a result of France being taken to task at EU level in the form of infringement proceedings requiring them to take steps to end what is seen as a form of relief that conflicts with wider EU convention.
A notice posted by the EU commission on 21st November, 2012 formally confirmed to France that their VAT exemption on charter yachts in France was not compliant with EU VAT rules and required France to take steps to remove the exemption from its tax legislation.
Yesterday's announcement was therefore widely anticipated although it had been hoped that the introduction of the new rules may have been postponed until the end of the charter season.
The French VAT rate is 19.6 per cent will apply although it seems likely that it will be possible to benefit from a reduced effective rate as a result of a fallback to existing French rules governing the VAT treatment of charter/lease activities through one of the following options:
1. Utilisation forfaitaire (Fixed Utilisation)
In this case subject to certain requirements it is possible to benefit form an effective VAT rate at 50% of the applicable rate, (i.e. currently 9.8%)
2. Utilisation réelle (Actual Utilisation)
In this case VAT is charged at the full applicable rate of 19.6% but only on the portion of the charter actually undertaken in French waters.
Oceanskies will continue to monitor the situation over the next few weeks. it is anticipated that the DLF and/or French customs will issue further information and guidance on the situation which we shall report.
In the meantime Oceanskies is already working with a leading provider of yacht related VAT services in France (and also in Italy) to provide a streamlined and cost effective French VAT registration system for charter yacht owners.
We have also receive a number of enquiries from owners wishing to de-commercialise their yachts in a tax efficient manner which is another service that we can provide.
Please do not hesitate to contact us for further information
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