France Hikes VAT Due On Yacht Charters

by Ulrika Lomas, Tax-News.com, Brussels

30 November 2020

The French tax authority has confirmed new rules regarding the calculation of VAT on pleasure yacht charters.

From July 2013, France was compelled to revoke its VAT exemption for recreational yacht charters and instead installed its 9.8 percent reduced rate of VAT.

From March 31, 2020, the country introduced VAT at the standard rate of 20 percent.

As of November 1, 2020, renting a boat for pleasure travel to a taxable or non-taxable person is taxable in France as soon as the boat has actually been made available to the person in France. The rents are then in principle fully taxable in France.

Until November 1, 2020, France offered a VAT lump sum reduction on yacht charters, reducing the VAT due by half where a voyage took the vessel outside EU waters. This is no longer available.

Under the new rules, an exemption is provided for the share of rents corresponding to the proportion of the duration of use or actual operation of the boat outside the territorial waters of the European Union. Newly, the exemption is proportionate to the time spent outside EU waters, not the distance travelled.

French authorities have now provided, effective November 1, 2020, the following rules for taxable persons to demonstrate the proportion of a vessel's use outside EU waters, for the purposes of calculating the VAT due.

The tax authority said: "For ships fitted with an automatic identification system in accordance with the technical and performance standards set out in Chapter V of the 1974 International Convention for the Safety of Life at Sea (SOLAS), the data recorded by this system are presumed probative and can only be called into question by the administration in the event of fraud relating to this system."

Alternative, "for ships which are not equipped with such an automatic identification system:

• for vessels with an overall length strictly less than 15 meters, the assessment may result from the terms of the rental contract or from the data recorded in the logbook if proof of the vessel's departure from the vessel is provided;
• for vessels whose overall length is equal to or greater than 15 meters, the assessment is carried out on the basis of any technical data making it possible to establish the actual time spent outside the territorial waters of France or of another member state of the European Union."

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