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French MEP Bemoans Pleasure Yachting VAT Competition

by Ulrika Lomas, Tax-News.com, Brussels

23 September 2013


French Member of European Parliament Gaston Franco has called for a long-term solution to the VAT treatment of pleasure yachting in the Mediterranean region, noting fierce tax competition between member states.

Franco recalled that, based on a November 2012 request from the European Commission, France was compelled to revoke its VAT exemption for recreational yacht charters on July 15, 2013, instead installing a 9.8 percent VAT rate. He highlighted that this new rate places France at a competitive disadvantage to Italy where a 6.6 percent VAT rate applies.

In a written submission to the European Parliament, Franco stated: "However difficult to justify the granting of a VAT exemption to firms operating in this sector may have been, the current disparity in rates is even more so because it is distorting competition and resulting in nautical business moving away from France's coasts."

"Corsica, for instance, is a leading center for such business, with 20 percent of the world's recreational fleet congregating around its coasts during the summer months. In view of the island's high levels of unemployment and many geographical handicaps, it is vitally important to protect local manufacturing and tourism-related businesses."

Franco has called for a lasting solution to VAT competition between European state through a review of EU VAT law. In three questions to parliament, he asked whether the European Union would allow an exemption for the sector, reversing its November 2012 position; consider the possibility for the introduction of a special VAT regime for large recreational craft; and called for debate on whether Europe should harmonize the VAT treatment of the sector in the Mediterranean region to remove distortions to competition.

Article 148 of the VAT Directive allows member states to offer a VAT exemption for certain transactions concerning vessels. However, this exemption does not apply to luxury boats used by individuals for recreational purposes. This was confirmed by the European Court of Justice in a case in December 2010, involving Bacino Charter Company SA. The court determined that a VAT exemption may only be granted in circumstances where a vessel is chartered for use on the high seas, for the purposes of commercial, industrial or fishing activities, but not recreational purposes.

The changes to the French regime, set out in publication BOI-VAT-FIELD-30-30-30-10-20130625, revoked the exempt treatment of chartering arrangements in circumstances other than those aforementioned.

TAGS: individuals | court | compliance | VAT rates | tax | business | marine | European Commission | value added tax (VAT) | law | manufacturing | unemployment | France | Italy | VAT case law | VAT compliance matters | Europe

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