OVERSEAS YACHT CHARTER COMPANIES
Since July 15, 2013, foreign companies renting pleasure boats (under a yacht charter agreement) on the French coasts have to charge local VAT on the rental fees.
The previous VAT exemption situation
Until the summer 2013, rentals of pleasure boats were under certain conditions exempt from VAT in France. To qualify for the tax exemption, the ship had to fulfill the three following conditions:
- Be registered to trade on the maritime registers of a French or foreign administrative authority
- Be assigned exclusively to a commercial activity
- Having on board a permanent crew while sailing at sea and mooring at berth in ports
Firstly criticized by the European Commission, this favorable tax scheme has been condemned twice in the judgments of the European Court of Justice (ECJ, Case. No. C-116/10, Bacino Charter Company SA of December 22, 2010 and ECJ, Case. No. C-197/12 of March 21, 2013, Commission vs France).
A new VAT rule applicable since July 15, 2013
Since 15 July 2013, “the exemption does not apply to rental and charter operations consisting, for any consideration, to put a ship with or without crew, available to persons for the purpose of recreational journeys, including where this journey takes place on the high seas, and the renters do not use the ship for commercial activities. (…)
These rental and charter services for the purposes of recreational journeys are subject to VAT in accordance with tax rules applied to pleasure boats for private use”*.
It is worth mentioning that French VAT is systematically applied when the pleasure craft is made available to the client in a French port.
To be "made available in a French port" means that the client takes the physical and effective possession of the vessel in France and NOT the mere legal possession such as the signature of the Charter Agreement or the delivery of the keys.
Special case of foreign charter companies
In order to collect VAT on their rental operations in France, foreign companies will now have to register for VAT in France when their clients are private individuals or any other entity not having a VAT identification number in France.
The VAT registration process of Charter companies established in the European Union (including the Isle of Man, the Azores and Madeira Islands) and the periodic submission of tax returns derived therefrom, can be handled either directly by themselves or by appointing a tax agent. It is reminded that for companies outside of the European Union, the appointment of a tax representative established in France is mandatory.
Failure to comply with the new VAT obligations in France could result in tax penalties, especially in cases of random checks performed by the Customs agents on the French coasts.
*Source : BOI-TVA-CHAMP-30-30-30-10 n°115