In July, we informed our readers about the new regulations imposing French VAT on yacht charters taking place in that country.
The new regulations will apply from 15 July 2013 to charter agreements for yachts for the purposes of leisure travel.
“The rate has been set at 19.6% and will increase to 20% on January 1, 2014. However, the taxable base can be reduced by 50% if the yacht is used outside European Union territorial waters, which by definition extend out 12 nautical miles from the coastline. Thus, if you started a charter in Nice, France, and cruised out beyond the 12 nm limit, and concluded the trip the next day in Sardinia, the tax would drop to 9.8%.”
Question # 2. Does it apply if the charter starts and ends outside France?
“No. The law reads VAT is applicable on the charter if the vessel is put, ‘…at the disposal of the charterer in French waters.'”
Question #3. Will charterers need to be involved with VAT registration and compliance in France?
“Not at all. It is the responsibility of the yacht owner to make the necessary arrangements to register his or her vessel with the French taxing authorities. As to the collection and processing of the tax, most owners are hiring local French-based fiscal agents.”
“As charter consultants, our responsibility is to clearly explain the new regulations to our clients. Many are repeat charterers who cruised multiple times in France in the past. For some, it will be a shock to hear their next Western Mediterranean yacht charter vacation may be subject to a tax of nearly 20%. We will work with them to modify their itineraries, in an effort to mitigate as much of the tax liability as possible.”
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