The cost to rent a private yacht in the fabled south of France is about to go up. The impact on the economy has some in the charter industry concerned.
In late November 2012, a European Union commission stated that the VAT exemption on chartering yachts in France is not compliant with EU VAT rules. France will now be required to take steps to remove the exemption from its tax legislation within two months, a ruling prompting one tax expert to say that France, “…cannot be regarded as a paradise for yachts anymore.”
COMPANY PRESIDENT COMMENTS
Yachts in Cannes France
Jana Sheeder, President of 1-800 Yacht Charters explains how clients have escaped the VAT in France, until now.
“The rules for chartering yachts in the European Union changed back in 2010. Basically, chartering a yacht for less than 90 days requires VAT to be paid in the country where the chartered trip departs. France was able to avoid this ruling for many yachts by claiming that vessels registered as ‘commercial’ yachts could remain VAT exempt. To save thousands of Euros in tax-related expenses, we would only promote commercial yachts to our clients considering a cruise in France. Unfortunately, that option appears to be ending.”
For the moment, France does not have a system in place to check and enforce the new rules. French tax experts believe the new charter tax will be up and running by summer 2013. Consequences for non-compliance may go from large penalties to even seizing the yacht.
WAIT FOR SUMMER
Sheeder is less certain the new rules will be in effect by the summer.
“The process might be delayed by political lobbyists who represent the interests of the vast French yachting sector, ” says Sheeder. “The French government will be pressured to find a way to prevent a massive exodus of yachts from French ports to other destinations with more favorable tax environments.”
Whether or not the new tax rule is delayed, Sheeder and her team are taking a proactive approach. “We will begin notifying our clients in the coming weeks to prepare for a potential increase in the total cost of their yachting vacations in French waters. Additionally, we are investigating other countries in the European Union as alternative Mediterranean yacht charter destinations. Gibraltar, for example, has no import duty for yachts over 18 meters – and no VAT.”
Sheeder concludes, “If there is a way to save our clients money – we will find it.”