THE END OF THE FRENCH COMMERCIAL EXEMPTION
Many yachting professionals were expecting to have a “relaxed” summer season. It seems that France has decided differently.
The long-awaited decision has now been published.
The French Fiscal Authorities have indeed finally published on 25 June, after several months of rumours and indecision, a “Bulletin Officiel des Finances Publiques” which puts an end to so called “French Commercial Exemption”. With the view to comply with the ECJ Bacino ruling, and with effect from 15 July, all Charters starting in French waters will be subject to VAT at the full rate of 19.6%. All Charters signed before shall still benefit though from the prior exemption regime.
Nevertheless and on the basis of art 59 of EC Directive 2006/112 - which governs the use and enjoyment rules for yachts capable of travelling in international waters and which applied so far to French Leasing Schemes- and on the basis of art 259 A 1 of the French Tax Code and art I-A-2 & 90 of the « Bulletin Officiel des Finances Publiques » published on 12 September 2012 - Charter Companies that make international voyages could either opt for the prorata temporis basis regime, if they can determine the time they spend inside and outside of internal waters or otherwise from an allowance of 50% on the taxable basis, leaving an effective VAT rate of 9.8%. This rate could be soon increased to 10% if the predicted increase in the standard VAT rate from 19.6 to 20% takes place.
Following this announcement, it now becomes urgent for all Charter Companies with yachts commencing charters in France and/or Monaco to register for VAT or to appoint a fiscal representative in either country.
What remains unclear is how the new rule will be applied in practice. It will be necessary to wait for clarification on a few aspects, in particular how the French Authorities will interpret “International voyages” and “high seas”, how long the yachts shall stay in International waters, will the allowance be granted on an annual basis if the majority of the charters pass through International waters, and if so what will be the proportion required or for each charter? We still have a long path in front of us…
What seems clear is that French Authorities do not wish to amend for the time being the VAT exemption applicable on supply of goods and services provided to commercially registered and operated yachts. APA shall not be affected as well as they will fall under the disbursement regime on the condition that all invoices are issued in the name of the Charterer.
ITALIAN VAT ON CHARTERS STARTING IN ITALY
Italy is also expected to increase its VAT rate from 21% to 22%. This is due to happen on 1 July but might be delayed until October 2013 or beyond due to political disagreements.
Please contact us should you require assistance with registration or payment of these taxes on charters in France, Monaco, Italy or Spain.
Monoeci Management SAM will be providing occasional news updates to the yachting industry throughout the year.
For further information contact Janet Xanthopoulos by e-mail: firstname.lastname@example.org
For more information on our yachting services please visit our website at www.monoeci.com