The end of the VAT lump sum reduction in case of cruising into international waters

To apply the article 59 bis of the EU Directive 2006/112/CE, November 28th 2006, related to VAT, it has been decided that the French VAT lump sum reduction of 50% of the taxable base in case of cruising into international waters, due on charter contracts starting from France, must no longer be applied.

The French Tax Authorities specifies through the French Official Tax Bulletin published today, January 30th 2020, that the VAT lump sum reduction will be replaced by an effective reduction in proportion of the time spent outside European waters. The new regulation specifies that the French VAT will be due at its full rate, 20%, for the time spent into French waters or/and EU waters.

As a result, only the time spent outside French / EU waters will be VAT exempted.
The owning company will have to demonstrate by proper evidence the actual use and enjoyment of the service outside EU waters. The owning company remains liable.

How to demonstrate such a use and enjoyment?
• For yachts less than 15mt long, the time spent outside of EU waters can be proven using the charter contract itself or data recorded in the logbook.
• For yachts more than 15mt long, the time spent outside of EU waters can be proven with the AIS. Evidence provided by AIS compliant with the SOLAS (safety of life at sea) Convention cannot be challenged by Tax Authorities, such evidence is considered as a conclusive proof unless there is a fraud involving the system itself. If the vessel does not have an AIS system, the assessment will be done by any technical mean, any global positioning system.

ECPY succeed bringing the new rule into force from March 30th 2020, and is to be applied to charter contracts signed from this date. Evidence of signature such as payment of the 1st instalment would be needed.

Charter contracts signed after March 30th 2020 will be subject to the new rule.
SOS YACHTING will assist you step by step in order to be ready to start a new successful charter season in France. Feel free to contact our French operations manager Ms. Camille Penquerch at: [email protected].