From the 30th March 2020, the way in which French VAT is calculated on yacht charter activities will change.
Previously, VAT was due and payable on yacht charters starting in French waters based on a lump sum reduction of 50% of the taxable amount. However, there are two major changes to the current VAT laws in France that owners will need to be aware of;
- The lump sum reduction rule has been cancelled.
- There will be no further concessions.
The new law means that, as of 31 March 2020, VAT at the full rate of 20% will apply to all yacht charters starting in France. The French Tax Authority has been quite clear in their recent notice regarding the VAT rule changes, unequivocally stating that it is a time-based rule, not a distance rule.
On this basis, it is not how far you travel but how long you spend outside EU waters, which will form the basis of the VAT calculation. Therefore, VAT will now be charged at the full VAT rate (20%) for the time the yacht is in EU waters with no VAT applicable while it is in international waters or non-EU waters.
For yachts over 15m in length, the time spent in/out of EU waters will be determined using the Automatic Identification System (‘AIS’). Evidence provided by the AIS, which is compliant with SOLAS, cannot be challenged by the French Tax Authority and therefore will be considered conclusive proof for the time a vessel has spent outside of EU waters. If a vessel does not have AIS then assessments can be made using alternative technical means, such as GPS.
For more information,or if you would like to discuss how the changes may affect the operation of your vessel, please email yachts@sentieninternational.com.
