After long months of deliberation it has been confirmed that VAT will apply to yacht charters starting in France with effect from 15 July, 2013. The announcement was formally made yesterday evening, 25 June 2013, by the French Direction de la Législation Fiscale (DLF) through the issue of an official bulletin.

The decision brings an end to the French Commercial Exemption (FCE) rule previously applied to the charter of commercially registered yachts. Previously commercially operated yachts could be imported into France at a zero rate of VAT and for subsequent charter activities originating in French ports to be supplied without VAT being charged.

Now all charters commencing in French waters where the charter contracts are signed after 15 July will be subject to French VAT rate at 19.6 per cent, although it may be possible to benefit from a reduced effective rate as a result of fallback to existing French rules governing the VAT treatment of charter/lease activities through either fixed utilisation or actual utilisation.

The commercial yacht market and the FCE regime was challenged after France being taken to task at EU level and yesterday’s decision means France has fallen into line with EU VAT rules.

Reportedly French and EU Authorities are still discussing how to define ‘for international travel’ and ‘high seas’, which will undoubtedly be a long and drawn out process. In the meantime, the French will continue interpreting Article 262 as it stands and carry on with zero rating the supply of goods and services to commercial charter yachts. (Superyacht Business, 26 June 2013)
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