Last Friday, the French tax authorities announced the end of their VAT lump sum reduction, publishing a new tax bulletin with retroactive effect from 1st November 2020.
The French VAT lump sum reduction is now replaced by a reduction in proportion to the time spent outside of EU waters with this time only being VAT exempted. The owning company of the vessel needs to demonstrate, by proper evidence, the actual use and enjoyment of the service outside of EU waters.
This means only charter contracts signed prior to 1st November 2020 can benefit from the lump sum reduction of 50% of the taxable base in case of cruising outside of EU waters.
The owning company can still benefit from a VAT exemption in France under the French Commercial Exemption (FCE). One of the conditions of the FCE is that the vessel must perform at least 70% of trips outside of French waters; this 70% rule should not be mistaken with the French VAT due on charter contracts.
Döhle Yachts’ Nikki Quinn commented, “French tax authorities have been very quiet on this topic over the past few months, so even though some changes were expected, no one was expecting these now and certainly not with retroactive effect. There are still a lot of questions regarding FCE operations that will need to be clarified with French customs and tax authorities, now that the lump sum reduction regime is over.”
We will be monitoring the developments closely. For further information on our wider Yacht Finance and Administration services, please visit https://www.dohle-yachts.com/service/corporate/.
