Firstly, since there has been some confusion about this, the amendments made in May 2015 do not affect VAT owed on charter fees. All yachts starting a charter in in France are subject to VAT paid on charter fees. However, this may be subject to a 50 per cent reduction in cost provided the vessel leaves EU waters during the course of the charter.
According to SOS, the regulatory changes only affect the French government’s stance on VAT payments – or the exemption thereof - due on the purchase of goods and supplies. In order to qualify for the tax exemption commercial yachts must comply with the three essential criteria that characterised in the original provisions of the ‘French Commercial Exemption.’ Additionally, 70 per cent of a commercial yachts’ ‘trips’ must be conducted outside French national waters.
A new trip, as outlined in BOFIP, occurs any time a guest embarks or disembarks the charter for good. Over the course of a single charter a vessel may be subject to a number of different trips as and when guests choose to come and go.
In order for a trip to contribute towards VAT exemption it must travel from French waters into international and/or foreign waters or begin and remain in international and/or foreign waters. If the yacht does not exit French territorial waters and/or the on board guest list and logbook are not accurately kept, the trip will be void in regards to VAT exemption.
Exemptions are granted on the basis of the previous assessment year. Commercial vessels wishing to be exempt for the year beginning January 1 2016 will be judged according to their 2015 January 1 to December 31 records. Exemptions last for a single calendar year and are subject to yearly reassessment.
If a yacht does not meet the criteria as set out above, the VAT paid by the yacht will be offset against VAT accrued (on most but not all items, like fuel) and the owning company may request the refund of the ensuing VAT credit.