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2020 viewed as anomalous for commercial exemption in France

An update for superyachts in France concerned about the French Commercial Exemption's 70 per cent of trips rule…

In response to threatened sanctions imposed by the European Commission, the French government amended the criteria for benefitting from a VAT exemption for the supply of good and services concerning the commercial operation of superyachts. In order to qualify for the tax exemption commercial yachts must comply with the three essential criteria that were outlined in the original provisions of the French Commercial Exemption, furthermore 70 per cent of a commercial yachts ‘trips’ must be conducted outside of French national waters. However, in light of the COVID-19 pandemic and the resultant lack of activity, there have been concerns about commercial vessels’ ability to claim exemptions in 2021.

“Following long discussions and struggles led by ECPY, the French tax authorities have informed us that, in 2020, for yachts that have not been able to operate commercially (charters or transport contracts) the following would apply. The year 2020 will not be taken into consideration to assess the 70 per cent rule condition. In 2021, these yachts will need to fill out a provisional commercial activity statement to keep the benefit of the French Commercial Exemption alive,” explains the ECPY.

The provisional commercial activity statement entails a stringent obligation to comply with the 70 per cent rules before the end of the year concerned. In other words, those yachts filing a provisional commercial activity statement in 2021 will need to be compliant with the 70 per cent rules before 31 December 2021. In the event that the vessel fails to do this, the VAT will be potentially readjusted on the value of the yacht and on the good and services purchased within the scope of her commercial activity.

While for a number of superyachts, 2020 may have seen a complete lack of commercial activity there has been a further concern on the part of those vessels that have operated a limited number of commercial voyages. However, the French authorities have confirmed that those yachts will be treated as vessels that have not performed any charter or commercial operation in 2020 and, as a result, they will be subject to the same aforementioned requirements as those vessels that have not been active at all.

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2020 viewed as anomalous for commercial exemption in France

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