On November 29, Thierry Voisin, president of ECPY, met with the Directorate of Tax Legislation (DLF) to discuss VAT reductions on superyacht charters. DLF officers informed ECPY that the application of current VAT reductions on charters as practised in Italy, France, Malta, Cyprus and Greece would no longer be applicable in 2020. In other words, merely cruising into international waters and benefitting from a lump sum reduction in VAT will no longer be possible. In 2020, the only possible reductions in VAT will be granted on a pro rata basis. However, quite how these reductions will be implemented remains a mystery.
The European Commission (EC) has requested that the aforementioned countries modify their practices in order to apply the principle of ratio from 1 January 2020. It is hoped that the new principles will be applied under the same terms and at the same time in each country, providing the market, one hopes, with a greater degree of uniformity.
Negotiations between the ECPY and the authorities are ongoing and the following questions levied are yet to be answered. How will the pro rata calculation be generated, on a time or distance basis? Will short-term charter contracts that have been signed and paid for before the publication of the new rules benefit from the previous flat rate reduction? Will short-term contracts that have been signed and paid within three months of the publication of the law benefit from the previous flat rate tax reduction scheme?
The ECPY received verbal assurance that the changes will be applied to all countries in the European Union in the same way.
“For the time all we 100 per cent sure about is that the rules concerning VAT on charters will be changed in 2020 and will apply proportionality. In my opinion, we will have answer to the above questions in January,” explains Voisin, in an exclusive conversation with SuperyachtNews. “The big question is, will it be determined by time or mileage? So far as we can tell, mileage refers to transport and time refers to rental. It seems likely then, that it will be determined by the latter.”
With the January deadline imminent, it seems utterly absurd that there has been no clarification on exactly how this new VAT system is to work. That being said, January is not a particularly busy charter period for the superyacht industry in Europe.
Voisin expects confirmation to be provided between 25 December and 1 January; let us hope that the change in law does not disrupt the 2020 charter season in Europe.
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