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VAT exemptions for charters starting in Martinique and Guadalupe

The French government has passed legislation allowing VAT exemptions for chartered superyachts in the Caribbean…

The French government has officially passed legislation that exempts superyachts chartered from Martinique and Guadalupe from paying VAT, provided the yacht is more than 24m long, is less than 3,000GT and travels beyond French territorial waters.

The system that is now applied to Martinique and Guadalupe is akin to that previously applied in France before the fallout from the Bacino Charter case (2010) forced the French government’s hand in 2013.

“Since the Bacino Charter case, there has been an obligation to tax short-term charters at the destination where the vessel is put at the disposal of the client,” starts Jean-Philippe Maslin, senior associate at Ince & Co. “This is why the French government introduced a 20 per cent taxation on charters with a possible reduction to 10 per cent when you travel outside of EU territorial waters.”

In the 2010 Bacino Charter case, the EU ruled that charter exemption cannot be applied to yachts used for recreation even if registered as a commercial vessel.

“The Bacino case, however, is based on an interpretation of the VAT Directive, but the VAT Directive does not apply to France’s overseas territories, which are Martinique and Guadalupe. The French government has introduced his new exemption as part of the finance law for 2019,” continues Maslin. “The activities of the hire of pleasure vessels in these territories are subject to a lot of competition from other neighbouring states and countries that do not tax such hired pleasure yachts. So, the French government wanted to re-establish a level playing field and ensure that competition is fair for the charter of these vessels.”

As well as ensuring that Martinique and Guadalupe are able to compete with neighbouring jurisdictions for charter business, the exemption will also greatly simplify charter operations from the two regions, where previously Martinique and Guadalupe had been considered problem spots for the charter market.

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VAT exemptions for charters starting in Martinique and Guadalupe

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