Dissecting the complexities of French VAT on yacht charters

Chartering a yacht in the South of France is enjoyed by many each summer, and it is often what people longingly look forward to. However, understanding the different VAT rates that are applicable can often be a challenge to get your head around. We have broken down the different contract options, and the consequential VAT rate, that can be applied to your  yacht charter this summer.

There are currently two main contracts available in the yachting industry for charters starting in France & Monaco; the Charter Agreement and the Transport/Cruising Contract. The VAT applicable on charters depends on which contract is used, but there are other factors to consider when choosing a charter contract, such as use of the vessel and where the contract can be used.

We have dissected the different rates and the different benefits of using each contract below.

When choosing to use the Charter Agreement

The Charter Agreement is a contract where a charterer has full use the vessel and its staff as he/she wishes, within the limits of the Agreement. The Charter Agreement is the most widely used contract throughout the Mediterranean, and is recognised internationally.

VAT rate:

• 20% VAT for charters starting in France/Monaco and travelling within EU waters. (This is exemplified in red by Trip 1 & 3 in the map above)

Other benefits:

• Charters are exempt from French VAT only for the period of the charter outside EU waters. (This is shown in green in Trip 2 in the map above. 0% VAT is applied to the period of the charter in international waters (12nm offshore))
• The Charter Agreement can be used for static/quayside charters, whereas the Transport/Cruising Contract cannot.
• No defined itinerary is required within the contract, whereas this is a requirement of the Transport/Cruising Contract.
• The Charter Agreement is widely used in the Mediterranean and recognised internationally.

When choosing to use the Transport/Cruising Contract

The Transport/Cruising Contract can only be used for charters starting in France and Monaco, where the client is a “passenger” but still has exclusive use of the yacht. To use this contract, a seagoing itinerary with a fixed price (including fuel) must be defined, although the itinerary can be modified during the charter. The requirement to have a planned, seagoing itinerary means this contract cannot be used for static/quayside charters as there is no actual transport of passengers.

VAT rate:

• 10% VAT for trips travelling within French national waters. (This is represented in blue in Trip 1 in the map above)
• 2.1% VAT for trips travelling in French national waters around Corsica. 2.1% VAT is also applied to the proportion of a trip in French national waters around Corsica (This is represented by the orange section of Trip 2 in the map above)
• 0% VAT for international voyage(+ 12nm offshore) with a real stopover outside France has to be made. You must provide an invoice proving the stopover is needed: fuel, port, provisioning, etc. (This is shown in Green in Trip 3 in the map above)

Other benefits:

• Charters travelling into international waters are exempt from VAT only for the period of the charter outside French waters. (This is shown in green in Trip 2 in the map above. 0% VAT is applied to the period of the charter in international waters (12nm offshore))

A benefit of using the Transport/Cruising Contract is that fuel can be exempt from different taxes. For this there are two scenarios:

• When a yacht is non-compliant with the French Commercial Exemption (FCE), fuel is exempt from duty tax (known as TICPE)
• When a yacht is compliant with the French Commercial Exemption (FCE), fuel is also exempt from VAT.

Other VAT rates across the Mediterranean

While you’re here we thought we could refresh you on the VAT rates due on yacht charters across the rest of the Mediterranean.

The VAT rate due on a yacht charter is applied in relation to what country the charter starts in. For example, a 40m yacht charter starting in Italy will be subject to 22% Italian VAT.

To make things a bit more complicated, charters starting in a Non-EU country (such as Montenegro), and then travelling into EU waters (such as Croatia), may be charged local VAT on a pro rata basis (13% Croatian VAT charged on the number of days spent in Croatian waters).

ITALY

VAT rate:

• 22% VAT for all charters starting in Italian waters and cruising within EU territorial waters
• 22% VAT is due on the number of days spent in Italian territorial waters and fuel consumed on these same days for charters starting outside the EU and entering Italy.

Other benefits:

• If charters starting in Italy travel outside EU territorial waters, they are exempt from Italian VAT only for the period of the charter outside EU waters. They may still be subject to VAT in the country travelled to.

MALTA

VAT rate:

• 18% VAT on short term charters regardless of the flag of the yacht.

SPAIN (including the Balearics)

Spanish VAT is due on the entire charter fee, including the delivery/re-delivery fee if it’s included in the contract.

VAT rate:

• 21% VAT for charters starting in Spanish waters
• For charters starting outside EU waters and travelling into Spanish waters, 21% VAT is applied to the number of days spent in Spanish territorial waters.

CROATIA

VAT rate:

• 13% VAT for charters starting in Croatian waters
• For charters starting outside EU waters and travelling into Croatian waters, 13% VAT is applied to the number of days spent in Croatian territorial waters.

GREECE

All yachts starting charters in Greece must have a Greek charter licence. A commercial yacht that does not have a Greek charter licence must start and end charters outside of Greece.

VAT rates (dependent on the yacht registry):

• 6% VAT for yachts with a certificate of International voyage
• 12% VAT for yachts with a certificate of Long Range voyage within Greece (including Turkey)

TURKEY

VAT rate:

• 18% VAT for Turkish flagged yachts
• Non-Turkish flagged yachts may cruise and charter in Turkey without any limitation by paying L.O.A X35 Euro plus the Check in and Out fees depending on the Net and Gross Ton and L.O.A values of the boat per Charter.

MONTENEGRO

VAT rate:

• 0% VAT for charters starting in Montenegro.