IMPORTANT: COMMERCIAL VESSELS VAT EXEMPTION · Vessels need to remain registered as Commercial in order to benefit from VAT exemption. The new administrative instruction reads that

IMPORTANT: COMMERCIAL VESSELS VAT EXEMPTION

Modifications of the exemption conditions as of May 12th, 2015

Following clarifications received from the Tax Authorities This guide replaces the previous newsletter sent in this matter.

To benefit from the VAT exemptions in France, a yacht shall have to fulfill the five following criteria:

Already existing criteria :· to be registered as a commercial vessel · to be crewed permanently · to be assigned to a commercial activity exclusivelyNew criteria :· to have a length overall equal or superior to 15 meters (49ft) · to carry out at least 70% of the sailing outside French territorial waters.

We will finish 2015 with the former 3 criteria. However, in 2016, vessels will continue to benefit or not from the VAT exemption according to the sailing percentage carried out in 2015.

The criterion “70% sailing outside

French territorial waters” is to be

understood as follows :

• A trip/journey is considered as any navigation carried out under charter agreement between two ports with either embarking or disembarking passengers.

• The yearly activity of one vessel is the sum of all completed trips/journeys.

• Non commercial trips/journeys do not count, such as : • Sea trials ;• Navigations towards a shipyard, a boat show,

repositioning voyage etc.

• A charter contract is considered “one trip/journey” if there is no movement of passengers in any of the way ports

• The main activity of the yacht should be dynamic charters: the overall # of static charters VS the # of dynamic charters over one year cannot be more (the # of contracts is here the reference and not # of trips).

• A trip or journey is assumed valid for the “70%” if part of it is carried out outside the French Territorial waters.

• Meeting “70% of the navigation outside French territorial waters” criterion allows vessels to benefit from the exemptions provided by Article 262-II (i.e. VAT exemption on repairs, provisioning, etc.).

• Do not confuse the 70% criterion (for the “commercial status” of the yacht) with the 50% (for the taxation of charters departing from France) !

Charter hired for recreational purposes remain taxable in the same conditions : FR VAT at 20% on 100 %, or 50% of the taxable base for charters sailing in international waters.

• For new owners or newly registered commercial vessels only starting their commercial activity during 2016, it will be possible to benefit immediately from the VAT exemption.

A statement issued by the vessel operator that the said vessel will meet all the conditions during the ongoing year will be required.

The owning company will have to settle the VAT due if the five conditions are not meet.

Following is a translation of the statement to be

provided any French Suppliers when seeking VAT

except goods/services

This statement will need to be provided to the

suppliers in addition to the currently asked

documents: Certificate of registry, Crew list, Charter

contract…

TO BE PRINTED ON THE LETTERHEAD PAPER OF THE VESSEL OPERATOR

Attestation of compliance with the conditions for the application of VAT exemptions on transactions relating to certain vessels provided by 2°, 3°, 6° and 7° of II of the article 262 du French Tax Code .

I, the undersigned, (name, quality), certifies that the vessel (Full name , registration) cumulatively fulfills the conditions for application of VAT exemptions provided by 2°, 3°, 6°and 7° of II of the article 262 du French Tax Code :

The vessel is on a commercial registerThe vessel has a permanent crewThe vessel is dedicated to commercial activityThe vessel is at least 15 meter longThe vessels exits French Territorial waters at least for 70% of her trips

Failure to comply with any of the above conditions constitutes a change of assignment of the vessel, as per Article 257 2° III of the French Tax Code shall result in a regularization of the VAT that should have been paid otherwise.

Signed at (place of signature)On (date of signature) Signature

Calculation :Example 1 : Out of 20 trips carried out in 2015, 14 or more are sailed partially or totally outside French waters → the condition is fulfilled as the percentage is 70% or more.

Example 2 : Out of 9 trips carried out in 2015, 6 are sailed partially or totally outside French waters → the condition is NOT fulfilled as the percentage is 66%.

• The percentage is reached under the responsibility of the vessel operator and must be proved by all means, such as the log book or the information provided by any of the navigation systems (i.e. GPS, AIS) .

This symbol stands for movement of passengers (i.e new guest embarking or disembarking definitively)

• “F.T.W” is the acronym for “French Territorial Waters” F.T.W” includes Monegasque waters for this purpose

IN

IN

OUT

OUT

OUT

IN

Charter: Static charter Itinerary: Static charter Movements of passengers: Yes but in the same port

How many trip(s) does this charter includes : 0How many trip(s) valid for the 70% = 0

Charter: One charter from A to B Itinerary: The route from A to B remains in “F.T.W” Movements of passengers: Yes, in both ports

How many trip(s) does this charter includes : 1 How many trip(s) valid for the 70% = 0

Charter: One charter from A to C Itinerary: The route from A to B to C remains in “F.T.W” Movements of passengers: Yes, in all tree ports


Charter: One charter from A to B Itinerary: The route from A to B exits the “F.T.W” Movements of passengers: Yes, in both ports


Charter : One charter from France A to Italy B Itinerary: The route from A to B exits the “F.T.W” Movements of passengers: In Port A and Port B


Charter : One charter from A to CItinerary: The route from A to B does not exit the “F.T.W”

The route from B to C exits the “F.T.W” Movements of passengers: In port A and C


Charter : One charter from A to CItinerary: The route from A to B does not exit the “F.T.W”

The route from B to C exits the “F.T.W” Movements of passengers: In port A and C


Charter : One charter from A to BItinerary: Charter starting in Italy, Port A, ending in Italy, Port B

The route from A to B is out of the “F.T.W” Movements of passengers: In Ports A and B


Charter : One charter from Italy A to Italy CItinerary: The route from A to B is out of the “F.T.W”

The route from B to C is out of the “F.T.W” Movements of passengers: In Ports A , B and C


Charter : One charter from Montenegro A to France EItinerary: The route from A to B is out of the “F.T.W”

The route from B to C is out of the “F.T.W” The route from C to D is out of the “F.T.W” => The vessel sails into international waters

Movements of passengers: In Ports A, C, D and E How many trip(s) does this charter includes : 3How many trip(s) valid for the 70% = 3

Charter : One charter from Saint Lucia A to Barbados BItinerary: The route from A to B is out of the French Territorial WatersMovements of passengers: In Ports A and B


Vessels need to remain registered as Commercial in order to benefit from VAT exemption.

The new administrative instruction reads that a Commercial vessel switching to Private registry (even outside the F.T.W) and returning in France as such, would not be able to benefit from the F.C.E should it again switch back onto the Commercial registry.

It is understood that if the vessel switches to Private register while outside the “F.T.W” and returns in the “F.T.W” as Commercial, it would be accepted.*

* Further clarification is expected for the above from the relevant authorities.

Change of status(Commercial ↔Private↔ Commercial)

In the meantime, please feel free to contact us for any further information

Christopher Pousse [email protected]+33(0)4 93 72 53 33

We will keep on updating you with any further clarification issued.

Documents

IMPORTANT: COMMERCIAL VESSELS VAT EXEMPTION · Vessels need to remain registered as Commercial in order to benefit from VAT exemption. The new administrative instruction reads that