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In France (like most EU countries) fuel is subject to two taxes: VAT, which accounts for 20% of the final cost, and excise duty which accounts for approx. 50% of the cost per liter.
Current regulations provide that energy products supplied “for use as fuel for the purpose of sea navigation other than private pleasure vessels” are excise-duty exempt.
Charter yachts are almost always leased under a rental contract, which identifies the charterer as the final user of the yacht, and for pleasure rather than business purposes.
The 2010 ECJ ruling states that “the lessee of the vessel concerned must use it for an economic activity…..”. The meant that the conditions required for excise-duty exemption fail to be met by the majority of charter yachts.
To date, all FCE compliant yachts under a rental contract operating in French waters can purchase VAT exempt supplies, services and fuel, but not excise exempt fuel.
Duty-free fuel and the transport contract
As of 2017, there is an option for yachts wishing the purchase VAT and duty-exempt fuel. They can operate under a transport service contract.
Under a transport contract, the owner operates the yacht for a commercial purposes and offers a service to passengers rather than putting the yacht at the disposal of the charterer for recreational purposes. The owner, as service provider/carrier, complies with the ‘commercial purposes’ requirement. However, the contracts has limitations since it is intended for the transport of passengers rather than for charter.