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50 shades of VAT

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June 2017

The French Commercial Exemption

Benefits and compliance

To date, compliance with the terms of the French Commercial Exemption (FCE) enables EU and non-EU registered commercial yachts to purchase VAT exempt supplies and services in France.

The FCE also enables non-EU commercial yachts to be imported and released into free circulation in the EU under a specific customs relief scheme.

Up until 2015, to be compliant, yachts were required to be commercially registered, employ permanent crew and be used exclusively for commercial purposes, i.e. under a charter agreement (no private use by the beneficial owner was allowed).

However, Article 148 (a) of the Sixth Directive grants exemptions to “….. vessels used for navigation on the high seas and carrying passengers for reward or used for the purpose of commercial, industrial or fishing activities…”. Navigation “on the high seas” means in international waters beyond 12 nautical miles from the coastline.

The above three provisions were deemed inadequate by Brussels. So in 2015, the French tax agency added three further criteria.
The Bulletin Officiel des Finance Publiques-Impôts 05/2015 states that a yacht’s LOA must be over 15m and that 70% of trips during one calendar year must be outside French waters; a yacht must do more dynamic charters than static charters at the dock.

If compliant with the above, a yacht can benefit from the following advantages in France:

 
  • #   Non-EU yachts can be customs cleared without paying VAT upon importation into the EU
  • #   VAT-exempt fuel supplies
  • #   VAT exemption on supplies of goods and services (repairs or refit)