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Purchasing VAT exempt supplies and services in France
How to comply with the FCE in 2017
Let’s recap. In order to benefit from the terms of the FCE:
1 The yacht must be registered as commercial
2 The yacht owning company must employ permanent crew on board
3 The yacht must be used exclusively for commercial purposes (under charter agreement or a transport service contract); no switching to private use in the EU
4 The yacht’s LOA must be over 15m
5 The yacht must do more dynamic charters than static charters at the dock
6 During each calendar year 70% of cruising trips must be outside French waters
Provisions from 1 to 4 are purely administrative requirements.
Provisions 5 and 6 relate to charter itineraries. For instance, if you only charter during the Monaco GP you will not qualify since a GP charter is considered static. The 70% rule is more complex.
The “70% rule”
The Bulletin Officiel des Finance Publiques-Impôts 05/2015 states that “…..During each calendar year 70% of cruising trips must be outside French waters”.
So, what is a trip?
The Bulletin defines it as: “a segment of a charter identified by guests embarking/ disembarking during the charter. If no guests disembark/embark, the charter includes only one trip”.
What is a qualifying trip?
A qualifying trip must take place either outside French territorial waters (both in EU and/or non-EU waters) or cruise in international or non-French territorial waters if it starts or ends in France or Monaco. A trip must include navigation. Charters “at the dock” do not generate any trips.
How to compute your trips
To compute your yearly number of trips you must divide the number of international trips by the total number of trips (national + international) and multiply the result by 100 (since we are talking percentages).
Number of international trips
(------------------------------- = X) = X
Total number of trips
If X equals 0.7 or over (i.e. 70%) you will continue to benefit from the VAT exemption.
Let’s make an example. During the calendar year (from 1 January to 31st of December 2017) you have done 8 charters which include 39 trips. Of these, 28 are international.
(------------) x 100 = 0.71
The result equals 71% so you qualify.
The charter starts in St Florent where guests embark and ends in San Remo where all guests disembark. Guests also embark/disembark in Calvi, St Tropez, Monaco and San Remo. The charter includes four trips.
The first trip from St Florent to Calvi, is a domestic trip since it only includes French waters.
The second trip from Calvi to St Tropez includes international waters.
The third trip from St Tropez to Monaco also includes international waters (“touch and go” is permitted in France but the itinerary must be logged in the log book), while the fourth trip from Monaco to San Remo includes Italian waters.