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50 shades of VAT

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June 2017

A yacht fails to comply with the 70% rule. Can she charter?

What happens if I don’t meet the 70% rule?
Yachts with LOA under 15m or for those which do not comply with the FCE, can still charter. They simply do not qualify for any exemptions and the owning company must operate as any other business.

This means that the owning company will pay VAT on the supplies or services it purchases from other businesses (input VAT) and charge VAT on the supplies or services it sells to clients or other businesses (output VAT).

The idea is that the VAT paid and the VAT charged roughly equals out. Every month the owning company must file a VAT return computing input and output VAT. If it has paid more input than output VAT, it can claim the difference back from the authorities in its VAT returns.

With regards to importation, the yacht can no longer benefit from the customs relief scheme in France. However, it can be re-imported and released into free circulation in the EU, including France, under an alternative customs relief scheme in another EU Member State. Typically, importation will entail, at least, movements of cash flows.