Changes may occur very soon in Europe concerning the current reduced VAT lump sum taxable base on charter contracts.
The EU Commission’s goal is to harmonize rules abolishing the laws currently in place in Italy, France, Malta and Cyprus for the reduction of VAT on the taxable base for charter contracts and apply the general criteria contained in articles 56 and 59a of the EU VAT Directive 2006/112/CE.
We point out that the intention of the EU Commission is to allow for the future, a reduction of VAT on charters only on an actual calculation method in accordance with the provisions of article 59a:
“In order to prevent double taxation, non-taxation or distortion of competition, Member States may, with regard to services the place of supply of which is governed by Articles 44, 45, 56 and 59:
(a) consider the place of supply of any or all of those services, if situated within their territory, as being situated outside the Community if the effective use and enjoyment of the services takes place outside the Community;
(b) consider the place of supply of any or all of those services, if situated outside the Community, as being situated within their territory if the effective use and enjoyment of the services takes place within their territory.
However, this provision shall not apply to the electronically supplied services where those services are rendered to non-taxable persons not established within the Community”.
The Italian Ministry of Economics and Finance (MEF) and the French Authorities are working with the EU Commission in order to outline new guidelines to be put in place in 2020.
Our VAT Experts in each Country are involved with the Authorities in the discussion to get information and instructions before the end of 2019 and we’ll keep you updated about any news that will come in the next weeks.
It seems that the direction of the discussion goes to the application of a possible pro rata reduction for cruising outside of European waters according to the time or to the cruising miles spent in International waters as per above mentioned article 59a.
We are aware of the charter market’s need of receiving responses and guidance in order to plan the next charter season in the Med putting owners and charterers in a safe position therefore we still recommend to the charter industry to put in place a Security Deposit and/or clarify in writing on the contract that VAT regulation may change and a difference of VAT should be due by the charterer on the contract in 2020.
SOS Yachting group will keep you updated on developments in the forthcoming weeks.
