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Same Ocean, New Rules
How the rules have changed
Yesterday the French Revenue Agency published the long-awaited bulletin on how VAT will be applied to charters starting from France and Monaco and cruising in EU and International Waters. The substance is essentially in line with what the industry anticipated.
Key points include:
1. The former ‘lump sum’ reduction scheme has been superseded by the current scheme which requires standard VAT (20%) to be paid on all charters starting from French and Monegasque waters.
2. The new VAT scheme will come into effect on the 30th March 2020. The old rules (providing for a 50% reduction on the charter fees subject to VAT) continue to apply to charter agreements executed before that date, i.e. up until March 29th included. The date of signature shall determine which scheme applies.
3. The time spent in international waters, rather than the distance traveled, will provide the basis for any VAT exemption. Under EU law, VAT can only be levied if a service - the charter, in this case - is delivered within the EU. Services performed outside the EU are VAT exempt. However, any VAT exemption only applies to the actual time spent outside EU waters and proof of navigation in International Waters is required, specifically the data recorded by the onboard Automatic Identification System (AIS).
4. Finally, the Revenue Agency has announced a public consultation process until March 1st, 2020 to collect feedback and comments from the industry.
What does this actually mean for charterers?
In actual fact, the majority of cruising occurs within EU waters and the portion of time spent in International Waters is almost always negligible.
Let’s take a 2-week Monaco to Monaco charter via Bonifacio and make a rough calculation. This involves two crossings in International Waters. At @10 kts each crossing will take approximately 6hrs. The impact of 12hrs in International waters on the overall charter time (334hrs) is less than 1%. Consequently, the financial benefits are miniscule. (Itinerary based on information from http://ports.com/sea-route/ ).
Have you any comments or queries? Let us know, we will be pleased to bring them up with the Revenue Agency before the March deadline. You can reach us at th@hv-yachting.com or + 33 643 91 98 60.
Key points include:
1. The former ‘lump sum’ reduction scheme has been superseded by the current scheme which requires standard VAT (20%) to be paid on all charters starting from French and Monegasque waters.
2. The new VAT scheme will come into effect on the 30th March 2020. The old rules (providing for a 50% reduction on the charter fees subject to VAT) continue to apply to charter agreements executed before that date, i.e. up until March 29th included. The date of signature shall determine which scheme applies.
3. The time spent in international waters, rather than the distance traveled, will provide the basis for any VAT exemption. Under EU law, VAT can only be levied if a service - the charter, in this case - is delivered within the EU. Services performed outside the EU are VAT exempt. However, any VAT exemption only applies to the actual time spent outside EU waters and proof of navigation in International Waters is required, specifically the data recorded by the onboard Automatic Identification System (AIS).
4. Finally, the Revenue Agency has announced a public consultation process until March 1st, 2020 to collect feedback and comments from the industry.
What does this actually mean for charterers?
In actual fact, the majority of cruising occurs within EU waters and the portion of time spent in International Waters is almost always negligible.
Let’s take a 2-week Monaco to Monaco charter via Bonifacio and make a rough calculation. This involves two crossings in International Waters. At @10 kts each crossing will take approximately 6hrs. The impact of 12hrs in International waters on the overall charter time (334hrs) is less than 1%. Consequently, the financial benefits are miniscule. (Itinerary based on information from http://ports.com/sea-route/ ).
Have you any comments or queries? Let us know, we will be pleased to bring them up with the Revenue Agency before the March deadline. You can reach us at th@hv-yachting.com or + 33 643 91 98 60.
