The French Official Tax Bulletin issued a statement on November 6 announcing the end of the lump sum reduction VAT (Value Added Tax) scheme with retroactive effect, starting from November 1.
Following in the footsteps of Italy, France has now announced a replacement to the lump-sum reduction scheme for tax on yacht charter in France.
The replacement scheme will enforce effective VAT reductions in proportion to the time spent outside EU waters, meaning that only time spent in international waters will be exempt of VAT.
The new regulations will not affect charter contracts signed prior to November 1, regardless of the date of the charter. These yacht charters can still benefit from a 50% reduction of the taxable base provided all terms are met.
Yachting legal firm SOS Yachting has been quick to point out that the 70% French Commerical Exemption (FCE) still applies. “As a reminder, the owning company can benefit from a VAT exemption in France under the [FCE].
“One of the conditions of the FCE is to perform at least 70% trips outside of French waters. The 70% rule shall not be mistaken with the French VAT due on charter contract.”