An official bulletin of the French Administration (01/27/2020) has just amended certain VAT rules applicable to the yachting sector, which will enter into force from 30 March 2020.
The European Commission has recently questioned certain national tax provisions affecting the VAT arrangements for the leasing of recreational craft. Five countries are involved to varying degrees: Cyprus, Greece, Italy, Malta, France and by extension the Principality of Monaco.
The hire of a boat for the purpose of pleasure travel, to a person, whether liable or not, shall be taxable in France or Monaco, provided that the boat has actually been made available to that person in France or Monaco.
Whatever the duration of the contract, the rents are then in principle fully taxable in France.
By way of derogation, and in order to avoid any risk of double taxation or distortion of competition, with regard to article 259 A, 1° and 1° bis of the French CGI/ article 12 of the Monegasque Tax Code, it is specified that the rental of a means of transport used partly in France or Monaco (and, If the lessor uses the asset in another Member State of the EC (if applicable, in another Member State of the EC) and partly outside the EC, the lessor is taxable only on that part of the rental price which corresponds to the use of the asset in the EC, provided that the lessor provides proof of such use.
a. Before March 30, 2020
In the event of difficulties, the lessors of pleasure craft may determine on a flat-rate basis the time spent outside Community or French territorial waters by applying a 50% reduction to the total rental time, regardless of the category of the vessel (Inst. 3 A-1-05), it being specified that, when the vessel has its deed of francization, this reduction may be used by the lessor without it being necessary for it to provide proof of the use of the leased property outside territorial waters (Rép. Giran: AN 1-6-2004 p. 4028 No. 15895; Rep. Giran: AN 19-4-2005 p. 4067 n° 59015).
b. From 30 March 2020
The share of the rentals corresponding to the proportion of the duration of use or actual operation of the vessel outside French/Monegasque territorial waters or another Member State of the European Union will always benefit from the VAT exemption.
However, this proportion will be assessed by the taxpayer under his responsibility and subject to the administration's right of control (Article 59a(a) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax). And this assessment will have to be corroborated by any means of evidence.
These provisions shall apply to ship rental and chartering contracts concluded as from 30 March 2020.