The reverse charge mechanism on charters
Referring to the following article:
Article 194 of the Directive 2006/112/EC
- When taxable delivery of goods or provision of service is made by a taxable person who is not established in the Member State in which the VAT is due, Member States may provide that the person liable for the tax is the recipient of the delivery of goods or the provision of services.
- Member States shall determine the conditions of application of paragraph 1.
France has opted to apply the principle of the reverse charge mechanism when a foreign company, who is not established in France, carries out taxable operations in France (Article 283-1 of the French Tax Code).
In this case, the VAT is payable by the charterer who is identified for VAT purposes in France.
Taking into account that:
- The owning company is not established in France,
- The charterer is VAT-registered in France,
- The charter departs from France.
In this case, the charter contract must be drafted excluding VAT.
Remember that, in order to ensure full compliance, the correct wording must appear on the contract:
“Reverse charge by the lessee, Article 283-1 of the French Tax Code.”
Be careful: if a charter contract is incorrectly drafted (with VAT), it will be mandatory to proceed with the amendments and the reimbursement of the VAT amount paid by the charterer.
