Taxation, VAT and fees for chartering yachts in the Mediterranean
Although there are Community rules, the conditions for chartering yachts (pleasure or commercial) and transporting passengers depend primarily on the regulations specific to each Member State of the European Union. France, Monaco, Italy, Spain, Croatia… each one has its own doctrine and a well-defined VAT tax regime for renting a yacht.
Chartering a vessel with a crew (charter) Community rules
Does your client wish to organize crewed vessels rentals (charter) in the Mediterranean?
The rule applicable to pleasure yacht rentals is that of short-term rentals (less than 90 days). A Community regulation that also requires the yacht owners to pay VAT in the place where the means of sea transport is made available for use.
Most charter contracts leave the costs to the charter, in addition to the cost of the rental. These expenses are listed on a statement of expenses called “APA – Advance Provisioning Allowance”. Depending on the Member State, APA is subject to different taxation rules.
What does “place made available” mean for a pleasure boat? This is the place from which the lessee (charterer) takes possession of the vessel, whether the charterer is on board or not.
If the companies owning the vessels are established outside the country of provision, they must register for VAT in those Member States from which the vessels are provided in order to pay the VAT due.
Chartering a yacht in the Mediterranean for each EU Member State
There are several doctrines for chartering yachts in the Mediterranean. They are evolving rapidly, and some Member States are (or were) offering the possibility to ship owners to pay VAT only on a part of their collected rents. A tax possibility called ” reduction of the taxable base ” which is not, however, consistent with European Union legislation.
To help you rent your clients’ yachts while remaining in compliance with each of the doctrines of the European Union member states in the Mediterranean, EASYTAX INTERNATIONAL presents the main information to know for yacht charter in France, Monaco, Italy, Spain, Croatia.
VAT and tax regulations for boats rented in France and Monaco
| Main rules applicable to yachts made available for use in France | |
|---|---|
| Charter license required | No |
| Application for commercial use of the yacht | No |
| VAT rate on charters | 20% |
| VAT on charters from outside the EU | No |
| Reduction on VAT | Yes |
| VAT charged on delivery and redelivery charges | Yes |
| Commercial exemption on yachts | Yes |
| VAT on fuel | No if the yacht benefits from the French commercial exemption (FCE) |
| Excise on fuel | Yes for charter contracts / No for transport contracts |
VAT on the Advance Provisioning Allowance (APA) | Yes if not paid at source |
Rental contract versus passenger transport contract: what changes?
Your clients who own yachts can, if they wish, offer their clients in certain Member States passenger transport contracts instead of the standard charter agreement. However, this transport contract is subject to specific rules regarding standards, status and insurance.
The object of the transport contract
The contract must expressly stipulate a transport service and specify: the departure port, the various stops if required, and the arrival port. However, it is not necessary to mention a vessel being available at the quay.
The yacht’s itinerary
The French doctrine provides that “the service provider ensures the permanent navigation and operation of the vessel”. The yacht must therefore remain under the provider’s control and they are responsible for defining the route. This does not prevent the service provider from developping a “tailor-made” private cruise in the Mediterranean with a client to meet their needs. Moreover, from a legal point of view, the initial itinerary can be modified during the execution of the contract. This change must be made under the control of the vessel’s master and a contract amendment (addendum) must be completed.
Documents to be provided in case of a tax audit in France
The captain must create and keep, for possible tax audits, a complete file including:
- A carriage contract.
- A record of the itinerary followed (logbook and navigation, AIS) demonstrating the planned nature of the itinerary by the service provider, and if applicable its international nature.
The rate of vat applicable to vessel rentals in France
- For navigation in French waters, passenger transport services are subject to the 10% VAT rate.
- For maritime transport to or from abroad (stopovers, departure or arrival port abroad), passenger transport services are exempt from VAT.
The taxable base for the payment of VAT in France
The VAT rules applicable in France for passenger transport apply to the fixed price stipulated in the contract. They therefore also apply to services ancillary to the transport such as crew, fuel (oil), royalties, port fees, costs of positioning and repositioning the vessel, etc. The services provided by third parties on land are treated as client disbursements and paid by means of the Advance Provisioning Allowance (APA), under the VAT regime of the country concerned.
The tax regime for provisioning and petroleum products when transporting passengers in France
The energy products mentioned in article 265 of the French doctrine may be exempt if they are intended to be used as fuel, in particular if they are used for the purposes of transporting people or goods, as well as for the provision of services for consideration.
VAT and tax regulations for boats rented in Italy
| Main rules applicable to yachts made for use available in Italy | |
|---|---|
| Charter license required | No |
| Request for commercial use of the yacht | Yes |
| VAT rate on charters | 22% |
| VAT on charters from outside the EU | Yes |
| Reduction on VAT | Yes |
| VAT charged on delivery and redelivery charges | Yes |
| Commercial exemption on yachts | Yes |
| VAT on fuel | Yes, because some suppliers refuse to apply the Italian Commercial Exemption (ICE) |
| Excise on fuel | Yes (with some exceptions) |
| VAT on Advance Provisioning Allowance (APA) | Yes if not paid at source |
VAT and tax regulations for boats rented in Spain
| Main rules applicable to yachts made available for use in Spain | |
|---|---|
| Charter license required | 2 licenses: one regional and one national. Each region in Spain has its own charter license and its own requirements |
| Application for commercial use of the yacht | No |
| VAT rate on charters | 21% |
| VAT on charters from outside the EU | Yes |
| Reduction on VAT | No |
| VAT charged on delivery and redelivery costs | Yes |
| Commercial exemption on yachts | No |
| VAT on fuel | Yes |
| Excise on fuel | Yes |
| VAT on the Advance Provisioning Allowance (APA) | Yes |
VAT and tax regulations for boats rented in Croatia
| Main rules applicable to yachts made available for use in Croatia | |
|---|---|
| Charter license required | Yes for non EU flag vessels |
| Application for commercial use of the yacht | No |
| VAT rate on charters | 13% |
| VAT on charters from outside the EU | Yes |
| Reduction on VAT | No |
| VAT charged on delivery and redelivery costs | No |
| Commercial exemption on yachts | No |
| VAT on fuel | Yes |
| Excise on fuel | Yes |
| VAT on the Advance Provisioning Allowance (APA) | Yes |
Renting a yacht under 18-month temporary admission
The regulations linked to certain flags allow a pleasure yacht to be rented. The Marshall Islands, Bermuda and the Cayman Islands, for example, have implemented the “YET” or “Yacht Engaged in Trade” status. The customs procedure is called “Temporary Admission for Hire”.
