Tax,Yacht Ownership and Registration: What to expect?

Since the ECJ ruling “Bacino Charter Company” it has become increasingly difficult for owners of commercially registered yachts to continue to operate their yacht on a real commercial basis. This arises from the unprecedented number and variety of different rules across Europe in conjunction with fewer fiscal advantages gained from operating commercial yachts within EU waters.

 

 

 

Uncertainties resulting from non-uniformity of rules and regulations:

1. VAT payment on owner and 3rd-party charters which became compulsory varies from country-to-country. Different VAT rates and differing interpretation of the rules lead to a lack of harmonisation and increased confusion for the yacht owners and operators.

2. It is reputed that the supply of duty-free fuel for commercial yachts will cease. We do not know when. Different rules still apply in EU countries. The apparent absence of coordination between EU countries leads to a lack of information on this key subject.

3. VAT on APA. No clear rules and lack of harmonisation between countries.

4. Exemption of VAT on the hull, works and supplies and the importation of commercial yachts registered under offshore flags may be subject to change which will harm the industry. Again, the apparent absence of coordination between EU countries leads to a lack of information on this key subject.

5. VAT-paid yachts may risk losing their status when leaving EU waters. Yacht owners and operators require clarity on this important subject.

6. There is a risk of requalification of commercial yachts into private yachts if the proportion of 3rd-party charters is considered to be insufficient. Yacht owners and operators need to be given numerical data to ensure compliance.

7. Some countries, including Spain, Croatia and (Greece) require local charter licences. Owners and operators are concerned about potential changes in these.

8. Leasing schemes for private yachts may come under scrutiny by the authorities. Yacht owners and operators are concerned they could be involved with a scheme that becomes invalid.

Consequences of uncertainties:

•  We have seen and continue to see a growth in enquiries from owners wishing to de-commercialise their yachts

• Some owners have decided, or are considering, to sell their yachts in favour of real estate purchase and may choose to charter a yacht from time to time

•  Some owners have decided, or are considering, to sell their yachts in favour of real estate purchase and may choose to charter a yacht from time to time

•  Many yachts leave EU waters, demonstrating owners and operators concerns at the lack of cohesion and clarity of the rules and regulations. Montenegro and Turkey where duty free fuel is still available and VAT on charters not applicable have taken advantage of this situation

•  Non EU yachts stay outside of the EU

The above result in a reduction in charter revenues and economic losses for communities and industries in proximity to marinas and shipyards from a reduction in purchases and requirement for services.

Since the Bacino case, VAT is now required on charters starting in EU waters.

What does the future hold?

VAT on the hull, VAT on supplies, VAT on works, VAT on charter, duty free fuel, APA, delivery fees, temporary admission, importation, VAT paid status, new initiatives…

Part 1: 

RULES FOR OPERATING YACHTS IN EU WATERS

I. General considerations for choosing a flag

In order to choose the most suitable jurisdiction(s) to own and register a yacht, which can be two different jurisdictions, there is a number of factors to bear in mind which will need careful analysis.

Elements to consider in respect of the flag: Experience and Reputation, Political Stability, Registration Process, security of mortgages registered in the Flag State, Registration Fees, Manning requirements, level of services, compliance with international regulations and casualty record.

Elements to consider in respect of the personal situation of the owner and the yacht: nationality, residence of the owner (EU or not), residence of the yacht’s principal user(s) and their guests, physical characteristics of yacht (age, tonnage, length), VAT or equivalent tax status of the yacht.

Elements to consider in respect of the use and area of operation of the yacht: Use within or outside EU, usage of yacht (private, commercial, dual).

However, taxation is one of the main issues to consider for yachts navigating within EU waters especially for yachts which are ultimately owned by EU residents.

A general advice for choosing a flag would be not to mix EU with non EU structures and flags as this could create some confusion and trigger VAT liabilities.

II. General rules for operating yachts in EU waters. A. Commercial Yachts

Traditionally charter market reserved to EU commercially registered yachts and occasional charter allowed for offshore commercially registered yachts under certain limited conditions which are/were usually not fulfilled (non EU customers on board, embarkation and/or disembarkation outside of EU waters). VAT exemptions on the hull, supplies, works, fuel or zero rated operations traditionally granted. Changes are expected.

Offshore commercially registered yachts can charter but need to be imported first and obtain a DAU to be put into free circulation in the EU and allowed to charter (importation through Monaco, France or Malta).

For commercially registered yachts (whether EU or offshore registered which have been imported) necessity “to be operated on real commercial basis” (commercial registration, permanent crew, commercial operation at all times, charter fee at commercial market rates even when the Ultimate Beneficial Owner uses his yacht) and appoint a fiscal agent/representative who will collect and pay the VAT payable on charters in the country where the charter starts (rates differ from one country to the other and reduced rates or allowances are available in some countries if the yachts sail in International waters (ie: Italy, France, Malta). In addition a Charter Licence and some specific formalities will be required in certain countries (ie: Spain, Greece, Croatia).

II. General rules for operating yachts in EU waters -  B. Private Yachts

Offshore privately registered yachts ultimately owned by non EU resident Ultimate Beneficial Owners can benefit from the Temporary Admission regime which allow them to remain in EU waters for a maximum period of 18 months before being liable to pay VAT on the hull (6 months only in Greece).

This is conditional upon:

•the yacht being used for private purposes

•the yacht being used by a non-EU resident person

•The yacht being legally and beneficially owned by a non-EU resident person

“Private use” means that the yacht cannot be used for charter activities. Moreover, the private use must be such that the non EU resident person is always on board. Should the yacht be found only with EU resident persons on board, the tax authorities might claim a breach of the temporary importation rules.

(Legal basis: Articles 137 to 144 of the Customs Code (Council Regulation (EEC) N° 2913/92 of 12 October 1992 establishing the Community Customs) and Articles 553 to 562 of the implementing provisions of the Customs Code (Commission Regulation (EEC) No 2454/93 of 2 July 1993).

Privately EU and offshore registered yachts ultimately owned by EU residents are liable to VAT No VAT exemption on the hull, fuel, supplies, works or zero rated operations and in general no charter allowed. Available options:

1. Payment of VAT up front (rates will depend upon the country of delivery as VAT will be payable in the place of delivery or final delivery or first port of call if the yacht is imported or re imported after being exported). If the yacht is imported a formal valuation will be required unless the yacht is new

2. Leasing Schemes to mitigate VAT on the acquisition (involving a bank: Italy, France / not necessarily involving a bank: Malta, Cyprus (Monaco)).

3. Exemptions: Yachts built before 1985 and in EU waters before 1.01.1993/Vat paid yachts (Vat not recuperated and if exported for less than three years.)

Part 2:  

CHANGES AFFECTING THE OPERATION OF YACHTS IN EU WATERS

(France, Italy, Spain, Greece, Croatia, Malta)

II. Vat changes affecting the operation of commercial yachts in EU waters

A. France

The general rules

• Since 15 July 2013, all Charters starting in French and Monaco waters are subject to French VAT at the full rate of 20%

• Necessity to appoint a fiscal agent/representative in France and/or Monaco depending upon where the charters start and obtain a French / MC VAT number

• Nevertheless and on the basis of art 59 of EC Directive 2006/112 - which governs the use and enjoyment rules for yachts capable of travelling in international waters and which applied so far to French Leasing Schemes- and on the basis of art 259 A 1 of the French Tax Code and art I-A-2 & 90 of the « Bulletin Officiel des Finances Publiques » published on 12 September 2012 - Charter Companies that make international voyages could either opt for the prorata temporis basis regime, if they can determine the time they spend inside and outside of internal waters or otherwise from an allowance of 50% on the taxable basis, leaving an effective VAT rate of 10% if the yacht exits the 12 nm limit and enters International waters during the charter (charter agreement, log book and AIS statement or GPS screen shot shall be used to prove it). Same rules apply to the delivery fees which are part of the main service, which is the chartering of the yacht (delivery fees shall not be considered as fuel)

• Detaxed full available. TBC in the future. •No VAT on APA which shall be dealt with in accordance with the “disbursement” system / Invoices made directly in the name of the charterer shall include VAT

• Commercial Exemption still available on the hull, works and supplies if cumulative conditions are met. Art 262 II 2 of the French Tax Code. TBC in the future

The anticipated changes

• VAT / Duties on fuel and other excisable goods (tobacco, alcohol) and general provisioning:
Following the ECJ cases Helmoltz and Haltergemeinschaft (1 December and 21 December 2011), France was invited by the EU Commission to modify its excise legislation on the exemption of excise duties on supply of fuel for commercial vessels.

As a consequence, Article 265 bis of the French Tax Code was modified on 1 January 2014 to read that only vessels used commercially by their end-users can benefit from the duty exemption.

Hence, yachts chartered for recreational purposes should now be excluded from the excise exemption on fuel supplies, as their end users do not use them for commercial purposes.

However, the French customs authorities unofficially agreed to postpone the entry into force of the measure, as the excise legislation of the EU member states has not yet been harmonised.

We expected the change to be announced in January 2015. Good chances that this be delayed until the end of the 2015 charter season.

• VAT on the hull, supplies and works: impact of the 12 miles criteria:

The ECJ condemned the French Commercial Exemption which is considered to be in breach with the provisions of Article 148 of the VAT Directive, and therefore illegal.

France, which is very supportive of the Yachting Industry, tabled an alternative proposal adding two new criteria for a vessel to qualify for tax-exemption. The proposal they have put forward would classify a vessel as a tax-exempt commercial entity if they fulfilled the 5 following cumulative criteria:

•Commercial registration

•permanent crew on board

•yacht operated on commercial basis and used exclusively for commercial activities in the high seas

•LOA > 15m

•70% of the commercial activity being conducted in the high seas (12nm from shore)

A decision on whether this proposal was in line with EU legislation was expected on 21 March 2014, but this has been delayed, with no indication of when a judgment will be passed down. A new BOD is currently under discussion. Lots of grey areas.

Implications:

Commercial yachts fulfilling these cumulative conditions will still be able to benefit from the VAT exemption stated in art 262 II 2 of the French Tax Code.

Question still opened for the 70 per cent use in International waters: does this mean that 70 per cent of the charters shall reach the high seas or 70 per cent of the navigation time shall be made in the high seas? Could a navigation France /Italy be taken into account for that calculation (navigation outside of national waters)?

Commercial yachts not fulfilling these conditions, will be liable to VAT but the owning company shall be able to claim back and recover VAT or shall account VAT under the reverse charge mechanism system. TBC.

Project of Anchorage Tax for yachts mooring in managed marine areas of French Territorial waters

As part of the bill on the new territorial organization of the French Republic, the Government has proposed from the beginning of the year to impose an anchorage tax on any vessel anchored inside a Marine Protected Area; “Law NOTRe” The law shall apply to the following:

The law shall apply as follows:

In mainland France from 1 June to 30 September (for areas attracting few visitors)

For areas attracting large numbers of visitors in metropolitan France and overseas, all year round

In managed areas (national parks, Natura 2000 areas, protected marine areas)

Each manager will decide which areas under its management shall be covered by the law

For each yacht, the tax is capped at 20 euros per day per linear meter

Coming into force summer 2016, this could represent potential disaster for the Yachting Industry and threat to the attractiveness of the French Riviera.

Measure comparable to the tax introduced in 2006 in Sardinia, and abolished three years later after great pressure and joined force action from the Italian Yachting Industry. The number of yachts cruising in that area had dropped by 50% following the introduction of that law. However the bill was rejected once, yet the government has again put the bill on the agenda and filed a new amendment.

The French Riviera CCI has decided to take action and to join forces with ECPY and other local Associations and yachting professionals to influence the upcoming debates in the National Assembly and the voting of the bill.

Following that action an on-line petition was initiated to stop this project which can be found by clicking on the following link: http://www.riviera-ports.com/en/news/a-serious-threat-to-the-future-of-yachting

The more people sign, the more weight we will have. Click on the link above to sign it!

II. Vat changes affecting the operation of commercial yachts in EU waters.

B. Italy

The general rules

• Circulars N43/E and N 49/E October 2011. Since 2012, all Charters starting in Italian waters are subject to Italian VAT

• Necessity to appoint a fiscal agent/representative in Italy and obtain an Italian VAT number

• Standard VAT rate in Italy is now 22 %. Nevertheless according to Circulars and related rulings this VAT rate is reduced depending on the size of the vessel (based on a deemed use outside of EU waters, on the same principles as VAT applicable on Italian leasing schemes)

• The VAT rate applicable to charter yachts over 24m starting their charter in Italy and cruising in and outside of Italian waters is reduced to 6.6%

• ATTENTION: Stricter rules than France /the cruise in International waters shall be implied by the specific route of the charter (charter agreement, log book and AIS shall be used as proves)

• Italy implemented the principle of use and enjoyment : EC Dir 2006/112 art 59b. At the difference of other EU countries, if a charter starts outside the EU (e.g. Montenegro, Turkey) and then enters Italian Waters, then VAT at the reduced rate of 6.6% (or higher for yachts below 24m) will apply only to the portion of the charter taking place in Italy

• Exemption on the Hull, works and supplies still available for commercially registered and operated yachts that sail in the high seas: Article 8-bis of the Italian Presidential Decree No. 633/1972 and Circulars N43/E. Italy might be affected by the ECJ position on the French Commercial Exemption

The latest changes

• “legge di Stabilità” 30 December 2014 (law on fiscal and financial matters) confirmed the significant reduction of the Italian VAT rate from 22% to 10% for transit mooring and berthing in Italian Marina resorts. This provision first entered into force for 2014 and was extended for 2015. Not applicable to permanent berths

• Since 2014 new dual use registration scheme initially created in 2005 (“noleggio occasionale”) authorised only in Italian waters /charter up to 42 days without registering the yacht for commercial use and removal of the 30.000 EUR limit. No VAT on charters but 20% income tax on charter revenues. Not a success  

• Duty Free Fuel /Customs Circular n.10/D dated 14 July 2014 : duty free fuel still available? No clear rules and different interpretations from the Customs. Difference between EU and non EU commercially registered yachts. Need to import non EU commercially registered yachts. Awaiting national clarification. ECJ position?

• APA: different positions. VAT / No VAT and use of the disbursement system as France / no VAT but all purchases made in exemption of VAT by the owning company recharged with VAT to the charterer including fuel which shall be the correct position in our opinion.

• Delivery fees: are not fuel and shall follow the same rules as the charter. Different interpretations as well

II. Vat changes affecting the operation of commercial yachts in EU waters

C. Balearic Islands

The initial rules

• Before October 2013 / Matriculation tax: No charter could start and or end in Spain unless the yacht was under Spanish flag or the foreign flagged yacht was covered by a charter licence and the 12% matriculation tax paid. Tax established by the Special Tax Act in 1992, the tax applied to all pleasure yachts over 8m in length registered under Spanish flag and all yachts over 15m chartering in Spanish waters (including foreign flagged yachts having a base in Spain or used temporarily by Spanish residents in territorial waters)

• After a long fight and many years of lobbying, on Thursday 17 of October 2013 the Spanish Congress of Deputies finally approved the Tax Bill number 121/000054 which was also published in the Government State Boletín Oficial Del Estado on 30th October 2013. Amongst other matters the Tax Bill approved the removal of the 15metres limit which now allow EU commercial yachts operating in Spanish waters to apply for the Matriculation Tax exemption. Matriculation tax is over but VAT at 21% will still be charged on all charters starting in Spanish waters

• To be able to start and/or terminate a charter in the Balearics it will be required to: appoint a fiscal representative / register for Spanish VAT / apply for the Matriculation Tax exemption / apply for a Charter Licence (regional charter permit and Spanish Marine Authority Permit)

• Charter licences were initially granted only to EU entities. (Isle of Man accepted)

The recent changes

• Possibility for non EU commercially registered yachts to apply for a Charter Licence in the Balearics Circular 1/2014 August 2014. Same conditions as EU yachts but only if no other similar EU yachts are available on the local market for the same period (annual licence based on bona fide delclaration from local Broker). Licences already delivered for Isle of Man, BVI and Cayman Islands Yachts

• Possibility opened for non Spanish Ultimate Beneficial Owners to charter their own yachts in Spain and benefit from the Matriculation Tax relief

• Possible income tax liability on charter revenues of 24% if the owning company is based in a jurisdiction that does not have a double tax treaty in place with Spain

•Temporary export advised for non EU yachts which have been imported or are VAT paid when leaving EU waters in order not to lose their Community good status. (return good relief regime)

II. Vat changes affecting the operation of commercial yachts in EU waters 

D. Greece

The old rules

• Greek charter licence issued for 5 years was required for commercial yachts to be able to embark and disembark passengers in Greek waters. At the difference of Spain it was possible to proceed to one of the two operations without a charter licence (embark or disembark passengers in Greece). In addition foreign EU entities had to open a branch office in Greece, apply for a local VAT number and pay VAT in Greece on charter fees

• Issuance of Greek charter licences was reserved only to EU yachts. Non EU yachts not allowed to charter. Isle of Man considered as non EU

• No VAT was applied to EU foreign flag yachts starting their charter in Greece or partially chartering in Greece

• Yachts under Greek flag and EU yachts having obtained a charter licence had to pay VAT on charters starting in Greek waters.

• The Greek VAT applicable for non static charters is 13% for 1 or 2 days charter and 6,5% for over 48h charter. (Standard VAT rate is 23%)

• Fuel could be purchased without duty and local taxes

The new rules

New rules announced: new Law 4256/2014 14 April 2014 “Touristic yachts and other provisions” (commercial / private yachts and commercial touristic day trip boats)

• End of the necessity to obtain a Greek charter licence to be able to embark and disembark passengers in Greek waters + abolition of the 10% Luxury Tax imposed on Pleasure Yachts

• EU commercial flagged yachts and non-EU commercial flagged yachts of over 35m (providing they are larger than 35m, built of metal or GRP and can carry over 12 passengers) can charter from Greece (embark and disembark passengers) by registering on the online « Registry of Touristic Yachts and Small Vessels » and submitting an application to the Ministry of Mercantile Marine and Aegean

• Minimum days of charter to do over a three years period. 105 days if chartered without crew otherwise 75 days or 25 days for classic yachts and 5 to 20% reductions depending upon the age of the yacht. No minimum days requirement for VAT paid yachts.

• EU yachts still need to obtain a DEPKA and non EU yachts a Transit Log which are delivered for one year

• For commercial yachts a declaration shall be made to the port of embarkation 48 hours prior to departure and charter agreement submitted

• Private Charters by the UBO are allowed when the yacht is not engaged in third party charter

• No changes on VAT and detaxed fuel for commercial yachts? TBC

• Possible to charter with pleasure yachts if allowed by the flag of registration. Allowed for Greek pleasure yachts but not VAT exemptions or Tax benefits

The current options

The online Registry of Touristic Yachts and Small Vessels is still not activated. The Charter licence will be still required until the online Registry works.

Available options today only for EU companies / EU flagged yachts to obtain a Charter Licence and be able to embark and disembark guests from Greek ports are based on a mixture of the old and new regime:

1 - Open a Branch Office in Greece

Only possible for EU companies. Isle of Man not accepted at the difference of Spain and Croatia.
Necessity to have local office, obtain a Greek VAT number.
Necessity to keep accounting books, file quartely VAT returns, annual accounts.
Charter income will be taxed as per Greek tax law taking into account the double tax treaties in place.

2 - Establish a NEPA / MCPY (MARINE COMPANY for PLEASURE YACHTS)

Option followed by the majority of the Greek flagged commercial yachts.
At least 51% of the shares must belong to an EU company or EU resident person.
No income tax however the company representative will have to pay National Insurance and Pension contributions to TANPY -OAEE (which applies to shipping/yachting agents)

Applicable to both options:

Duty free fuel and supplies in exemption of VAT / VAT on charters at 6.5%. 5.2% if navigation in the high seas.
Minimum days of charter to do over a three years period as per the conditions set in the New Law.

As long as the Charter Licence is required necessity to observe Greek Social Security Regulations and insure the crew with the Greek Seamen Merchant Fund (Ν.Α.Τ.). The only exception is for yachts of over 650 GT which can apply the regulation of their Flag State.

Questions:

VAT on charters starting in Greece by yachts that do not have applied for a charter licence and opened a Branch as fiscal representation has not been authorised yet and possible ECJ condemnation? VAT on charters starting outside Greece and principle of use and enjoyment? Charters starting in Greece and sailing to Italy? Advice: embark at least outside of Greece until clear rules are annouced. / Greek social security for crew // Private charters, confidentiality, PSC and navigation in other EU countries…

II. Vat changes affecting the operation of commercial yachts in EU waters

E. Croatia

Croatia joined the EU on 1st July 2013, and have therefore implemented a VAT system, which was announced in Zagreb at the end of January 2014.

• Standard VAT rate is set at 25%, however 13% VAT applies to charters starting in Croatia and for the yachts that are allowed to embark passengers in Croatia

• Charter in Croatia can be performed by EU and Croatian flagged commercial yachts regardless of size

• Non EU flagged yacht of over 40m in length could perform charter if they have been imported and obtain a charter licence. (Limited number of licences are available for non EU flagged commercial yachts and are delivered on a first come first served basis). The charter licence will be valid for one year and could take up to three months to be issued

• The owners of such commercial yachts allowed to charter in Croatia would need to appoint a fiscal representative and obtain a Croatian VAT number. They shall also have on board a technical inspection report issued in the last twelve months otherwise a Croatian inspection might be required

• Non EU commercial flagged yachts under 40m cannot embark in Croatia, however they can embark in Montenegro or Slovenia without paying VAT and disembark their guests in Croatia. Question remains if VAT will be applied for the time spent in Croatia? Still not the case

• No duty free fuel allowed for the time being but under negotiation

• No VAT exemptions on the supplies

II. Vat changes affecting the operation of commercial yachts in EU waters

F. Malta

• A new updated Commercial Yacht Code to be introduced in 2015

• Attractiveness of the leasing scheme for pleasure yachts which benefits from the general tendency of yachts changing from commercial to private registration due to the continuous increase of technical and safety requirements and VAT/Tax burdens imposed on commercial yachts

• Attractiveness of the Malta flag for commercial yachts. One of the most popular flags for Yachts. (Importation, tax incentives, mortgage system…)

• ‘Guidelines for the VAT treatment of short-term yacht hiring’ introduced on 24.07.2014 and applicable to charters undertaken for a period less than 90 days that commence in Maltese waters

Standard VAT rate 18 % however this will only be applied proportionally, based on the amount of time the charter is in EU waters based on the use and enjoyment principle found in EU legislation, which Maltese authorities have used in recent years and is similar to the interpretation given in the case of yacht leasing, leaving for instance an effective rate of 5.4% for yachts over 24m commencing a charter in Malta. 

Any charter contract could and should be sent to the VAT Department beforehand for scrutiny, together with supporting documents, and in each case the VAT department will issue a comfort letter upon approval.

No duty free fuel available.

PART 3

SUGGESTIONS FOR A BETTER 'YACHTING' FUTURE

A. One single voice for lobbying in Brussels and possible alliance with the business jet industry

1. One single voice for the EU yachting industry for lobbying in Brussels

The diversity of professions and multitude of small professional and trade associations need to speak with one single voice and be represented by one or two influential persons per EU maritime country, to defend the interests of the Yachting Industry and fight to maintain the commercial benefits with respect to VAT, Tax and technical regulations applicable to commercially registered and operated yachts. Too many small and independent actions are taken today which are harmful to the Industry.

2. Possible alliance with the business jet industry

Owners of commercial yachts and business jets follow the same battle: fight so that the VAT exemptions be maintained or a new advantageous system found. In the jet industry, there are differences between the qualifying airline companies operating under an AOC and the business operators operating private jets for business purposes, which encounter the same difficulties as owners / operators of commercial yachts. Jet operations may open the right to reclaim VAT or be exempted from VAT if the flights are:

• business related
• operated for a reward Most of the countries require that 50% to 80% of the flights be International flights

B. EU VAT Harmonisation and fight for keeping advantages for commercial yachts

1.Requirement for confidence in the existing systems and clarity on the rules:

Owners operating their yacht on a real commercial basis need confidence that the chosen ownership structure and registration (whether they operate EU registered or offshore registered commercial yachts that have been imported) will not be subject to change that will affect payment for VAT on the hull, supply, shipyard works and charters.

Owners operating privately registered yachts need clarity on the VAT-paid status of their yacht and confidence that the status will be sustainable when navigating in and out of EU waters.

Key words are confidence, clarity, uniformity and harmonisation.

2. Studies to demonstrate the impact of the yacht industry in the local EU economies

A Global Study might be difficult to obtain and will turn out to be time and cost consuming. Nevertheless local studies have already been conducted within several maritime communities (MYBA, SYBASS, ECPY, ANEN, AEGY, UCINA…)

On national levels, the Chambers of Commerce and Industry should be considered as a resource to use to finance new studies at no cost (some local studies are already available but may be out of date)

3. VAT harmonisation:

Common rates at least for VAT on charters (common rates for internal/static charters and those involving navigation in high seas and similar interpretation across Europe). The difficulty will be to determine an average VAT rate acceptable by all countries (this could be based on lower rates applicable to hotels and those of similar services for instance as Croatia did).

MINI ONE STOP SHOP (MOSS): Single VAT registration number and online VAT declarations across Europe.

A similar system to the one applicable to EU companies providing telecommunications, broadcasting and electronic services since January 2015 could be put in place to declare and pay VAT on charters. Under the new VAT rules, these companies must pay VAT in the EU country of establishment of their customers and not in the country where they are based.

Same situation applies to a yacht owning company operating a commercial yacht in EU waters as the company needs to register for VAT or appoint a fiscal agent in each EU country from which the charters start.

Under this MOSS scheme, the EU service provider can, under certain conditions opt to report its EU VAT liability in one of the EU countries only. This means that under certain strict conditions the EU service provider can opt to file the VAT returns for its supplies to private customers in any of the 28 EU countries with their local tax authorities.

In doing so, the EU Service Provider only need take into account the applicable VAT rates in the countries of the buyers for reporting and payment of the VAT due.

4. Fight for keeping advantages for commercially registered and operated yachts (hull, works, supplies at least and fuel if possible) + leasing schemes for private yachts.

C. Think about new ways to operate yachts

1. Dual use schemes

Owners no longer willing to operate their yacht on full commercial basis are seeking a solution which will permit them to use the yacht on a private basis, whilst offering the possibility to charter the yacht out to third parties a few days per year to minimise their annual running costs. Dual use schemes shall be considered and authorised when properly implemented.

Flip-flop schemes permitting numerous changes from private to commercial registration are plagued with accounting and VAT issues in EU waters.

Private bareboat schemes like Monaco (3 months), France, Italy (42 days) and Greece could be challenged as yachts under these schemes do not comply with commercial standards and are / could not really be chartered without crew, resulting in potential issues with Flag states and Port State Control if charterers are found on board and if they sail outside of their country of registration. No VAT advantages shall be allowed for such yachts (at the exemption of duties on fuel in some countries when on charter ie: France).

SOLUTION: Develop dual-use operation schemes approved by PSC for yachts commercially compliant on voluntary basis to avoid any detention that shall also take into account the tax element (Marshall Islands are well advanced in the development of such scheme)

2. Move towards a shipping operation for « real » commercial yachts.

Time Charter based on shipping standards for yachts really operating commercially and engaged on International voyages.

BIMCO or Transport Contract could be used…

Problem: brokers are reluctant as they will be responsible like a travel agency if the yacht is not put at the disposal of the charterers, in addition to the pre determine route and new type of contract to be draft and used.

CONCLUSION

The future will tell us how these measures will be applied in practice, whether they will have a real impact on the charter business and whether we will manage to speak with one single voice to defend our Industry in order that the Med does not lose its “prestige".

In the meantime GET PREPARED

 

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