Further to our article of the 5th December, France is first out of the blocks to provide clarity on the new rules to be applied in relation to the VAT on charters.
On 30th January the French Authorities issued the Official Tax Bulletin that details the way that VAT on charters shall be calculated on charter contracts signed on or after 30th March 2020. All charter contracts signed before this date will need to be accompanied by evidence to support the contract date being applied. One way to do this would be by way of payment of the first instalment by the charterer at the same time.
The new rules permit the application of zero VAT for time spent outside of EU waters and full VAT applied for all time inside EU waters. This will need to be carefully monitored with evidence required to support the VAT treatment for each charter. Due to the flexible nature of most charters, it would be prudent for the charter broker to collect full VAT on the whole charter and to then issue a refund once the charter has finished and the data has been reviewed and verified.
For any charters already signed for the 2020 season, the first instalment should be paid by 30th March (if not already) and charterers advised that failure to do so could result in the new rules being applied to the charter. Yacht owners and managers of all yachts over 15 metres need to ensure that suitable measures are in place to record the movements of the yacht by way of a tracking device such as AIS (Automatic Identification System) or similar. For yachts under 15 metres, the charter contract and log book are sufficient to support the calculations.