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Is there VAT in Europe on luxury private crewed yacht charters?

by admin on January 22, 2013


That is a question that in past years for those chartering large crewed luxury yachts in the Mediterranean would perhaps have had an answer; “yes but only in Greece, Turkey and Spain”.


In recent years however that answer appears to be changing and, as new processes and liabilities are being defined within the EU countries, yacht charter costs including VAT are temporarily less clear.


This is an issue further compounded by yachts potentially moving between countries, both EU and non-EU countries, on a single yacht charter. As this is written, it is probably best said that the answer is increasingly that a payment of VAT is more likely than not due for a yacht charter but it’s not 100% defined yet. However the yachting industry is concerned obviously of the negative affect of Increased taxation on industry revenues and is lobbying for the status quo.


Charters are planned many months in advance and currently, depending on location, what may be known and defined regarding tax liabilities on the charter fee for the charterer during planning and confirmation of a charter may well change before the charter occurs. Hence the final charter payment may have to include a VAT payment by the time the voyage takes place but at a rate unknown at time of booking. A situation required because the VAT is due at time the service or product is delivered vs. when booked.


Where does this affect?

A very popular destination for charters to originate is France with destinations such as St Tropez and Cannes with many smaller destinations and Monaco nearby. In recent past that may well have been because of the VAT exemption by France on the charter fee. In one-way that has been a big savings for guests compared with charters in some nearby countries. Of course, one has to also realize that clients choose destination first and yacht second in most cases so depending on the VAT rate to be applied there may be less impact on the volume of charters but it has to be a large unknown.


In 2012, while Italy was defining it’s VAT rates for such charters, guests planning a charter in the summer in Italy likely were asked to accept terms that conceptually would have stated that VAT may be payable on their charter fee at the time they take their charter but at the time of booking the amount was undefined. It is quite possible that the same will be the norm for yacht charters booked in France in early 2013 until the new liabilities are 100% defined. This leaves a situation of uncertainty for yacht charters in France until any rates are defined, which for some may be uncomfortable. Many people may find it harder to commit when part of the charter costs are not clear vs. commit when they are defined and a extra tax is payable.


The exemption by France has limitations and they, very simply put, were for commercially registered vessels that maintained a permanent crew and were used for commercial purposes. More recently an addition was made that included the yacht must be navigating the high seas to be exempt but it was unclear how far from the coast defined “high seas”.


The EU commission believes in simple terms that such exemption should not apply for a charter for recreational purposes and has been pushing France to conform. As mentioned, Italy has been defining how VAT applies to yacht charters both operating in its waters and transiting its waters and what rates apply. The applied rate varying based on permutations of time spent in Italian waters.


[Katie Harper, the author of this article, is not a tax specialist and this narrative reflects her high level understanding only. It should not be used for any decision-making. For those planning a yacht charter, it is recommended to ask for up to date information for any specific charter plans by EU taxation specialists, other legal expertise and/or charter specialists regarding the possible taxation of their specific yacht charter plans on specific yachts in specific locations in the Mediterranean or elsewhere.]


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