Postponement of French tax reforms means cheaper yacht charters in summer 2020

By Katia Damborsky 30 March 2020

New tax regulations for yachts chartering in France, which were due to come into effect on new yacht charter contracts signed after April 1, have been suspended amid the Coronavirus outbreak.

Reforms to amend lump-sum VAT reductions on yacht charters in France have been suspended, meaning charterers will continue to benefit from flat-rate VAT reductions on superyacht vacations in France this summer without having to spend extended time in international waters.

Under new reform proposals, any VAT reductions would be subject to the amount of time spent in international waters (more than 12 nautical miles off the coast).

The reform was meant to take effect on new charter contracts signed after April 1. Thierry Voisin, the President of the Trade Organization ECPY has said that the details are not available yet, but in France “the deadline of March 30 for signing contracts with a flat-rate VAT reduction no longer exists."

Background on Postponed EU VAT Changes

These changes have been in motion since December 2019, when the European authorities announced big changes for VAT reductions on Mediterranean yacht charters starting in 2020. The reform aims to scrap the practice of briefly cruising into international waters in order to benefit from a VAT reduction.

In a statement released by the ECPY on December 2, the ECPY has stated that "In 2020 the only possible reductions will be pro-rata reductions for cruising outside European waters (i.e. time spent/or distance in international waters."

It comes after the ECPY spoke with the Directorate of Tax Legislation (DLF). "The DLF officers informed ECPY that the application of the VAT reduction on charters as practiced in Italy, France, Malta, Cyprus and Croatia would no longer be applicable for the 2020 season (i.e. just cruising into international waters and obtaining a VAT reduction)."

"The European Commission has asked the above-mentioned countries to modify their practices in order to apply the principle of ratio [...]. It is expected that the implementation of the new rules on VAT reductions will be applied under the same terms and at the same time in the different countries."