Some Good News!

Sanremo, 31st March 2020

We have received a press release issued by the French Nautical Federation (FIN). You will find here below for your review an in-house translation.

The press release states that the French government has agreed to postpone the application of the new tax regulation related to charter hire (VAT due on the exact time of navigation in EU waters and the abolition of the 50% lump sum reduction).

This certainly would come as great news to our industry during these difficult times however we are waiting for the official confirmation to be issued from the French government in this regard.

Please find below the translated text from the FIN’s press release:

PRESS RELEASE | 25 March 2020, Paris

Applicable VAT Regime on charter hire: the Federation obtains a postponement of the new measure.

Following constructive contacts with the office of the Minister of the Economy, the FIN informs the professionals in the nautical sector of the suspension of the reform project aimed at modifying the 50% lump sum VAT reduction that applies when navigation outside the territorial waters of the European Union occurs during a charter.

“For several months now, we have been working in close coordination with the Government services on this subject. Until the Covid-19 crisis, we were moving forward on a common position with our Italian counterparts. This work will resume after the health crisis. We have pleaded with the government for the suspension of the measure that should have applied on 1 April. This is a relief today. This decision should be made official in the next few hours,” said Yves Lyon-Caen, President of the FIN

In the light of this the French Finance Minister has cancelled the implementation of the new regulation (see more here) due to the current situation of COVID-19 pandemic.

As the changes made to the conditions for determining the taxable base have been withdrawn, the VAT lump sum reduction (20% on 50% of the charter fee) is still applicable in the case of cruising in international waters (BOI-TVA-CHAMP-20-50-30).

For what is concerned to Italy the UCINA Confindustria Nautica is currently dealing with the Italian Authorities to do take analogous measures and therefore to postpone the application of the new rules in order to keep the old taxation law for all Charters to execute during season 2020 (taxation at 22% on 30% of the agreed Charter Fee).

New VAT Guide 2019

The 2019 edition of the Yacht Welfare VAT Guide is finally released. You can ask your copy by sending an email to info@yachtwelfare.it. Our Team of Lawyers and Fiscal Advisors is always available to assist you during your Charter Season in the Mediterranean Sea.

25% YES OR NOT?

Sanremo, 14th April 2019

25% YES OR NOT?

The French Customs Office has released important dispositions and clarifications about yachts engaged in commercial and transport activities (e.g. charter).


25% DUTY TO APPLY TO US BUILT BOATS

The French Customs Office confirms that every US built boat having commercial registration and officially imported in European Community before the 22nd of June 2018 will be exempt from the payment of the 25% customs duty on the boat’s return in Europe if all the standard import formalities will be executed (the same formalities and practices arranged before the 25% rule).

The same principle applies for boats exported from EU before the same date (Export Declaration is required. In absence of this Declaration an alternative proof of exportation has to be provided).

All the boats having completed the import back to the European Community can benefit from FCE/ICE (French Commercial Exemption / Italian Commercial Exemption) advantages according to the +70% rule.

If the boat has been imported under the FCE/ICE regime in 2018, it is still required to provide the proofs attesting its qualifications to take advantage of the same benefits (+70% international voyages).

Therefore, we confirm that any and all US built boats falling within the below listed cases:

1. never imported before the 22nd of June 2018, or

2. imported before the same date but having changed the Owning Company (sold/purchased)

are subject to the application of the 25% customs duty.


CHARTER UNDER TEMPORARY ADMISSION STATUS

Besides, all US built boats never imported before the 22nd of June 2018 will have the possibility to perform commercial activities (Charter) under Temporary Admission status, whether the boat is registered as commercial or private (in the latter case only if the Flag Registry admits this condition).

However, there are specific restrictions to the above frame:

a. the impossibility to have EU resident Charterers

b. at present not all the EU Members States still permit a boat under Temporary Admission to execute commercial activities (Charter).

In regards to non US built boats (EU or non-EU) registered as commercial and to coming to Europe to execute commercial activities (Charter), which are under “Import Status”, the FCE/ICE benefits apply to all those non-EU boats (as well as to some EU boats in specific cases: more info will follow) intending to execute commercial activities (Charter). This is the only case in which the Charterer can be a EU resident.

Concerning the non-EU boats which will not be imported (both Commercial and Private registered), they will only have the possibility to execute Charters under the regime of Temporary Admission and will not be entitled to charter to EU resident subjects.

As far as is concerned to side boats (chase-boats/tenders) having own registration and which are employed to attend the mother ship (main vessel), we are still waiting for the necessary clarifications by the Customs about the possibility to charter said chase boats to EU residents.


All the hereby listed rules and information provided might be subject to variations by the Customs Office.

Therefore please always contact us to know if something has been changed, integrated or just updated.

For any additional info or clarifications required please email us to info@yachtwelfare.it


You can download the complete version of this news below:


VAT News 2018

VAT EXEMPTION REGIME APPLICABLE TO VESSELS

On September 2017, the Italian Tax Authorities (Agenzia Delle Entrate) and the Association of Italian Shipbuilding Industry (“Unione Nazionale Cantieri e Industrie Nautiche”, “UCINA”), issued the general guidelines on tax and yachting matters (Guidelines), contained in the book “Nautica & Fisco (see also https://ucina.net/en/ucina-new-tax-rules-for-the-nautical-sector/)”. The Guidelines provide further explanations about VAT exemption for transactions related to vessels:

a. used for commercial purposes
b. used for navigation on the high seas (“navi adibite alla navigazione in alto mare”).

Primarily, on 12 January 2017, Agenzia Delle Entrate issued the Resolution 2/E providing certain clarifications on the definition of vessels used for navigation on the high seas for the purpose of the application of the exemption regime under Article 8-bis, letter a) and letter d) of the Presidential Decree No. 633/1972.
Specifically, the above mentioned Article 8-bis reproduces the content of Article 148, letter a), c) and d) of Directive 112/2006/EU, providing for an exemption of certain operations relating to “vessels used for navigation on the high seas and for carrying passengers for reward or used for the purpose of commercial, industrial or fishing activities”.
In this respect, taking into account the position expressed by the Court of Justice of European Union, the Agenzia Delle Entrate pointed out that:

1. In order to benefit of the exemption regime, the condition that the vessel shall be “used for navigation on the high seas” refers to vessels carrying passengers for reward, or used for the purpose of commercial, industrial or fishing activities, but it does not refer to vessels used for rescue or assistance at sea or to vessels engaged in inshore fishing (CJEU, Elmeka, joint proceedings C-181/04 e C-183/04).

2. For VAT purposes, “high seas” shall be intended as that part of the sea exceeding the maximum limit of 12 nautical miles from the base lines under International Law of the Sea (Article 3 of the Montego Bay Convention of 1982).

3. In order to assure that the exemption regime under Article 8-bis of Presidential Decree 633/1972 is applied, with limited reference to the cases provided by the law (i.e., only to vessels actually and for the predominant part navigating on the high seas), it not sufficient to exclusively take into account the length or tonnage of the vessel.

For the above reasons, the Agenzia Delle Entrate clarifies that “a vessel can be considered as used for navigation on the high seas if, with reference to the preceding year, she has effected, by more than 70%, voyages in the high seas (i.e., beyond the 12 nautical miles)” and “such condition shall be verified for each tax period based on official documentation”.

With specific regards to the adequate “official documentation” necessary to prove the prevalence of voyages carried at the high seas, the Resolution No. 6/E, released by the Italian Tax Authority (Agenzia delle Entrate) on 16th January 2018, provides the below list of documents that shall be considered as “official”:

i. the Log Book (also known as ship’s log or captain’s log), according to articles 169-173 and 174 of the Italian Navigation Code (Codice della Navigazione).
ii. The maps of voyages as well as the data extracted from the ship’s tracking or identification systems (for instance, with no limitation, the A.I.S., GPS, etc.).
iii. The charter contracts, invoices and relevant payments.

As of today, such documentation is absolutely necessary to prove the “high sea cruising condition”. If the Company owning the vessel is not able to provide the suppliers with all or any of the above listed official documents, a mere statement issued by the yacht Owner/Master (self-declaration) declaring the “high sea cruising status” of the vessel might suffice just if the Declarant (Owner, Captain, Master, Manager, or any other person in charge for this, clearly listing his connection with the vessel or position on board, etc.), clearly explains the reasons why it is not possible to provide the required documents.


DEFINITION OF “VOYAGE”

Pursuant to the Guidelines and according to the provisions contained into the Resolution No. 6/E dated 16th January 2018, “voyage” shall mean any cruise carried out between ports (Italian, EU and/or non-EU ports) where embarkation/disembarkation of goods and/or people take place or more generally where said ports are used by the vessel for the purposes of carrying its commercial activity. Within the same Resolution (6/E) the Italian Tax Authority clarified that for “voyage” shall be intended also any cruise starting from and coming to the same port (also known as “circular cruises” or “circular voyages”). If during a “circular voyage” (starting from and coming to the same Italian port) the 12 nautical miles at some point will be crossed by the vessel to sail the high seas, said voyage is qualified as an “international voyage” (voyage at the high seas). Further, any voyage entirely carried outside the Italian territorial waters (exempli gratia: any charter contract having both embarkation and disembarkation places in France) shall be considered as international voyages (voyage at the high seas) as well. If on the contrary a “circular voyage” will only take place within the 12 nm Italian territorial line, said voyage cannot be considered as an “international voyage”.

Lastly – still in respect of the calculation of the 70% of voyages – the Italian Tax Authority explained, with Resolution 6/E, that any displacement (moving from/to) of the vessel to one other port or shipyard for technical reasons (even if those reasons are connected to the vessel’s commercial activity) cannot be considered as a “voyage” and so cannot be included into the calculation of the 70% of voyages.

Moreover, the “high sea cruising condition” shall be verified each year. In case of a percentage of voyages greater than 70% during a calendar year, the VAT exemption pursuant to Article 8-bis applies to the following calendar year. In the event that the percentage above does not exceed 70% during the calendar year, it shall be no longer possible to enjoy the VAT exemption as from 1 January of the following year, except in the special cases listed hereinafter:

a. the vessel is under construction, or
b. the vessel has not yet carried out any voyage in the sea.

Only in these cases, it could be possible to apply the VAT exemption on the basis of a statement declaring the intention to use the vessel on the high seas. Therefore, in order to issue an invoice VAT exempted under Article 8-bis, the supplier shall require the owner or the person responsible for the yacht (for example, the master of the yacht) to provide a statement attesting: the declarant’s personal data, the legal status of the declarant in relation to the vessel and the period for which the statement is provided. However, in the following year, the declarant shall verify if “70% high sea voyages condition” is met and, in the event of a failure in reaching the 70% of voyages on high sea, he shall inform the supplier accordingly. On the contrary, if such condition is met, the declarant shall provide the supplier with the official documentation proving that voyages on high sea, as described above, have been carried out.


COMMERCIAL USE (THE CONDITION)

To enjoy the VAT exemption, in addition to the “high sea cruising condition”, another condition shall be met. Said condition is that the vessel must be used for commercial purposes. Therefore, any transaction related to vessel intended for sport or pleasure purposes shall be excluded from the VAT exemption.
Firstly, it has to be pointed out that, VAT exemption shall apply, in any case, to vessels registered in the International Register, since such registration implies that the registered vessels shall be used for commercial purposes only.
In addition, the Italian pleasure yacht code (“Codice della Nautica da Diporto”) provides a list of cases of commercial use of pleasure yacht, including, charter, leasing, professional teaching of navigation and activities carried out by diving centres using the vessel as basis for diving; for which, generally, the VAT exemption also applies.
However, to benefit of the VAT exemption, the commercial use of pleasure yachts shall be attested by a public register (Italian, International or foreign). Hence, as a general rule, the relevant foreign Harbor Authority or the relevant foreign shipping register shall indicate the use for business purposes of the vessel by inserting, for example, the wording “Commercial Yacht”/“Commercial Vessel/ Yacht in commercial use” in the relevant records. The VAT exemption, as above described, also applies to any advanced payment made during the construction of pleasure yachts, in accordance with the terms of the contract executed between the parties. When the VAT exemption is required for the purchase of a new pleasure yacht, the seller shall require a certificate of the Company Register attesting that that the buyer’s core business is a commercial activity in the maritime sector.
Finally, it has to be underlined that, the transfer of a vessel, registered or to be registered for non-commercial use (private use), to a natural person, shall not qualify for VAT exemption.
Moreover, to register a pleasure yacht as having commercial purposes when it is conversely used for personal purposes may imply significant sanctions. In fact, by law, pleasure yacht used for commercial purposes must be exclusively used for the activities for which they are officially registered. Nevertheless, the use of private pleasure yacht for occasional charter activities is allowed by law, but it never can be qualified as commercial use for VAT exemption purpose.

Part of the hereby provided info has been provided by ucina.net.
For any questions or additional info please email us to info@yachtwelfare.it


Download useful files and documents:

YW News “VAT” 2018 (pdf)
Resolution 6/E January 2018
Resolution 2/E Januery 2017

Italy Cancels VAT Rise

Sanremo, 21st December 2017

 

ITALY CANCELS 2018 VAT RISE: VAT STAYS THE SAME

The Italian Council of Ministers has overturned plans and announced the country’s new financial measures for 2018. Italian value-added tax will not rise in 2018, although it is scheduled to increase in 2019 and 2020 asper below listed:

10% VAT will go up by 1.5% in January 2019 and a further 1.5% in 2020.
22% VAT will increase by 2.2% in 2019 and by an additional 0.7% in 2020 and another 0.1% in 2021.
Excise Tax will also go up in 2019.

Any question can be sent to info@yachtwelfare.it.


Delivery / Redelivery Fees in France

Sanremo 1st March 2017.

Please find hereby the info just released by our French partner: As you are aware, it has been EASYTAX policy since July 15, 2013, when the VAT became applicable to charter hire in France, to include any Delivery/Re-delivery fees charged to the charterer into the taxable base. This approach was based on Article 267 of the French Tax Code, which considers Delivery/Re-delivery fees as an ancillary service to the main service. Therefore this ancillary service should be treated the same way tax-wise. Over the years, there has been some confusion within the industry on this matter, with various positions taken. As a result, several of our partners have asked that we seek confirmation from the French Tax Administration on this particular point – which we did.

Some time ago, we had requested for a legal ruling from the French Tax Administration Rules and Regulations Division (“Département de Legislation Française”) to confirm the taxable regime to be applied to Delivery/Re-delivery fees. Recently, we received the ruling (Ref. D2B/1500014757D) that confirmed that such fees – regardless if they are just fuel &/or “a time package” – charged in order to put a vessel at the charterer’s disposal, EITHER before the charter from one port to another OR after the charter to reposition the vessel, are indeed constitutive of an ancillary service to the main service, and therefore are taxable under the same condition.

To quickly summarize: DELIVERY/REDELIVERY FEES ARE TAXABLE IN FRANCE

1. If the charter fees are taxed at 20% French VAT, the delivery/re-delivery fees are taxed at 20%
2. If the charter fees are taxed at 20% French VAT on 50% of the charter fees, the delivery/re-delivery fees are taxed at 20% French VAT on 50%.

For any additional info please call or email us to info@yachtwelfare.it or chartermcf@easytax.fr.
We remain at your disposal for any clarifications or questions.