French tax authorities reform VAT rules relating to commercial yachts
After pressure from the EU Commission, the French tax authorities have had to address the original French Commercial Exemption (FCE) ruling. Commercial vessels could now face VAT charges.…
Following infringements proceedings initiated by the EU Commission, the French government has issued a memorandum detailing legislative changes to VAT exemption for commercial vessels, as of 1st January 2011.
French legislation known as the French Commercial Exemption (FCE) has stated that the provisioning, fuelling, repair, refit and all services related to commercial vessels operating in French waters were exempt from VAT charges.
However, the European Commission has now confirmed that this legislation is in contravention with its own ruling, which decreed that only those vessels operating outside EU waters earn exemption from VAT charges.
In light of the changes, Ayuk Ntuiabane, Director of Moore Stephens Consulting Limited, believes owners will start investigating the possibility of registering their charter business for VAT in a more favourable EU tax enclave.
“We are still awaiting details from the French Customs department on precisely how these changes will be implemented, and until that happens, we can only speculate on what steps need to be taken in response to these changes,” Ntuiabane told Synfo. "It is clear that owners will have to address the location of their vessel’s operational structure, with variable VAT rates in force throughout the Union.”
In contrast to Mr. Ntuiabane’s view Chris Allix, of yacht management company Dominion, feels that this legislative amendment will have very little – if any – impact on French vessels. His position is that a loophole will undermine the imposition of new VAT charges: “The term ‘High Seas’ can be used to describe any vessel operating 12 miles offshore. “As most commercial yachts operate in open water anyway, they will be able to avoid the new tax.”
Thierry Voisin, Chairman of Thierry Voisin, has called for the industry to remain calm, saying, “the French administration never wanted this to happen in the first place and there will be no rush to change the current rules. In theory, the rules governing which vessels are subject to VAT have changed, but does it really matter?
“We are going to spend the next few weeks meeting with tax administrators to establish some sort of clarity of meaning and we would urge people to remain quiet on the issue during that period.”
This is because, Thierry says, a collaborative effort between the relevant parties will ensure that radical reforms of the current system are avoided. A hysterical reaction will only prompt further interference from Brussels.
The coming weeks then, will involve debate and deliberation between the French tax department, its customs department and the region’s yachting professionals. But, according to Freddy Desplanques of maritime law firm Ince & Co., it will all boil down to one crucial issue of definition – the interpretation of the term ‘high seas’.
Therefore, “the issue is whether the high seas begin 12 or 44 miles from port, but I can say now that it is more likely to be 12 miles. Such an interpretation will allow the French authorities to modify current VAT rules at their own pace and on their own terms.”
Mr Desplanques and Mr Voisin will be two of the expert speakers attending this year’s Superyacht Fiscal Summit, taking place on 8th February 2011. They will both be speaking on the relationship between brokers and owners as part of the third seminar of the day. This session will address the obstacles faced by brokers when dealing with both buyers and sellers. They are also likely to address French Commercial Exemption as part of a wider examination of new financial complexities that have emerged.
Click here for the opportunity to register for the event, as well as further details of the day’s schedule and a full list of speakers.
WM
French legislation known as the French Commercial Exemption (FCE) has stated that the provisioning, fuelling, repair, refit and all services related to commercial vessels operating in French waters were exempt from VAT charges.
However, the European Commission has now confirmed that this legislation is in contravention with its own ruling, which decreed that only those vessels operating outside EU waters earn exemption from VAT charges.
In light of the changes, Ayuk Ntuiabane, Director of Moore Stephens Consulting Limited, believes owners will start investigating the possibility of registering their charter business for VAT in a more favourable EU tax enclave.
“We are still awaiting details from the French Customs department on precisely how these changes will be implemented, and until that happens, we can only speculate on what steps need to be taken in response to these changes,” Ntuiabane told Synfo. "It is clear that owners will have to address the location of their vessel’s operational structure, with variable VAT rates in force throughout the Union.”
In contrast to Mr. Ntuiabane’s view Chris Allix, of yacht management company Dominion, feels that this legislative amendment will have very little – if any – impact on French vessels. His position is that a loophole will undermine the imposition of new VAT charges: “The term ‘High Seas’ can be used to describe any vessel operating 12 miles offshore. “As most commercial yachts operate in open water anyway, they will be able to avoid the new tax.”
Thierry Voisin, Chairman of Thierry Voisin, has called for the industry to remain calm, saying, “the French administration never wanted this to happen in the first place and there will be no rush to change the current rules. In theory, the rules governing which vessels are subject to VAT have changed, but does it really matter?
“We are going to spend the next few weeks meeting with tax administrators to establish some sort of clarity of meaning and we would urge people to remain quiet on the issue during that period.”
This is because, Thierry says, a collaborative effort between the relevant parties will ensure that radical reforms of the current system are avoided. A hysterical reaction will only prompt further interference from Brussels.
The coming weeks then, will involve debate and deliberation between the French tax department, its customs department and the region’s yachting professionals. But, according to Freddy Desplanques of maritime law firm Ince & Co., it will all boil down to one crucial issue of definition – the interpretation of the term ‘high seas’.
Therefore, “the issue is whether the high seas begin 12 or 44 miles from port, but I can say now that it is more likely to be 12 miles. Such an interpretation will allow the French authorities to modify current VAT rules at their own pace and on their own terms.”
Mr Desplanques and Mr Voisin will be two of the expert speakers attending this year’s Superyacht Fiscal Summit, taking place on 8th February 2011. They will both be speaking on the relationship between brokers and owners as part of the third seminar of the day. This session will address the obstacles faced by brokers when dealing with both buyers and sellers. They are also likely to address French Commercial Exemption as part of a wider examination of new financial complexities that have emerged.
Click here for the opportunity to register for the event, as well as further details of the day’s schedule and a full list of speakers.
WM
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