Although it started with the clear assertion that Europe’s VAT laws are simple compared to tax laws in the United States, a seminar hosted by SOS Yachting spent three hours yesterday morning discussing the intricacies of how this value-added tax is applied in various countries around the European Union, and what reductions are available to commercial yachts chartering in the region.
France seemed the clearest to understand, with a standard VAT applied to the charter fee. In specific cases, the applicable charter fee can be reduced, therefore reducing the tax owed. In some cases, such as when a charter
begins in another country, VAT is not due in France at all.
Italy’s VAT scheme was more complex and applies in more situations. When started in another EU country, VAT doesn’t apply in Italy. But if started in a non-EU country such as Turkey or Montenegro, for example, a charter must pay VAT for the time spent in Italian waters.
Spain’s system is relatively new now that charters can be exempt from the country’s matriculation tax. No VAT reduction applies to charters that begin in Spain, and those that begin outside of Spain are not expected to pay VAT for time spent in Spanish waters.
And whatever the rules are in Croatia could change with parliamentary elections coming Sunday.
Rarely do countries apply VAT rules in the same way. For example, in France, simply touching international waters qualifies a charter for a 50 percent reduction of the base charter rate to which VAT applies. In Italy, the yacht must spend a “reasonable time” outside of Italian waters for the reduction to be applicable, but nowhere is that time frame defined.
SOS Yachting started in Italy in 2012. Industry VAT expert Thierry Voisin joined the company in France in 2013. It added an office in Croatia in 2014, and one in Spain this year.
According to the company, 1,085 charters were invoiced in 2015, with 95 percent of them taking place in Italy and France. Sixty-eight percent of those charters paid a reduced VAT, with the remaining 32 percent paying full VAT on their charters, the company reported.
Click to read more about France’s new regulations regarding VAT and commercial vessels.