• Under charter (rental), it will obtain fuel supplies without VAT 20 % (subject to the status of 70% navigation rule) but with TICPE (Taxe Intérieure de Consommation sur les Produits Energétiques - Domestic Tax on Consumption of Energy Products). The amount of the TICPE is approximately €0.60/litre)
• Under transport (cruising), will obtain fuel supplies without VAT (20 %) and without TICPE (€0.60/litre)

Commercial yachts are authorised to mix the two types of status and therefore fuel during the same year under the status “mixed commercial use of yacht”, subject to keeping a fuel logbook and the provision, at the end of the year, of a fuel logbook to the Pôle Action Economique (Economic Action Division) of French customs and the payment of any balance of TICPE (no refund allowed).

FLYN-YACHTING will compile (in the case of a premium annual contract) a fuel logbook in the case of mixed commercial use. The contract includes:

• All of the commercial and non-commercial cruises of the yacht, by date (distances covered). FLYN-YACHTING may, where necessary, compile these distances, based on the AIS, with the list of the various commercial agreements carried out.
• All of the fuel supply invoices with volumes, full amounts, and tax/tax-free status.
• Standard consumption (en route and at anchor).

In France:

There are 2 fiscal categories of yachts:

• “High Sea yachts” which benefit from VAT exemption (and therefore do not pay VAT on services or supplies or on the value of the yacht)
• “Coastal yachts” which do not benefit from VAT exemption and fall within the general VAT regime (payment of VAT on services and supplies and on the value of the yacht followed by recovery)

The legislator introduced the concept of trip to determine whether the yacht enters into the high sea category (exemption regime) or coastal category (general regime, taxation, recovery).

“The term “trip” means any commercial navigation made between two ports situated in national, EU or international waters, and specifically where loading/unloading of merchandise and/or embarkation/disembarkation of passengers occur.” [BOI-TVA-CHAMP-30-30-30-10]

When, during the course of a calendar year (1 January to 31 December), the yacht reaches 70% or more of qualifying trips, it is classed as a high sea vessel (exemption from VAT). If it does not reach 70% qualifying trips , it is classed as a coastal vessel (general regime of payment followed by recovery of VAT).

FLYN-YACHTING will calculate the percentage of qualifying trips made throughout the year, with a report sent at the end of each navigation, to the decision maker (shipowner, captain, manager) who can thus permanently check the situation with regards to the tax in question. At the end of the year, FLYN-YACHTING will issue (in the case of a premium package) a certificate indicating the percentage of qualifying/nonqualifying trips, which will indicate which tax regime will be applied to the yacht during the following year.

Consequences:

• In the case of a ratio lower than 70 % in year N-1 the yacht will be classed as a coastal yacht for year N and during year N must pay VAT on suppliers invoices and on the value of the yacht if this has not been done previously; applications for refunds from the tax departments will need to be made in order to obtain a refund for the VAT paid.
• In the case of a ratio equal to or greater than 70 % in year N-1, the yacht will issue a certificate of commercial activity which will enable it to benefit from exemption throughout year N.

In Italy

In Italy the two categories of yachts: “high sea” and “coastal” exist, as they do in France, the difference is found in the definition of the trip and in the threshold of the ratio which must be greater than 70%.

There is only one trip per commercial operation: the disembarkation or embarkation of passengers during the charter are not taken into account. When, over a calendar year (1 January to 31 December, the yacht reaches over 70% of qualifying trips, it is classed as a high sea vessel (exemption from VAT). Otherwise, it is classed as a coastal vessel (general regime of payment followed by recovery of VAT).

FLYN-YACHTING will calculate the percentage of qualifying trips made throughout the year, with a report sent at the end of each navigation, to the decision maker (shipowner, captain, manager) who can thus permanently check the situation with regards to the tax in question. At the end of the year, FLYN-YACHTING will issue (in the case of a premium package) a certificate indicating the percentage of qualifying/nonqualifying trips, which will indicate which tax regime will be applied to the yacht during the following year.

Consequences:

• In the case of a ratio lower than 70 % in year N-1 the yacht will be classed as a coastal yacht for year N and during year N must pay VAT on suppliers invoices and on the value of the yacht if this has not been done previously; applications for refunds from the tax departments will need to be made in order to obtain a refund for the VAT paid.
• • In the case of a ratio greater than 70 % in year N-1 the yacht will issue a certificate of commercial activity which will enable it to benefit from exemption throughout year N.

For a charter departing from France

The activity is measured by the time spent in commercial activity.The VAT payable will be calculated only on the proportion of time spent in EU waters. FLYN-YACHTING will therefore calculate, using AIS points, the time spent in the various national waters (EU / non-EU) and international waters, determine the amount of the VAT base (value of charter less time passed in EU waters over the total period) and therefore the amount of VAT itself. The applicable VAT rate is that of the country of departure for charter services, in this case 20% for France.

Outside the rather exceptional cases of itineraries with the majority of time spent outside of EU waters or a final destination outside of the EU, the resulting VAT rate is not generally much below 20%.

Example: Departure from Côte d’Azur – Ibiza – Côte d’Azur

Charter from 10 to 17 August

Cruising speed 14 knots

Stopover of 3 days and 18 hours in the Spanish waters around Ibiza

Time spent in French waters: 8 hours

Time spent in Spanish waters: 118 hours

Time spent in international waters: 43 hours

Proportion of VAT 20%: (8+118) /(8+118+43)=74.5% i.e., a resulting VAT of 14.9% on this charter agreement TVA résultante de 14.9% sur ce contrat de charter

For a charter departing from Italy

The activity is measured by the time spent in commercial activity.The VAT payable will be calculated only on the proportion of time spent in EU waters. FLYN-YACHTING will therefore calculate, using AIS points, the time spent in the various national waters (EU / non-EU) and international waters, determine the amount of the VAT base (value of the charter less the time spent in EU waters on the total time) and therefore the amount of VAT itself. The applicable rate of VAT is that of the country of departure for charter services, in this case 22% in Italy.

Key: Blue: international waters - Green: EU waters - Red: transition points

Example: departure from Italy (Naples to Sardinia, Southern Corsica, Tuscany and returned to Naples)

Charter from 10 to 15 August

Cruising speed 12 knots

Various stopovers in Italy and in France

Time spent in Italian waters: 81 hours

Time spent in French waters: 17 hours

Time spent in international waters: 32 hours

Pro rata de TVA 22% : (81+17) /(81+17+32)=75,6% soit une TVA résultante de 16,6% sur ce contrat de charter

In the case of a transport agreement departing from France

The activity as measured by the distance covered during the transport service.

VAT is only applied on the activity i.e., the distance covered in the territorial waters of the country of departure. Outside of the territorial waters of this country, VAT does not apply. The applicable rate of VAT is that of the country of departure for transport services (10% for navigation in French continental waters, 0% for international navigation).

The trip is classed as “international”, if:

• the final port of the cruise in question, qualified by disembarkation and/or embarkation of passengers, is in a different country from the country of departure.
• a commercial stopover without disembarkation of passengers, but with purchase of goods and services on board and/or by the passengers has taken place in a country other than the country of departure.

The principle applied is that cruises classed as “international” are totally exempt from transport VAT on departure from all European Union countries.

Reduced transport VAT rates may apply: this is the case for maritime transport in the French territorial waters of Corsica: rate reduced to 2.1% instead of 10%.

There may also be total VAT exemptions for certain types of transport: this is the case for the transport of passengers between mainland France and Corsica under certain conditions.

In the case of a voyage which is not international, the applicable VAT will only apply to the proportion of distances covered in the waters of the country of departure, at the applicable rate. Thus, for example, for a Cannes-Cannes itinerary passing through Bonifacio (without any other stopover in Corsica), the VAT base will be calculated on the basis of the amount of the reduced transport of the distances in non-French waters, and will be distributed, at the rate of 10% (basic transport VAT in France) for the part in continental waters, and at the rate of 2.1% (reduced transport VAT in Corsican waters).

Applying this to the same itinerary as the previous “charter” example:

Example: Departure Côte d’Azur – Ibiza – Côte d’Azur

NB the itinerary could have been further optimised by leaving directly from Cannes to international waters (and vice versa on the return cruise), which would have further reduced the distance in French waters to 24/760 ~3.1% of the cruise, i.e., VAT of …0.3% instead of 1.4%.

Charter from 10 to 17 August

Any cruising speed

Various stopovers in the Spanish waters around Ibiza

Distance covered in French waters: 110.5 NM

Distance covered in Spanish waters: 55.7 NM

Distance covered in international waters: 598.6 NM

The VAT calculation gives, for the same itinerary as in the previous charter example, a rate of VAT of 1.4% instead of 14.9%[1].

[1] Advantage on VAT alone, independently of additional fiscal advantages on the cost of fuel.