vat guidelines in europe - Yachting Partners International

VAT GUIDELINES IN EUROPE 2013 - 2014

Prepared by:

Yachting Partners International (YPI) Charter & Financial Teams Update 05 February 2014

Yachting, as a business and a pastime, is presently undergoing some particularly important fiscal change with expert opinion remaining divided as to the most accurate interpretation of many of the upcoming amends. To help guide our clients and colleagues, Yachting Partners International (YPI) has compiled this brief guideline for charter yachts on the VAT requirements in Europe this summer. It is based on all the information and advice our Charter Managers and Financial Department has been able to ascertain to date. However we stress that YPI is not a fiscal advisor and the situation remains unclear. We continue to monitor the on-going situation closely and strongly recommend clients and colleagues take independent fiscal advice to cover their specific individual case.

For more information contact: Annemarie Gathercole or Ian Petts on: +377 99 99 99 97 or email: [email protected]

OVERVIEW The overall MYBA Agreement principle is that, unless otherwise agreed, VAT is for the charterers account. This principle is detailed in Clause 8 of the MYBA Charter agreement. The ways in which VAT is applied, however, and at what rates, varies from territory to territory.

FRANCE After much speculation VAT now applies to yacht charters starting in France with effect from 15 July, 2013. This announcement was formally made on the 25 June 2013, by the French Direction de la Législation Fiscale (DLF) through an official bulletin. Until now commercially operated yachts could be imported into France at a zero rate of VAT and their subsequent charter activities originating in French ports were VAT exempt. Reportedly French and EU Authorities are still discussing how to define 'for international travel' and 'high seas', which will undoubtedly be a long and drawn out process. In the meantime, the French have continued interpreting Article 262 as it stands and carried on with zero rating the supply of goods, fuel and services to commercial charter yachts. It is likely that this will change in 2014 

Monaco has followed the fiscal rules of France for VAT since both Monaco and France make up the same VAT Territory

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All charters commencing in French waters will be subject to French VAT rate at 20% in 2014, although it is possible to benefit from a 50% reduction in the rate, 10% instead of 20%.

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In France currently, reductions in VAT are made for certain industries. Therefore the full rate (20%) is applied to half (50%) of the charter if the vessel enters international waters (12nm offshore) during the charter, with a bona fide itinerary, and proof of such. This can be proved using AIS plotting and captains’ log.

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The French Government recognises the date of signing of the MYBA contract as the Tax Point date, and the point of embarkation at the start of the charter as the Tax Point geographically.

It is becoming increasingly important that owning companies with commercially registered yachts actually charter their vessels in a real and economic fashion with demonstrable charters. Even though a structure may be legally compliant, the Tax Office can always deem a structure to be an “abuse of rights.” For example: if there is only vague proof of commercial charter activity and there is over-aggressive planning just to reclaim VAT on provisioning and fuel, the Tax Office may, in future, deem a chartering structure to be an abuse of rights and levy VAT. We predict that accounting for APA will become very important. APA spent needs to be accounted for with real VAT-able invoices. Any amount which is not accounted for properly and not returned to the owner may become VAT-able.

VAT REQUIREMENTS FOR YACHTS CHARTERING IN FRANCE If they have not already done so, boats owning/parent companies which will charter from France should, as soon as possible, initiate and complete the formalities for obtaining a French N° of intra-


community VAT. Vessels starting their charter in France will need to be VAT registered in France, and if starting in Monaco, they must also be VAT registered in Monaco.

ITALY 

For a yacht departing from an Italian port, with an itinerary which includes sailing both in Italian waters (within 12 miles of the coast) and EU waters (exceeding 12 miles from the coast), a reduced effective rate of 6.6 % is to be applied on the charter fees, delivery fee, APA expenses, including the fuel used during the charter (30% of the Full Rate of VAT which presently stands at 22%).

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For a yacht departing from an Italian port, with an itinerary exclusively in Italian territorial waters (sailing within 12 miles of the coast) the Full Rate of VAT is to be applied to the charter fee, delivery fee, APA expenses, including the fuel used during the charter..

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In principle VAT is due in the source country as per EU regulations at the point of departure.

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In order to charter in Italian waters and therefore pay the Italian IVA, the yacht must be VAT registered in Italy.

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The Italian Tax Date point of a charter is at the date of embarkation.

VAT REQUIREMENTS FOR YACHTS CHARTERING IN ITALY 

EC-owned vessels will need an Italian VAT number if they start a charter in Italian waters.

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In order to obtain the VAT registration vessels must be imported into the EU.

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Non EC-owned vessels will need both an Italian fiscal representative and an Italian VAT number if they start a charter in Italian waters.

Note: Getting an Italian VAT number can take, at best, between 2 – 3 weeks, assuming all documents are in order, so all applications should be filed as soon as possible.


MONTENEGRO 

At present VAT is not applied to charters starting in Montenegro.

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In order to obtain a Vignette/Cruising Permit, the owning or managing company of each yacht must issue a ‘Letter of Appointment’ or ‘Power of Attorney’ stating that the captain has full authority over the vessel and crew for which he is in command. This letter, or POA, has to be NOTARIZED, and any Notary will be accepted. The salient point is that the POA must be Notarized. NO APOSTILE is necessary.

GREECE 

Greek Flag yachts pay VAT on charters - the rate of VAT varies depending on the size of the yacht.

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At present Foreign Flag vessels must embark or disembark their guests outside of Greece

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No VAT is applied to Foreign Flag vessels – this might change in 2014 but as yet we have no confirmation.

TURKEY 

At present no VAT is applied to charters on Foreign Flag vessels.

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There are, however, new regulations for non-Turkish Flag yachts starting or finishing their charter in Turkey. If guests embark outside of Turkey (i.e. Greece), and then cruise to Turkey, there is no change in the usual ‘Clear-In’ procedures. On the other hand, for those wishing to embark directly in Turkey to charter in Turkish waters, the yacht is obliged to ‘Clear-Out’ of the country immediately and visit one port outside of Turkey (i.e. Rhodes), and then return to Turkey ‘Clearing-In’ to a port different from the one they ‘Cleared-Out’ of. Each and every time a commercial yacht ‘Clears-In’ to Turkey, a fee of 30.00 USD per metre will be charged (calculated as the registered LOA x 30.00 USD).

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All yachts, regardless of pleasure/commercial status will be able to take on Duty-Free fuel this year in Turkey. The only condition being that upon completion of bunkering operations, the yacht must ‘Clear-Out’ of Turkish waters.

SPAIN 

In 2013 only yachts imported into Spain, having paid the Matriculation Tax can legally charter in Spain. However, if all the guests embark and disembark outside Spain and only cruise in Spanish waters, then this is acceptable to the Spanish authorities. This advice only applies provided none of the guests are Spanish, Spanish Resident or own property in Spain.

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In 2014 the matriculation tax will be abolished and commercial yachts may charter in Spain, the charters will still be liable to Spanish VAT as per EU regulations

ALBANIA At the current time, Albania does not have legislation specifically addressing chartered yachts that come to the country. There are therefore no regulations regarding ‘Pick up’ and ‘Drop off’.


CROATIA Croatia joined the EU on 1st July 2013, and have therefore implemented a VAT system, this was announced in Zagreb at the end of January 2014. VAT in Croatia is 25%, however 13% will be applied to charters starting in Croatia as below: 

Commercial yachts under 40m - non-Croatian and non EU flagged cannot embark in Croatia, however they can embark in Montenegro or Slovenia without paying VAT (this is to protect Croatian flagged yachts where the owners have paid the VAT on their yachts in Croatia) – VAT will not be applied for the time spent in Croatia and VAT registration will not be necessary.

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Non-EU flag commercial yachts over 40m Can embark and disembark in Croatia – for this they will need a Cabotage licence – this can take up to 3 months and should be applied for immediately as the number of licenses is limited – it will be valid for one year. A fiscal representative should be used to register for VAT in Croatia and 13% VAT will apply to charters..

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EU flag commercial yachts 40m+ Can embark and disembark in Croatia and will need a charter license (approximate cost EUR 300 -400) and must appoint a fiscal representative and be VAT registered in Croatia in the name of the yacht owning company. They will pay 13% VAT embarking in Croatia

NOTE: THE VAT WILL ALSO APPLY TO ALL CONTRACTS SIGNED PREVIOUSLY All commercial yachts engaged in charter activity must have a certification of technical inspection done in the last 12 months; if not, an inspection will be performed in Croatia by the CRS (Croatian Register of Shipping). For the moment APA and fuel are still duty paid. However, there is a future meeting proposed to discuss the possibility of commercial yachts being able to obtain duty-free fuel. PLEASE NOTE: Whilst it is not officially necessary to have either a certificate of cabotage or licence if yachts are NOT (or authorised to) pick up guests in Croatia, it is highly advised for yachts to apply for the charter licence. It will save any confusion in the case of the yacht having to change their program or ports during a charter. Also, anyone planning to charter under the above conditions and apply for their permits SHOULD DO SO WITHOUT ANY FURTHER DELAY.

VISAS IN CROATIA The Croatian authorities announced that as of July 1st, 2013 the classic visa regime of the EU will now apply for citizens of Russia and Turkey, as well as all citizens of those countries that need a visa for entering the EU member countries. This means all alien holders of valid Schengen documents (as of July 1st) do not require an additional (Croatian) visa for entry and short term stays in Croatia. In past years, as many who have been in the region will remember, a visa waiver was granted for Russian citizens in the summer months to make entering the country easier. This is no longer the case and only valid Schengen documents will be accepted.


Russian citizens who do not have valid Schengen documents, will now have to submit an application at the Croatian Embassy in Moscow, or at an Accredited Tourist Agency/ Visa Centre in Russia. Due to the importance of the Russian tourism market, Croatian authorities have indicated that they will process Russian visa requests quickly (generally no longer than 5 days). Multiple-entry visas can also be issued. Negotiations are underway to also speed up the process for Ukrainian and Turkish visitors as well.

DISCLAIMER This document is intended as a general guide only and does not constitute legal or tax advice. The application of the advice in this document to specific situations will depend on the particular circumstances involved. Accordingly, we recommend that readers seek appropriate professional advice by consulting an Attorney, Chartered Tax advisor or Chartered Accountant regarding any particular problems they encounter. This information should not be relied upon as a substitute for such advice. Although we have made considerable efforts to be thorough in the construction of these pages, we offer no assurance that the information posted here is timely, accurate, complete or applicable to any particular set of facts. Its application to specific situations will depend on the particular circumstances involved. While all reasonable attempts have been made to ensure that the information contained herein is accurate, YPI SAM, YPI Group companies and its legal owners accept no responsibility for any errors or omissions it may contain whether caused by negligence or otherwise, or for any losses, however caused, sustained by any person or entity that relies upon it.
