The French Official Tax Bulletin announced the end of the VAT lump sum reduction in France, with retroactive effect. Charter contracts signed from November 1st 2020 are subject to the new rule. It means that only charter contracts signed prior November 1st can benefit from the lump sum reduction of 50% of the taxable base in case of cruising outside EU waters.
Previously, contracts signed before 1st November 2020 for charters starting in French waters were eligible for a VAT lump sum reduction from 20% to 10% if part of the trip entered non-EU waters or into international waters 12nm offshore.
The new regulation stipulates that the French VAT will be due at its full rate, 20%, for the time spent in French and EU waters. These measures are applicable for all MYBA and ECPY contracts. This means that only the time spent outside of French and EU waters will be exempt from VAT.
The Italian Tax Authority has clarified that from 1st November 2020 all contracts will be taxable at 22% Italian VAT. This means that vessels can no longer benefit from a lump sum reduction in VAT on charters travelling into international waters.
Contracts signed before 1st November 2020 for charters starting in Italian waters were eligible for a VAT lump sum reduction from 22% to 6.6% (for yachts over 24m) if part of the trip entered non-EU waters or into international waters 12nm offshore.
Contracts signed after 1st November 2020 are subject to the Italian VAT rate of 22% due on all charters starting in Italy.