French Commercial Exemption

A recent decision from the European Court of Justice has ruled that France must change its VAT exemption regime in regard to pleasure vessels.  As a result further changes to the French Commercial Exemption (FCE) regime are expected.

Tax authorities in France and the EU Commission have been for a while looking at possible amendments to ensure that the French system is compliant with EU law, specifically allowing for the definition of “commercial vessel used for navigation on high seas”. The proposals in the VAT Directive which would allow a condition of use of the vessel for navigation in international waters in order to benefit from the VAT exemption attached to commercial use of a vessel.

In order to make use if the FCE, certain conditions are in place:

1. The vessel must have a greater length than 15m, in addition
   • It must be Commercially registered
   • It must have a permanent crew
   • And be used for commercial use
   • 70% of its voyages must have been carried out outside French territorial waters in the previous tax year
2. If the vessel subsequently changes from being a Commercial vessel to that of a Pleasure vessel, it will be withdrawn from the FCE
3. An agreed statement would have to be supplied to a supplier in order to benefit from the VAT exemption

For further information contact Gary Le Cras at gary.lecras@bachmannyachts.com