French Customs has issued an order (Arrete of December 17, 2015) clarifying the rules governing exemption from the national tax TICPE, the internal tax on the consumption of energy products also used for bunkering.
Under the new rules, commercial yachts will continue to be able to take on duty-free fuel in France until October 1st, 2016.
Whilst this is positive news for the industry, there are some caveats. Alex Mazzoni, CEO of SOS Yachting, explains: “The order of 17th December 2015 specifically mentions commercial yachts being exempt if they meet specific criteria mandated by the French Commercial Exemption. The only fly in the ointment is current charter contracts do not comply with FCE requirements.”
To date, charter contracts identify the charterer as being the end-user of the service. In 95% of cases, the charterer uses a yacht for pleasure, not for commercial purposes thus debarring it from taking on duty-free fuel.
As a result, to continue to benefit from duty-free fuel, the French Tax Agency requires the adoption of a “global service” contract.
The French Customs in compliance with the Tax Agency have decided to allow commercially registered yachts to benefit from the TICPE exemption until October 1, 2016 to give the industry enough time to draft the necessary legal instruments.
ECPY, the European Committee for Professional Yachting, and MYBA, the Mediterranean Yacht Brokers’ Association, have already convened a groups of experts to draft new agreements with the input of Customs, who is keen to be involved in the process.
Unlike change in the past, this must not be seen as the Tax Agency or Customs as clamping down on yachting. Mazzoni explains: “Both agencies are keen to see the industry prosper in France but in compliance with FCE regulations as approved by EU Court rulings.”
Once a new contract has been drafted and approved, yachts that comply with the following criteria (see bullet points below) will be able to take on duty-free fuel (VAT and TICPE exempt) as before.
- The yacht must be registered as commercial
- The yacht owning company must employ permanent crew onboard
- The yacht must be used exclusively for commercial purposes, i.e. with a contract in place
- LOA over 15m
- 70% of cruising trips must be outside French waters during one calendar year with a higher number of dynamic rather than static charters