The European Commission has formally requested France to change its VAT exemption rules relating to yachts that are used commercially. The Commission argues that the French rules conflict with EU and the VAT Directive.

France’s exemption rules were revised in 2004 to include not only merchant ships but yachts undertaking commercial charters.

Under the French Commercial Exemption a yacht simply needs to have a permanent crew, a registration certificate of a flag state, and be available to charter. Under the Exemption there are no custom entry or exit requirements and yachts undertaking charters in France waters are VAT exempt in the areas of fuelling, provisioning and servicing.

This advantageous position contrasts with other European VAT regimes and has contributed to a significant growth in yacht charter activity in France. Other countries