Charter VAT Overview

June 16, 2017 10:53 am Published by Leave your thoughts

You can be forgiven for being confused when it comes to VAT on charters. With a variety of rules and regulations, stipulations and caveats, its no wonder it has our heads in a spin!

In an attempt to simplify the available advice we have summarised the main details of the charter position for yachts operating in the Key Member States below.

*All information correct as at 14th June 2017.

operates on a sliding scale of applicable VAT depending upon the size of the vessel being chartered. See the scale below.

Charters commencing in French waters are now subject to VAT at the headline rate of 20% (effective since 1st January 2014) however if the charter involves a passage into International Waters then VAT is only due on 50% of the charter rate (yielding an effective rate of 10% on the charter amount.) VAT is not charged on APA.

Spain has the double edge sword of both VAT & Matriculation Tax. Recent legislative changes have led to the wider application of the Matriculation exemption for non-Spanish Flagged yachts therefore less of a consideration these days.

It is still however, necessary to apply for a charter license and Matriculation exemption before commencing any charter activities in Spain. A separate licence application process is necessary for mainland Spain and the Balearics.

VAT is levied at the main headline rate of 21% with no alteration in the rate depending on area of charter.

There is a 24% withholding tax on charter income being paid to non-Tax treaty countries.

Italy also operates a sliding scale system similar to Malta. The parameters are as follows:

Cruising itinerary also directly impacts reduced VAT rates as follows:

Italy is the most complex of all the main EU cruising countries and it’s essential to acquire a local Agent’s clearance on the VAT rate proposed to be charged before finalising any agreements. Vat is also applied to APA at the same rate as that of the main charter fee.

Recent advice from Portugal indicates that whilst a short term charter (under 90 days) of a yacht with a Captain shall qualify as a ‘supply of passenger transport’, such supply shall be considered as a supply of services within the Portuguese territory. Under these terms, such supply does benefit from a reduced rate of VAT of 6% therefore entities chartering yachts in Portugal will be required to register for VAT there and charge VAT accordingly.

Having recently clarified its position on VAT on charters, the key facts surrounding chartering in Croatian waters are as follows:

Regime is open to both EU & non-EU flagged yachts, regardless of size

  • Yachts over 45m must have a Croatian licensed ship agent appointed
  • EU Yachts must be VAT paid or accounted for. Non-EU Yachts must be formally imported in the EU and in free circulation
  • Non EU yachts must obtain a charter licence; EU yachts do not. Isle of Man, Gibraltar and Channel Island Flags are considered EU flags in this instance
  • VAT on charters commencing in Croatian waters is levied at 13%. Charters starting outside the EU but traversing Croatian waters are subject to pro-rated VAT based on time spent in its waters. The above rules still apply.
  • Charters starting in other EU countries will not be assessable to Croatian VAT yet will be subject to Vat of the country in which the charter party takes delivery of the yacht.
  • Input Tax cannot be recovered
  • The UBO may obtain a slight reduction on the full market charter rate
  • Corporation Tax is not applicable provided the owning company does not have a place of establishment in Croatia

If you would like further information on how Pelagos Yachts can assist you with any matter, feel free to contact us via email or call +44 1624 819867

Pelagos Yachts are an Independent Yacht Management company with offices in the Isle of Man, Malta, Hamble & London.

Article written by Chris Stewart & edited by Colette Gambell.

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This post was written by Declan O'Sullivan