5 September, 2019
After introducing different VAT applications in Europe, in 2012 SOS Yachting was launched as a direct response to meet increased demands of the yachting industry to be in line with tax policies in different European countries
In 2010, the European Court of Justice determined that a yacht which is chartered by a client for leisure purposes, cannot be exempted from VAT anymore. This is known as the ‘Bacino case’ and it was related to Bacino Charter Company SA versus the Luxemburg Tax Authority for the interpretation of article 15(5) of the Sixth VAT Directive 77/388/EEC. The charter company regularly made available, for reward, a vessel which it owned, with a crew to natural persons for purposes of leisure travel on the high seas and they considered it to be exempt from VAT. This was in contradiction with the Luxembourg Tax official who claimed that VAT should have been calculated. The European Court ruled in favor of the Luxemburg Tax authority, meaning that the charterer that uses the yacht for leisure purposes needs to pay VAT on the service to the owner. Shortly after this, SOS Yachting was founded, first in Italy in 2012 to meet the demand for VAT related services following the application of the EU Directives. After Italy, SOS Yachting expanded to France in 2013 and then in 2014 to Spain and Croatia. SOS Yachting represents yacht owning companies and takes care of the issuance of VAT number in the country of supply of the service. Besides the fiscal representation, the company also provides operational guidance for commercial yachts and fiscal expertise when chartering in the Med including also generating of invoices if needed or maintaining accounting records to meet local standards within the established timeframe. But their main advantage for which they have earned international recognition is flawless knowledge of regulations, with elite clientele benefiting from that knowledge. The Croatian office was founded in 2014 immediately following a new regulation which allowed foreign flagged yachts to start a charter in Croatia and perform cabotage.
The office is led by Sanja Dujmić who successfully offers the services to foreign yachts, making the knowledge and services of SOS Yachting accessible to the local market. As of that year, EU and non-EU flagged yachts (only with length over 40 m) could legally charter in Croatian waters. VAT rate of 13% was applicable for all charters starting in Croatia. However, this regulation was quite abused by yachts and not so good for the local market since it allowed yachts to embark guests in Montenegro or other non-EU countries and cruise in Croatian waters, without paying VAT and without having a charter license. Due to this, in May 2017 new regulations were imposed by the Croatian Ministry of the Sea, Transport and Infrastructure and the Ministry of Finance. The main changes were: no limitation in length for non-EU flagged vessels, charter license is required for all non-EU flags and VAT is applicable also on charters starting outside of EU territory and cruising in Croatian waters. Since 2017, SOS Yachting Croatia has seen an important growth in VAT positions as well as an increase in the amount of VAT paid on charter fees. The role of the Croatian Tax office was crucial, representatives from the Croatian SOS Yachting say that the recognition and reaction from Croatian officials was impeccable which enabled the yachting scene in Croatia to be worry free regarding VAT regulations. But, there are still problems on the European level, although the EU directive is applied to all EU countries, the implementation differs from country to country. This results in that Croatia, France, Italy, Greece and Spain have different VAT regulations and procedures, as well as different VAT rates. For instance, in Spain a different charter license is required for each region. Italy and France have a reduction on the VAT rate in case of an international voyage.
In Croatia, VAT on charter fees is paid at a reduced rate of 13%, which has been equated with the hotel accommodation. Speaking about yachts with length over 24 meters, Italy has 22% rate which can be reduced in case of international voyage to 6,6%. In France, the VAT rate is 20% which can be reduced to 10% for international voyage (or 20% on the 50% of the charter fee) while Spain applies full rate of 21% and there is no further reduction. This can be quite challenging for clients that are chartering in multiples countries as they need to be aware of the rules for each country, as well as for big yachts that have different charters in different territories. For this reason, SOS have prepared a ‘lifesaver’, they print each year a VAT Smartbook which is the guide through chartering in Croatia, France, Italy and Spain. It has been issued since 2016 and is a very helpful tool to all their clients that wish to charter in the Med and explains how VAT works in each of these four countries. Lastly, as of this season, we may see a decrease in the number of US built vessels chartering in the Med as since the 22nd of June, 2018 all US built yachts have to pay an additional Customs duty when imported into the European Union. All commercial yachts built in the USA and imported into the EU territory after the 22nd of June, 2018 and private yachts imported into the EU territory (not under temporary admission – T.A.) before that date are subject to such duty.
Text Damir Vantić
Photos SOS Yachting