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FRENCH COMMERCIAL EXEMPTION AND IMMOBILIZED VESSEL

 

“YMCA has been involved in a case requiring patience and determination. The vessel, in this case, was under the French commercial exemption regime since a number of years and had always respected the 70% rule.

However, in 2019, the vessel could not have any chartering activity being immobilized in the shipyard for a great part of the civil year.

There is a specific provision in the French tax law allowing a vessel to continue benefitting from the French commercial exemption even though there was no commercial activity for a year but this must be justified by time spent in a shipyard and an impossibility to execute some charters.

The difficulty in this case was that the vessel in question did spend some time in the shipyard but was not immobilized for the whole year. Indeed, the vessel could possibly have had a chartering activity from January 2019 to March 2019. As you can imagine, this is not the best time for a vessel chartering exclusively in the Med.

YMCA was retained to file a Force Majeure request towards French customs for them to authorize the owning company of the vessel, in this specific case, to continue benefitting from the French commercial exemption in 2020.

We submitted a lot of documentation stating clearly that the vessel was in the shipyard for repairs from April to October 2019, thus during the peak of the summer season. Moreover, we also provided some elements proving that there had been some requests for chartering the vessel that had, unfortunately, to be declined because of the vessel’s conditions.

After months of struggle with the authorities, they finally admitted that, even though the vessel had not been immobilized for the whole length of the civil year 2019, it could benefit from the French commercial exemption in 2020 despite the absence of chartering activity in 2019.

In this case, the vessel had to file a commercial activity statement for 2020 indicating the respect of the 70% rule in 2018 (instead of 2019) according to the specific customs authorization that has been obtained by YMCA.

YMCA is proud to have achieved a satisfactory solution to our clients”.

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CUSTOMS INVESTIGATION REGARDING VAT PAYMENT ON THE VALUE OF A VESSEL 

 

“YMCA has been involved in a difficult case with a vessel that had been controlled by the customs in France. The authorities were trying to readjust the VAT based on the value of the boat. As a matter of fact, the situation of the vessel was perfectly legal but this had to be made clear to the customs.

The vessel was an EU good, built in the European Union and sold by a dealer established in France to an economic operator who had a VAT registration in Italy. By this transaction, the VAT could be accounted for in Italy and no disbursement of VAT was necessary. Indeed, the main activity of the buyer, as an economic operator, was the long-term rental of boats to third parties.

The difficulty of the case was that the main place of establishment of the vessel’s buyer was in another EU country (“Country C”), different than Italy (the owning company of the vessel had, thus, a second VAT number in that country).

The authorities of Country C accepted, as a common rule, that the VAT was not due on the value of the boat when a pleasure vessel was acquired in a member state of the European Union and transported to Country C provided that the buyer was a taxable person and that the vessel was

purchased to carry out economic activities.

The VAT was, according to country C, only due on the value of the rents when the vessel sailed in the European Union waters.

These explanations did not satisfy the French customs as they considered that, as the vessel had been delivered to Italy, and not to Country C, the VAT should have been paid on the value of the vessel.

Fortunately, in an official document specifically addressed to the buyer, Country C had considered that:

  • The buyer of the vessel had to be considered established in Country C and not in Italy (despite the place of delivery of the vessel and the Italian VAT registration).
  • In case of a long term hiring to a non-taxable person, the place of delivery is supposed to be the place of establishment of that latter person as long as they do not have a fixed-establishment in the country of delivery. In our case, the lessee was established in Country C and had no fixed-establishment in Italy.

This last piece of information has been crucial and customs have considered that there was finally nothing wrong with the customs and tax status of the vessel.

The intervention of YMCA has been conclusive as we have assisted our client liaising with the French customs and putting an end to the investigation”.

 

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APPLICATION OF THE 25% US-BUILT ADDITIONAL DUTY TO A VESSEL COMPLETELY MODIFIED IN THE EUROPEAN UNION ? 

 

« We encountered some challenges with an American built boat. The owner asked us to carry out the importation in France using the French commercial exemption procedure.

However, in the meantime, the European Union issued a regulation imposing a 25% customs duty applicable to American builds.

The French customs wouldn’t accept the importation of the vessel unless the owning company paid the duties which amounted to more than one million euros.

We had, as a consequence, to find a solution to that problem. Therefore, we submitted a file to customs in order to convince them that the 25% duty was not applicable to the vessel for three reasons:

  • The customs duty was only applicable to vessels exported from the USA after June 22nd, 2018 (which was not the case of “the vessel”)
  • The vessel had to be considered an antiquity vessel due to its age. For such vessels, no customs duties were applicable
  • The vessel had been refitted in the European Union and only the bare hull had been exported from the USA – many years ago

In these conditions, the French customs refused to accept the first point considering that the vessel had to pay the 25% customs tariff as soon as it became “commercial”. Indeed, the Yacht was exported from the USA as a private vessel many years ago.

The second point required a time-consuming survey and the client was not keen to carry out such a procedure.

As a consequence of our tenacity and experience, customs accepted to relieve the vessel from the customs duty basing their answer on the third point. Indeed, the vessel had been refitted in Europe and had lost its USA origin becoming a European built Yacht.

It has been a great success for YMCA and it proves that we always work to the best of our abilities always providing our clients with a correct and proper solution. »


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