The importation in France is very convenient for commercial yachts. Indeed, they benefit from two procedures allowing them not to disburse the value added tax (VAT) on the hull. The third possibility would be the payment of the VAT.
The VAT Reverse Charge also called the French reverse charge (FRC)
The normal VAT reverse Charge is the inversion of the final VAT payer. Normally VAT is paid by the company which realizes the service (or the seller) to the tax authorities. With such a system, a foreign company had to register by the French tax office when they realized commercial operations in France. VAT reverse charge’s objective has been to find a solution to that administrative burden.
With the VAT Reverse Charge, the client’s company, having a French VAT number, will be the one who pays VAT.
However, the principle under a customs point of view is a bit different because in our case we talk about importation’s VAT Reverse Charge. Normally, VAT is paid when the merchandise arrives in France to the customs authority. With the French reverse charge, no VAT is paid on importation. The owning company only needs to write the tax amount on their declaration and deduct it instantly.
To benefit from the VAT Reverse Charge, you need to make a clear distinction between EU owning companies and non-EU owning companies.
a ) For yachts owned by an EU company
If the yacht is owned by an EU company, you will have to make at least 4 importations the year before your application for the VAT reverse charge.
Since the 1st January of 2020, it is also possible to benefit from the FRC for EU companies having at least 12 months of existence when they submit their application to the regime.
However, for EU companies there are other conditions which must be respected in order to apply for the FRC:
- The companies must have a customs and tax book-entries management system capable of following the importation operations (système de gestion des écritures douanières et fiscales permettant le suivi des opérations d’importation). This condition is considered respected if the applicant certifies, having that management system, in the requesting form.
- The companies and their directors must justify that they haven’t been involved in serious or repeated breaches to the tax and customs provisions
- The companies must be able to certify having a financial solvability enabling them to clear all their commitments regarding the twelve months preceding the request. This condition is verified directly by the customs services and compared with the available information. This condition is deemed respected if the applicant hasn’t been the object of a non-payment procedure towards tax or customs services and provided that they are not subject to a collective proceeding.
Despite the January 1st, 2020 simplifications, it is still difficult for EU companies to apply for the FRC.
b ) For yachts owned by a non-EU company
If the yacht is owned by a non-EU company, your only obligation is to appoint a French customs representative as well as a VAT representative who will carry out the procedure for you.
In that case, the “4 importations” condition is not mandatory.
This procedure can take up to 8 weeks to be completed. As a consequence, we recommend that you contact us as soon as possible.
When imported under the FRC, you won’t need to disburse any VAT on the hull on importation. However, the VAT on purchases made during your commercial activity is still due but can be claimed back later.
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