VAT reduction on charters no longer applicable in 2020

We have received confirmation that with effect from 2020, short term charters (under 90 days) in EU waters will not be able to use the reduced VAT rate, also known as ‘use and enjoyment’, and the full rate of VAT must be charged on the charter fee. Therefore, all charters by the Ultimate Beneficial Owner will also be subject to the full rate of tax on the commercial charter fee.

An alternative is the Yachts Engaged in Trade (YET) scheme, however this will only be applicable for non-EU owners and also for charters to non-EU charter parties in French or Monaco waters.

Furthermore some owners may believe, or have been incorrectly advised, that commencing the charter in a non-EU port such as Montenegro would be the answer. However, if a charter commenced outside the EU and includes EU cruising, then the charter company must be registered for VAT in each EU jurisdiction the yacht is expecting to cruise in, and as such have to pay the VAT on that proportion of the charter at the full rate of tax.

Dominion Marine have the perfect solution to this issue just in time for when these new regulations take effect on 1st January 2020.

We are delighted to advise that we now have formal written confirmation that yachts owned through the Rental Solution in Monaco can now engage in occasional third party charters, the same as the solution through Cyprus, provided that:

1) The VAT is fully paid and up to date on the core rental agreement

2) The third party charter is not the principal activity of the company

3) The charter and yacht comply with “Flag State” regulations

4) The charter complies to the VAT regulations of the EU jurisdiction in which the charter commences

As the rental agreements within the Rental Solution are long term (over 90 days), the client can continue to use the existing “use and enjoyment” rates in Monaco until further instructions to change are received. Therefore yachts under the Rental Solutions in both Monaco and Cyprus can be used by the client having paid VAT on the rent, but can also charter the yacht to third parties whether they are EU residents or not.

For more information please contact us.

  • When we commissioned the award-winning, sailing yacht Atalante in 2015, Dominion provided excellent detailed advice on the registration and taxation options that we used.

    Beneficial Owner, S/Y ATALANTE
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