VAT on Yacht Charters, the new general rule
Until 2010 EU Member States and yachting professionals tended to give a wide interpretation to art 148 of the VAT Directive (ex art 15 point 5 of the Sixth Directive no.77/388/CEE). Commercial yachts engaged in trade were exempted from VAT / duties on the hull, supplies, fuel and charters.
In Bacino ECJ’s ruling of 22/12/2010, the European Court of Justice determined that a yacht chartered by a customer for leisure, carrying out no commercial activities, can no longer be considered as a VAT exempt transaction. A VAT exemption may only be granted in circumstances where a vessel is chartered for use in the high seas, for the purposes of commercial, industrial or fishing activities, but not recreational purposes.
As a consequence of the Bacino ruling and in accordance with the new place of supply rules (EC Directive 2006/112 Article 56), VAT on short term charter agreements (of less than 90 days) became payable at the applicable rate of the European Member State where the supply of services is taking place. In the case of yachting, VAT has to be paid in the place where the means of transport is effectively put at disposal of the customer.
In short: Charter Contracts are not exempted from VAT anymore. It became compulsory for all Charter companies to register for VAT or appoint a fiscal representative to collect and pay VAT on Charters in all EU countries from where the Charters will start.