Let’s start with the principles which remain unchanged.
WITH REGARDS TO PURELY PRIVATELY REGISTERED YACHTS OPERATING UNDER TEMPORARY ADMISSION (TA)
As long as they respect the conditions of the regime, yachts operating under TA will still be able to operate in EU waters without being liable to pay VAT on the hull for a maximum period of 18 months after being placed under TA either formally (which is highly recommended) or de facto by the mere fact of crossing EU waters.
These yachts will also continue to benefit from VAT exemptions on the works if they are formally placed under Inward Processing Relief (IPR).
WITH REGARDS TO COMMERCIALLY REGISTERED YACHTS WHICH HAVE BEEN PREVIOUSLY IMPORTED UNDER THE FRENCH COMMERCIAL EXEMPTION (FCE) OR THE REVERSE CHARGE MECHANISM (RCM)
These yachts can still either:
- be imported under the FCE and operate in EU waters in exemption of VAT, as long as the cumulative conditions of the FCE are respected including the 70% criteria or;
- be imported under the RCM as long as the conditions of the RCM are respected. In that event, VAT on the hull will be declared and claimed back immediately on the same VAT return when the yacht is imported. VAT on the works and supplies will have to be paid and claimed back or deducted. Yachts imported under the RCM will not need to comply with the 70% criteria as required for yachts operating under FCE.
These yachts can continue to charter with EU and non EU charterers and guests.
What has changed or what has been further confirmed?
WITH REGARDS TO US BUILT YACHTS
In accordance with our previous newsletter on the topic published in December 2018, and following the adoption by the European Commission of Regulation (EU) 2018/886 in June 2018 as a direct response to Trump’s trade policy, Yachts built in the US which are being imported into the EU are required to pay in addition to the 1.7% Customs Duty (required only for yachts below 12m) and VAT as applicable, a 25 % Customs’ Duty to be paid in the country of import.
Are concerned all yachts which are/ will be:
- fully imported into the EU as private yachts;
- imported in France as commercial yachts under the French Commercial Exemption (FCE) regime or through other countries (ie: Malta) ;
- imported in France under the RCM.
French Customs have confirmed / re-confirmed the following in relation to US built yachts:
For yachts operating under commercial registration:
- US built yachts which had been imported under FCE prior to 22 June 2018 and have never been exported since that date would continue to operate under the FCE regime without being liable to pay the 25% Customs Duty;
- US built yachts which had been imported under FCE prior to 22 June 2018 and have been exported since that date can benefit from the Return Good Relief and therefore can be re-imported under the FCE regime without being liable to pay the 25% Customs Duty;
For yachts operating under private or YET registration:
- US built yachts which are registered under a private or YET registry and are operating under TA in EU waters, are outside of the scope of the 25 % Custom's Duty as TA is a VAT and Customs Duty suspensive regime;
- There will be no need to put in place any bond or bank guarantee to cover the 25% Custom's Duty upon the arrival of the yachts;
- There will be no need to put in place any bond or bank guarantee prior to placing the yachts under Inward Processing Relief (IPR), in the event some works are to be carried out in exemption of VAT, at the condition though that the operator used is an Authorised Economic Operator (AEO).
WITH REGARDS TO YACHTS OPERATING UNDER THE YET PROGRAM AND TA
French Customs had to review their previous positions following a new reading by the European Commission of the provisions of the new Union Customs Code, and in particular those concerning TA and TA for Commercial Activity, as well as following the adoption by the Commission of the new definition of “commercial activity” in the customs sense of the term in accordance with the Fuchs judgment delivered in 2016 by the ECJ.
The new French Customs position which regards to YET registered yachts is as follows:
Simplification of the program:
It is not compulsory anymore to place YET registered yachts under a commercial bubble (TA for commercial activity) when they are on charter and operating under a Temporary Certificate of YET.
From now on, YET registered yachts only need to be placed under simple TA upon their arrival in EU waters.
YET registered yachts can be placed under TA either formally (which is highly recommended) or de facto by the mere fact of crossing EU waters.
YET registered yachts will be allowed to stay in EU waters for a maximum of 18th months whether they are used on a pure private basis or for charter activities as well (unless the yacht is placed under another suspensive customs regime). The periods during which yachts are on charters are not suspensive anymore.
Despite what you may have read elsewhere, ONLY Cayman and Marshall Islands flags have been authorised to make proper dual use in EU waters (YET Program), not only by Customs but also under the Paris MOU. YET registered yachts will need to comply with the necessary formalities and limits imposed by these two flags.
As of today, flags such as Jamaica, Bermuda, St Vincent etc..., are not authorized to do so and private yachts bearing these flags might be arrested if charterers are found on board.
Limitations of the program:
- The owning company may sign charter contracts only with individuals who are not resident in the Customs Territory of the Union or with companies not established within the Customs Territory of the Union whose Ultimate Beneficial Owner(s) is/are non EU resident(s) (the “main charterer”);
- The Charterer, who is the one who will assume the costs of the charter while on board, and who will be considered as the main user of the yacht during the charter, shall be non-EU resident;
- Subject to the above conditions being fulfilled, EU resident guests will be authorised on board as long as the Charterer is physically present on board.
Extension of the program:
- The YET program needs to be validated by the other EU countries. Spain and France now share the same position but Italy, Croatia and Greece have still to take a position. Due to this simplification process in theory and as these changes have been dictated by the EU commission in the light of a new reading of the new Union Customs Code, charters operated under the YET program shall be able to start and end in all EU countries. This would need though to be reviewed country by country to remain on the safe side.
WITH REGARDS TO THE TENDERS
The Customs regime of the tender varies depending upon its registration status and Customs status of the mother vessel.
If the tender does not have its own registration, the Customs regime of the tender will usually follow the regime of the mother vessel.
The difficulties arise when the tender has its own registration.
French Customs have clarified their new position for the tenders which have their own registration in light of their new interpretation of TA rules.
Tenders to commercially registered yachts duly imported under FCE or RCM
Customs confirmed that these tenders cannot benefit automatically from the import either under FCE or RCM of the main vessel, nor be placed under TA for commercial activity anymore to be able to embark EU resident guests.
However, and to be able to embark also EU residents during charters, these tenders could be considered as secondary vessels to the mother vessel.
To proceed on this basis, these tenders would need to be officially placed under TA upon their arrival in EU waters through a verbal declaration using the Annex 71-01 (as the mere fact of crossing the EU border will not be considered as sufficient) which should clearly state the details and registration number of the main vessel.
The following conditions would need to be cumulatively met as well:
- The details of the secondary vessel and registration number must be clearly stated in the charter contract of the main vessel;
- The charter contract must clearly state that the secondary vessel is exclusively used in relation to the operation of the main vessel;
- The secondary vessel could not be the object of a different and independent charter contract.
In addition to the above conditions, the secondary vessels shall be used exclusively in relation to the below operations:
- Shuttle operations from the main vessel to the disembarking or embarking docks;
- Short trips that the main vessel is in impossibility to carry out (ie: inaccessibility of the place for instance).
Tenders to yachts registered under pleasure or YET registration and operating under TA
Tenders to yachts which are registered under private or YET registration and operating under TA, which have their own registration will also need to be placed under TA.
The placement could be made de facto or formally as above stated.
Only non EU charterers / guests could use such tender during charters until Customs take a final position with regards to the presence of EU guests.
Do not hesitate to contact Janet Xanthopoulos if you wish to discuss about the possibilities to charter in the Med during the 2019 charter season or require further advise on the YET program.
For more information, please contact Janet Xanthopoulos, Legal Adviser / Head of Yacht & Jet Ownership & Administration Dpt: email@example.com
Credit Pictures: Medberth