VAT on short term charters (less than 90 days): Postponement of the reforms abolishing the “lump sum reduction regime”

Following the infringement procedures made against Italy in 2019, Italy and France had decided to align their positions on the way they apply the reduction of the taxable basis in relation to the calculation of the VAT applicable on charter revenues, as detailed in our previous newsletter, as it was made clear by the Commission that no more fixed lump sum reductions on the taxable basis will be accepted starting from 2020 for such vessels.
As far as France is concerned:
We were expecting by the end of March the publication of the new French BOFIP (French official Tax Bulletin) laying down the new rules applicable starting from 1 April 2020.
While no BOFIP was published, we understand following the announcement made by FIN (French Nautical Federation) on 25/03 that the reform shall be postponed until further notice due to the Covid 19 situation. An official announcement shall be made in the next days.
You will find below the link to the announcement made by the President of the FIN (French Nautical Federation) as well as a free English Translation:
Applicable VAT Regime on charter hire: the Federation obtains a postponement of the new measure.

Following constructive contacts with the office of the Minister of the Economy, the FIN informs the professionals in the nautical sector of the suspension of the reform project aimed at modifying the 50% lump sum VAT reduction that applies when navigation outside the territorial waters of the European Union occurs during a charter.

"For several months now, we have been working in close coordination with the Government services on this subject. Until the Covid-19 crisis, we were moving forward on a common position with our Italian counterparts. This work will resume after the health crisis. We have pleaded with the government for the suspension of the measure that should have applied on 1 April. This is a relief today. This decision should be made official in the next few hours," said Yves Lyon-Caen, President of the FIN
As far as Italy is concerned:
Italy had until the end of February to publish a new circular to confirm the new calculation mode and elements of proof to be retained. While no official text has been publish so far we do not know for now whether Italy will follow France in this period where all the country is under lockdown restrictions. Most likely no changes will occur while the Covid 19 lockdown restrictions remain in force.
Rosemont will continue to keep you informed of any further developments.
Be strong and stay safe during this period.

For more information on the topic please contact Janet Xanthopoulos at