Web Alert: New Entry Criteria for vessels calling French ports

The French State has implemented new provisions regarding tax exemptions on commercial vessels of at least 15 meters in length, including yachts. The provisions came into force on the 1st January 2016. These provisions can be found in the Official Bulletin of the Tax-Public Finance of the French Republic (BOI).

New procedure

According to the BOI, merchant vessels are subject to VAT on port rights and some other services. However, merchant vessels with an LOA greater than or equal to 15 meters and which navigate in the deep seas, may be exempt from VAT when they meet the following cumulative conditions: 

• The vessel needs to be registered as a merchant ship on a commercial register (for ships flying a foreign flag it is understood the acknowledgement by the foreign authority that a particular vessel is assigned to a commercial activity satisfies this requirement);
• The vessel needs to have a permanent crew on board;
• The vessel is assigned to the needs of a commercial activity; and
• The vessel should carry out at least 70% of her trading outside the French  territorial waters during the previous year (from the 1st January to 31st December).

The French Administration has given some guidance as to the last condition stating that the 70% results from, on the one hand, the relation between the number of trips in which the vessel travels out of the territorial waters during a single calendar year and, on the other hand, all the trips during the same period.

As such, when the amount of trips out of territorial waters amount to more than 70% within the previous calendar year the vessel will be entitled to VAT exemption for the next calendar year. If this percentage is below 70%, then any exemption previously granted will cease for the following year.

For vessels performing specific activities (for example vessels employed in the tanker trade), the percentage of trade carried outside territorial waters can be determined from the average number of trips made during the last five years.

It should be noted that this percentage is determined by the vessel operators who are accountable for the declaration.

Production of a statement/certificate

According to the new measures, ship operators will have to provide the French Port Authorities with a new certificate stating that the vessel fulfils the above conditions while committing to pay the tax should the conditions of the exemption prove to have been unfulfilled. This certificate should be issued on the operating company’s official letter headed paper and provide the following:

The letter should include as a subject that it is a certificate of compliance with the VAT enforcement rules for exemptions in accordance with the article 262 of the General Tax Code (paragraphs II.2,II.3,II.6 and II.7).

The person signing the document should clearly state that they (providing their full name and capacity within the company) certify that the vessel (full name, registration number – IMO) fulfils the cumulative conditions for VAT exemptions provided in the article 262 of the General Tax Code (paragraphs II.2,II.3,II.6 and II.7), i.e. :

• Vessel’s LOA is in excess or equal to 15 meters
• Vessel is registered as a merchant vessel on a commercial register
• The vessel has a permanent crew on board
• The vessel is assigned to the needs of a commercial activity;
• That the vessel carries out at least 70% of her trade outside the French territorial waters.

The letter should also clearly state that non-compliance with the above conditions constitutes a change of assignment according to the paragraph II.2 of the article 257 of the General Tax Code which will justify a recall of VAT with the beneficiary.

The letter should state the place where it is issued and the date of issuance followed with the appropriate signature.

Members are advised to ensure that they fulfil the requirements as stated in the BOI and provide the Port Authorities with a new certificate stating that the vessel fulfils the above conditions to ensure compliance with the domestic regulations.

Members may also wish to keep up to date on the requirements through local agents prior to their vessel's call at any French port.

The Standard Club is always able to assist and members should not hesitate to contact their usual club representative, or the authors of this article, if they have any query in relation to this publication.

Thanks to Marie Gueit and Philippe Garo of McCleans for their input into this article.​