VAT: Leasing of pleasure boats

In the context of boat leasing, the tax regulations specify that VAT is only payable pro rata to the time the boat is used in EU territorial waters.

Two types of tax assessment system allow the usage time outside EU territorial waters to be taken into account:

- The fixed-rate tax assessment system : 50% reduction on the total leasing period, i.e. VAT equal to 9.80% on the total sum of the leasing payments.
- Full assessment system : VAT applies to leasing payments pro rata to the actual time spent sailing outside EU territorial waters.

“In accordance with article 259 A, 1° of the French General Tax Code, leasing of pleasure boats by persons domiciled in France or in a third country is subject to French VAT pro rata to the time the boat is used in EU territorial waters (where the lessor is domiciled in France) or French territorial waters (where the lessor is domiciled in a third country). In order to remove any uncertainties that may have arisen from Instruction 3 A-1-05 of 24-1-2005 (FR 6/05 2 n°10 p.5), the Service hereby makes clear that this Instruction does not interfere with the operation of the simplifying provision that allows lessors to measure this pro rata period in a purely fixed manner (period from now on fixed at 50% whatever the type of vessel or construction of the boat) nor does it bring back into question the methods of its application set out in the Giran reply of 1-6-2004 which provides that this fixed rate may be used by the lessor without his having to provide proof of the use of the leased item outside territorial waters (Rép. Giran: AN 19-4-2005 p. 4067 n°59015; MF n°4443).”
Source Francis Lefebvre – April May 2005

We would point out that the choice of assessment system (fixed or full rate) cannot be changed.

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Italian law on pleasure boating (fiscal aspects – VAT)

The legislation in question is Law n°50 of 11/02/1971 and the Italian navigation Code which governs pleasure boating (boating with no financial purpose).

In the context of a leasing agreement under Italian law, the basis for VAT is determined according to certain technical features of the boat.
Thereafter, VAT applies only to the sum of the leasing payments corresponding to sailings undertaken within EU territorial waters.


The rate of VAT applicable

We would nonetheless draw attention to the fact that the lessor of the boat undertakes, through a usage declaration, to sail outside EU territorial waters for the pro rata period specified in the above table and that this can be checked by the Italian authorities.

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