VAT and short-term rentals: The tax reduction rule has been abolished
As a reminder, for service suppliers, the location whereby they are required to pay tax is contingent on the customer. However, this is not the case for all services, namely the hiring out of means of transport (including boats and aircraft, whether motorised or not) for short periods.
For the aforementioned type of service, the taxation location is France when the means of transport is effectively at the disposal of French customers. In the case of boats which are leased out in France, the amount of rent which is taxable is proportionate to the boat’s usage in territorial waters, as assessed by the person liable for payment. If difficulties arise in assessing this level, the doctrine allows for a 50% reduction on the total rental amount, irrespective of the type of vessel .
This rebate rule has been abolished after a new publication from the Directorate for Tax Legislation. From now on, the valuation must be determined by the actual time spent outside of territorial waters.
This assessment must be based on either :
- Automatic identification system
- For vessels less than 15m long : Logbook Data
- For vessels greater than 15m long : Technical data revealing the actual time spent outside of territorial waters
From now on, particular attention needs to be paid to technical data and the automatic vessel indentification system when leasing contracts.
Our team is at your disposal to explain the ramifications of this change in the doctrine.
For more information please email [email protected]