"French Leasing"

French Leasing is suitable only for

  • owners of yachts less than 24m length
  • who have a leasing period of 4 years and more, and remain permanently outside European territorial waters and
  • is possible only through leasing companies approved in France.

French tax legislation does not charge any VAT for leased yachts that remain outside European territorial waters.

Common rules indicate clearly that this special VAT for lessees is valid only if the leasing period is less than 90 days (identically as in Germany). After the ratification of the EU guidelines, § 3a III 2 VAT read in conjunction with the Federal Finance Ministry (BMF) utilization decree dated 9/2013 stands modified such that yacht leasing for yachts more than 24m long that spend more than 90 days at the place of residence of the lessee are to be taxed i.e., Germany at 19%. Thus, French Leasing as well as Italian Leasing are used in principle by owners and lessees who are EU citizens, only for small yachts!

There are two leasing models:

1. Leasing model

The first model leans directly on the text of the taxation law based on the actual use of the yacht, and is worthwhile especially for owners who go out on long cruises or have a permanent anchorage outside the European Union. At present, they pay 20% French VAT only for the time their yacht lies within the 12 mile zone of the territorial waters of the EU. The model is ideal especially for small yachts that have their own anchorage in the Caribbean (French and Netherlands Antilles). The tax is therefore computed over minimum 4 years as a mix between 0 and 20%, depending on the stay.

2. Leasing model

For all owners or lessees who are unable to prove convincingly with the help of log book records that they spent the required time outside EU territorial waters, there are rules that are supposed to simplify the process considerably. The second model is based on the provisional assumption of the French tax authorities favouring the leasing company that from the purely technical perspective, a sports boat is in a position to spend 50% of the time outside the 12 miles zone of the territorial waters of the EU. If the Leasing company faces difficulties in assessing the time frame, which brings the leased sports boat outside the territorial waters of the European Union, this may be evaluated with the tax authorities at a flat rate. An appropriate clarification must be demanded by the lessor from the lessee every year, because the liability of the acceptance by the tax authorities remains with the lessee. The lessor forwards the declarations only in the name of the lessee. The responsibility of minimum 50% stay (subject to audit) here too lies with the lessee. 50% lump-sum and using the yacht as house boot in EU territorial Waters therefore, is not possible.

At the end of the leasing period, the owner has the option of becoming the owner of the yacht. The final purchase Option price in turn is subject to the full regular French VAT.

Result:

French Leasing can be used only to a very limited extent. We see a risk which can hardly be underestimated, that leasing is possible only via leasing companies approved in France (mostly bank subsidiaries) with fixed design. The lessee therefore pays for a boat that belongs to the leasing company. If it goes bankrupt, as many examples show, the purchase option becomes worthless at the end of the financial lease. For this, the leasing commitment of minimum 4 years is rigid. Any other design is categorized by the French exchequer as purchase, and it increases not only the full VAT but also imposes 80% of the due tax again for misuse regulation.