Update: VAT on French charters

We revert to you concerning the administrative instruction confirming the application of VAT on charters in France which is available at:
The document is somewhat technical, but we have informally translated the key sections:

25/06/2013 : TVA – Locations de bateaux à des fins de voyages d’agrément – Jurisprudence (CJUE, aff n° C-116/10, Bacino Charter Company SA du 22 décembre 2010)
[25/06/2013: VAT – Hire of vessels for leisure purposes (ECJ decision on the Bacino Charter Company SA case [Case c-116/10] of 22 December 2010)]
First page:
The European Court of Justice (ECJ, Bacino Charter Company SA case [Case c- 116/10] of 22 December 2010) ruled that chartering activity of vessels for leisure purposes cannot benefit from the value added tax exemption set out in Article 15(5) of the Sixth Council Directive 77/388 EEC as recasted in article 148 of the Council Directive 2006/112/CE of 28 November 2006 on the common system of value added tax.
Value added tax will be applicable on charter of vessels used for leisure purposes from 15 July 2013.
Second page:
However, the exemption does not apply to hiring and charter operations consisting of making a vessel available with or without crew for reward, to persons for leisure use, including when such operations occur on the high seas, and which persons do not use the vessel themselves for an economic activity (Bacino Charter Company SA case [Case c-116/10] of 22 December 2010). These hiring and charter operations are therefore subject to VAT, following the general rules which apply to vessels in private leisure use.
Operations carried out by intermediaries in between the operator of the vessel on the one hand, and the end user who is engaged in private leisure use, are also subject to VAT under the same conditions.
These new regulations will apply to hiring and charter agreements for purposes of leisure travel entered into from 15 July 2013.

Questions arising:
What rate will apply to French charters after 15 July?
In relation to yacht chartering the applicable VAT rate is 19.6%, however the taxable base can be reduced by 50% as the yacht can be used outside the EU waters . This method is already applied for the French leasing scheme (long term hiring service) where the time spent outside the EU waters during the charter period cannot be determined. The French Administrative instruction 3-A-I-05 of 24 January 2005 explains how to determine the VAT basis for hiring of pleasure vessels.
Does it apply if the charter starts and ends outside France?
No. The VAT is applicable on charter if the vessel is put at the disposal of the charterer in French waters.
If we sign the contracts for the 2013 charters before 15 July, what about the payments? Do these need to be made also before 15 July?
The administrative instruction explains that it applies to charter agreements for private or pleasure use entered into from 15 July 2013. Payment is not legally required for charters concluded prior to 15 July but we recommend that payment be made before this date.
Is it possible to sign charter agreements and release deposits for the 2014 season prior to 15 July so to avoid paying the VAT?
In light of the administrative instruction, the owner could book and pay before 15 July 2013 for 2014 or 2015 in order to avoid paying VAT on charter contracts carried out after 15 July 2013. However, this practice might be treated by the French Tax authorities as an abuse of right (abus de droit) and the French authorities might consider that VAT would be due on these charters. The signature of charters in anticipation with the sole purpose of avoiding the application of VAT and the expected increase of the normal VAT rate can be seen as an act which distorts the scope of the tax legislation.
We will need assistance with VAT registration and compliance in France. Do Ince & Co provide this type of service?
Yes, we can assist and advise in respect of VAT registrations and compliance with VAT obligations. We can also organise ongoing fiscal representation.