France – Ruling on VAT Exemption Conditions for Commercial Vessels in 2021

Due to the current health crisis (COVID-19), the activity of commercial vessels in 2020 is not representative of reality and some vessels were not able to pass the 70% navigation outside French waters threshhold, a condition of the FCE (French Commercial Exemption). To compensate for this, the tax authorities exceptionally authorise vessels to assess compliance with the threshold on the basis of data for the year 2021 (n) instead of 2020 (n-1) just as they would for commisioning, changing owneership or starting an operation in France.

This measure concerns:

  • all ships, regardless of their flag/nationality (European Union, third countries and France)
  • vessels that have been active but have not been able to reach 70% navigation outside French waters during the year 2020
  • vessels that have had no activity during the year 2020

It is understood that vessels which have been able to comply with the 70% navigation outside French waters condition during the year 2020 are not affected by this measure. These vessels will continue to use their final certificate.

In practice:

In order to benefit from the exemption in 2021, commercial ship operators will be able to remit to their suppliers a provisional certificate drawn up themselves which certifies that the vessel will meet the 5 conditions listed below and that they undertake to pay the taxes if these conditions are not met. If the conditions are not fulfilled during the year 2021, a VAT adjustment will have to be made on the operations that benefited from the exemption. These adjustments will have to be made by the March 2022 VAT return. The authorities have clarified they will not apply penalties and interest for late payment.



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