A yacht operated commercially can be bought, repaired and supplied free of VAT, and its fuel is subject to a zero excise rate, on four cumulative conditions: at least fifteen metres, registration as a commercial vessel, a permanent crew, and at least 70% of navigation outside territorial waters, proved every year.
A yacht owner has a choice between two situations. Either the boat remains a pleasure vessel, reserved for him and his family, and he pays everything: VAT on the purchase price, VAT on repairs and maintenance, tax on fuel. Or the boat is operated as a commercial vessel, chartered to clients with its crew, and those three charges disappear. On a fifteen-million vessel, the difference runs into millions.
This second status is not obtained by ticking a box. It is proved, year after year, by sailing. The regime is known in broad outline: a commercial vessel used for navigation on the high seas can be bought, repaired, chartered and supplied free of VAT, and its fuel is subject to a zero excise rate. Less well known are the four cumulative conditions that govern this treatment, the way the administration counts voyages, and the fact that the operator who signs the certificate given to its suppliers personally undertakes to pay the VAT if one of the conditions is not met. The regime is not generous. It is documentary.
What commercial status allows, and what it does not
Article 262, II, 2° of the General Tax Code exempts supplies, repairs, conversions, maintenance, chartering and hiring of vessels used for commercial navigation and assigned to navigation on the high seas. Point 3° adds objects incorporated into the vessel or used for its operation at sea, 6° supplies of provisions, including petroleum products, and 7° services supplied for the direct needs of the vessel and its cargo: pilotage, towage, mooring, use of port facilities, custody, safety surveys and insurance surveys.
The exemption therefore covers almost the whole economic cycle of the vessel. It does not cover the transaction that matters most to a yacht owner: making the boat available to a client who uses it for pleasure. The Court of Justice so held in Bacino Charter Company (CJEU, 22 December 2010, case C-116/10) and the administration adopted this in paragraph 180 of BOI-TVA-CHAMP-30-30-30-10: hiring and chartering consisting in making a vessel, with or without crew, available to persons for pleasure trips are not exempt, even where the cruise takes place on the high seas, as long as those persons do not themselves use the vessel for a paid activity. The company operating the yacht therefore buys free of VAT and invoices with VAT. That is the normal structure of the regime, and it is also the first thing many structures presented as optimised have misunderstood.
The four conditions, and the fifteen-metre threshold
The statutory text uses just two expressions: commercial navigation, high seas. The administrative guidance is precise. In paragraph 10 of BOI-TVA-CHAMP-30-30-30-10, it covers vessels with a length overall of fifteen metres or more that cumulatively meet four conditions: being entered as a commercial vessel in a commercial register, which for a foreign flag means recognition by a foreign authority of the commercial use; having a permanent crew; being used for the needs of a commercial activity; and carrying out at least 70% of all their navigation outside national territorial waters.
These criteria were not dreamt up in an office. They are France’s response to the judgment of 21 March 2013 in which the Court of Justice found against France for failure to fulfil obligations (case C-197/12), on the ground that it exempted boats without checking that they were actually used for navigation on the high seas, whereas article 148 of Directive 2006/112/EC makes that use a condition of the exemption and exemptions are interpreted strictly. Since then, the classification is no longer inferred from a registration: it is demonstrated by sailing.
A point of vocabulary deserves weighing, because it decides whole files. The four conditions are cumulative, which means that a 32-metre yacht on the Maltese register, with a crew of eight on annual contracts, operated by a company that genuinely invoices its charters, loses the benefit of the regime for the whole year if its trips outside territorial waters fell to 64% the previous year. No proportionality. No tolerance. The threshold is a guillotine.
How the 70% is counted
Paragraph 20 of the guidance gives the mechanics: the percentage is the ratio between the number of voyages during which the vessel leaves French territorial waters during the previous calendar year and all the voyages made in the same period. It is calculated every year. If it reaches 70%, it gives entitlement to the exemption for the following year; if it falls below, the exemption ends on the following 1 January. A voyage is commercial navigation between two ports, during which loading or embarkation operations take place in particular. Sea trials and delivery trips to the yard do not count, lacking a commercial purpose.
Paragraph 30 is the least quoted and the most costly. For a vessel made available with crew for the client’s pleasure, a charter contract is a single voyage as long as no new passenger embarks and no passenger disembarks for good during a call; otherwise as many voyages must be counted as the contract has calls. In concrete terms: a week between Cannes and Saint-Tropez with the same group on board is one voyage, which does not leave territorial waters and therefore weighs on the wrong side of the ratio; the same week with two couples joining at Bonifacio and leaving from Porto Cervo becomes several voyages, some of which cross the line. The composition of rotations, decided by a base manager or a central agent who knows nothing of tax law, determines the VAT regime of the following year.
The same paragraph adds a requirement that Mediterranean operations underestimate: the exemption only applies if trips at sea are the vessel’s main activity compared with its activity at the quay, which is presumed where quayside hire contracts represent less than half of the contracts concluded in the year. A yacht hired for parties during the film festival, moored at the Quai Max Laubeuf, generates turnover and destroys its status.
The burden of proof, finally, lies on the operator, on its own responsibility and subject to the administration’s right to audit: sea log, logbook, GPS records, track printouts, AIS data. An owner who does not keep these records year after year does not have a problem of proof; he has an indefensible position.
The certificate: who will pay if the audit goes wrong
The practical mechanism is described in paragraph 140. The operator gives its suppliers a certificate drawn up on its own responsibility, certifying that the vessel meets the conditions, by which it undertakes to pay the VAT if they are not met. A model appears in BOI-LETTRE-000235. The yard that rebuilds the propulsion, the supplier, the tender hire company invoice free of VAT on the strength of this document, after noting the number and date of the francisation deed or customs registration, as required by articles 42 to 46 of Annex IV to the General Tax Code.
Where the vessel is new or has just changed hands, the operator may give a provisional certificate if it considers the 70% condition will be met. If it is wrong, it loses the exemption for the following year and must regularise the exemption it has enjoyed. The scenario always unfolds the same way: an operating company formed in the spring, a vessel delivered in June after a refit whose VAT-free invoice exceeds a million, a first season cut short by a propulsion problem, two charters cancelled, a few day trips and a handful of quayside hires during the festival; on 31 December the ratio is not 70% but 45%, the provisional certificate given to the yard, the supplier and the manager has turned into an undertaking to pay, and the owner discovers that the reassessment covers all transactions invoiced free of VAT since the vessel entered service, with interest. The risk therefore lies not with the yard but with the owner, and it materialises all at once, over several financial years, with late-payment interest.
That is why I advise against having these certificates signed by the captain or the management company without the owner having seen the calculation. This document is not an administrative formality: it is a personal tax guarantee given to the State on the basis of navigation statistics that nobody on board regards as a legal exercise.
Fuel: a zero rate, a condition of inherence
The second advantage of commercial status is fuel. Since the recodification of energy taxation, the subject is in the Code of Taxes on Goods and Services. Article L. 312-55 applies a reduced excise rate to products consumed for maritime navigation within the meaning of article L. 5000-1 of the Transport Code, where the journey is inherent in the carrying out, by the user of the floating craft, of an economic activity or in the performance by public authorities of non-economic activities. The table in article L. 312-48, as amended by Act no. 2026-103 of 19 February 2026, sets this reduced rate at zero euros per megawatt-hour for commercial maritime navigation.
Zero, then, but on a condition that is not that of VAT. The text says nothing about fifteen metres or 70%. It speaks of inherence: the journey must be inherent in the economic activity of the person using the vessel. An empty transfer to the port where the charter begins fits this logic. A pleasure cruise paid for by the client who uses it for his own enjoyment, by contrast, places the user outside any economic activity, and that is exactly the line drawn by the Bacino case law for VAT. The two regimes do not overlap, but they are checked with the same documents, and a file that collapses on one side usually collapses on the other.
Supplies of petroleum products also fall under article 262, II, 6° of the General Tax Code for VAT, with their own customs formalities, the exemption being justified by the customs declaration kept by the supplier, to whom the operator’s certificate must be presented.
The Cour de cassation has just set the test in a decision of 16 September 2026, to be published in the Bulletin (Cass. com., 16 September 2026, no. 24-19.047). The excise exemption is assessed by reference to the use made of the vessel by its end user, hirer or charterer, and chartering or hiring a boat for pleasure purposes does not qualify, in line with the case law of the Court of Justice (CJEU, 16 September 2021, case C-341/20). The Court reserves contracts which, under the name of charter, provide a package of services comparable to that of a cruise ship to parties who are only passengers with no control over the use of the boat, and it requires the lower courts to examine each contract. Duty-free fuel is therefore justified contract by contract, not by the vessel’s commercial status alone.
Change of use, or the deferred bill
Finally comes the situation owners discover at the worst moment, that of resale or return to family use. Article 257, III, 2° of the General Tax Code subjects to VAT vessels that have benefited from the exemption and cease to be used exclusively for the purpose that justified it. The guidance expressly covers, in paragraph 130, a vessel registered as commercial that changes its maritime registration, even outside national waters, and returns to France registered as a pleasure vessel without having been sold or hired and without any change to the vessel or its identifiers. It adds that failure by the beneficiary to meet the conditions of paragraph 10 is itself a change of use justifying reassessment of the VAT from that beneficiary.
In other words, an owner who bought a twelve-million yacht free of VAT in 2022, operated it for three seasons under commercial registration, then switched it back to pleasure because charters no longer covered costs, must reckon with a regularisation on a far from symbolic base. It is the most expensive and least anticipated split in the subject: commercial status is taken in a day, and left with a bill.
What changes on 1 January 2027
Practitioners must take account of a change of references. Ordinance no. 2025-1247 of 17 December 2025 recodifying VAT repeals article 262 of the General Tax Code from 1 January 2027 and transfers the subject to Book II of the Code of Taxes on Goods and Services, articles L. 200-1 to L. 256-12.
A point of timing is needed, because it has already caused errors in notes published this spring: the switch was initially set for 1 September 2026, and that is the date used in last February’s administrative commentary. Article 17 of Ordinance no. 2026-671 of 27 July 2026 postponed it to 1 January 2027. At the time of writing, article 262 is therefore still the applicable text, and Book II of the Code of Taxes on Goods and Services exists only in the future version of the Code. The recodification makes no substantive change, and the report to the President of the Republic states that the administrative commentary consolidated in the official tax bulletin will remain fully enforceable even without updated references, correspondence tables being due for publication.
Nothing therefore changes in substance, which is good news for audits of earlier years. But certificates, charter contracts and yards’ general terms of sale almost all refer to article 262 of the General Tax Code. These documents will have to be revised, and experience of previous recodifications, that of the Customs Code in May 2026 as that of energy taxation, shows that clauses not updated are the first to be disputed.
What the firm does
We act on three fronts. Upstream, to decide between commercial operation and private ownership before purchase, and to draft the documents that will carry the regime: charter contracts, management agreement, supplier certificates, tax clauses in the bill of sale. During operation, to build the annual evidence file, which means organising the collection of navigation data with the captain and the manager rather than reconstructing it three years later. And in disputes, to respond to a reassessment proposal, challenge the count of voyages, contest the characterisation as a change of use and, where the administration alleges deliberate failure, require the surcharge to be justified by something other than the mere existence of the reassessment.
The first meeting is used to find out whether the regime is sustainable. It often is, provided one accepts that the exemption is earned on the water, not in a status.
For a complete picture, our practical guide Yacht tax and customs: which status to choose, and at what cost? sets out the three statuses side by side, with the documents that prove each one and the cost of leaving it; it can be downloaded free of charge. To have your own situation reviewed, contact the firm.
Further reading: Late delivery of a new yacht: liquidated damages, termination, guarantees.
Frequently asked questions
Can a yacht under fifteen metres benefit from the VAT exemption?
The administrative guidance reserves the regime for vessels with a length overall of at least fifteen metres, in paragraph 10 of BOI-TVA-CHAMP-30-30-30-10. Below that, the exemption of article 262, II, 2° of the General Tax Code is refused, however genuine the commercial operation.
Does a foreign flag prevent the regime from applying?
No. For a vessel flying a foreign flag, commercial registration means recognition by a foreign authority of its use for a commercial activity. A yacht under the Maltese, Cypriot or Cayman Islands flag can therefore come within the regime, subject to the same conditions on crew, activity and navigation.
Why does the operating company charge VAT to its clients when it bought the yacht free of VAT?
Because the exemption covers transactions relating to the vessel, not the service sold to the client. Since the Bacino judgment of 22 December 2010, making a boat available for payment to persons who use it for pleasure is taxable under the ordinary rules, even on the high seas.
How is the 70% of navigation outside territorial waters proved?
By any means, on the operator’s responsibility: sea log, logbook, GPS position records, track printouts, AIS data. In practice, the evidence is built during the season, with a record for each voyage showing ports of departure and arrival, calls, embarkations and disembarkations.
What happens if the ratio is only reached every other year?
The exemption is assessed year by year, based on the voyages of the previous calendar year. A year below the threshold loses the benefit of the regime for the following year, without preventing a return to it later if the ratio is reached again.
Does switching the yacht back to pleasure after three charter seasons cost anything?
Yes. Article 257, III, 2° of the General Tax Code treats a change of use as a chargeable event, and the guidance expressly covers a vessel registered as commercial that returns to France registered as a pleasure vessel. The reassessment is claimed from the beneficiary of the exemption.
Does duty-free fuel follow the same conditions as VAT?
No, and this is a frequent source of error. The reduced excise rate, set at zero for commercial maritime navigation by articles L. 312-48 and L. 312-55 of the Code of Taxes on Goods and Services, requires the journey to be inherent in the economic activity of the vessel’s user. The fifteen-metre and 70% thresholds do not apply, but the same documents are used in audits.
Will the references change in 2027?
Yes, formally. Ordinance no. 2025-1247 of 17 December 2025 repeals article 262 of the General Tax Code on 1 January 2027 and transfers VAT to Book II of the Code of Taxes on Goods and Services. The recodification makes no substantive change and published guidance remains enforceable.
Hervé Guyader, avocat at the Paris Bar, doctor of law.
For a particular situation, the firm can be reached through its contact form.
Related analyses: proof of VAT paid, on the documents to gather before buying second-hand; temporary admission of a non-EU yacht, on the eighteen months and the resident too many; holding through a company, on what the structure protects and the 20% tax created in 2026; illegal charter, on what the administration takes back when a boat is chartered without commercial status.