For VAT and customs, a yacht based in Monaco is treated as a yacht based in France: the Principality is part of the customs territory of the Union and its transactions are treated as French. For the courts, Monaco remains a foreign State: an arrest there follows Monegasque law, and a French judgment is enforced only after exequatur.
Port Hercule, Fontvieille: owners who base their yacht there often think that changing quay changes the regime. On two fronts, nothing changes. On a third, everything does. Monaco is French for the customs officer and the VAT administration, foreign for the bailiff and the judge, and most mistakes come from applying the logic of one to the other. We deal here with what French and EU law do to a Monaco-based yacht; Monegasque law as such is the province of the avocats-défenseurs of the Monaco bar, with whom the firm works when a case requires it.
VAT: Monaco counts as France
Article 7 of Directive 2006/112/EC takes Monaco out of the third countries and requires transactions originating in or intended for the Principality to be treated as transactions originating in or intended for France. The practical consequence is simple and often overlooked. A refit invoice issued by a Fontvieille yard to an owner established in Cannes is not an export. A charter embarking its guests in Monaco follows the same rules as a charter from Antibes: 20 % rate, tax only on the part of the voyage spent in EU waters, proof through AIS data, as we explain in our analysis of yacht charter VAT. Moving the embarkation from Nice to Monaco saves not a single point of VAT.
Customs: the Principality is inside the customs territory of the Union
Article 4(2)(a) of the Union Customs Code includes in the customs territory of the Union the territory of Monaco as defined by the customs convention signed in Paris on 18 May 1963, territorial waters included. A Marshall Islands-flagged yacht arriving at Port Hercule therefore enters the Union exactly as if it berthed in Antibes. The eighteen-month period of temporary admission for a pleasure vessel in private use (Delegated Regulation (EU) 2015/2446, art. 217(e)) runs from that arrival, and trips back and forth between Monaco and the French Riviera do not interrupt it: they never take the yacht out of the customs territory.
The most expensive trap lies in the owner’s residence. Total relief under temporary admission requires a yacht registered outside the Union in the name of a person established outside the customs territory, and used by such a person (Delegated Regulation 2015/2446, art. 212(3)). Yet a natural person with his normal residence in the customs territory of the Union is established there (Union Customs Code, art. 5(31)). Monaco being inside that territory, a Monaco resident is, for customs purposes, an EU resident. Take a British entrepreneur who moves to Monaco and keeps, in his own name, a thirty-five-metre yacht flagged in the Cayman Islands. The day his residence becomes Monegasque, the basis for temporary admission disappears. All he has left are the narrow exceptions of the regulation, including private and occasional use at the request of the registration holder, who must himself be in the customs territory (art. 215). A tax move to Monaco, decided for good reasons, thus turns the yacht into a potential customs debt: import duty and import VAT on its value. This is settled before the change of residence, not after the inspection.
Litigation: Monaco is a foreign State
The Principality is not a member of the European Union, and the Brussels I bis Regulation does not apply between France and Monaco. The circulation of judgments is governed by the Franco-Monegasque Convention of 21 September 1949 on mutual judicial assistance, published by Decree No. 53-253 of 24 March 1953. Its article 18 organises exequatur; the French Cour de cassation applies it by checking, among other things, the jurisdiction of the court of origin under the law of its own country and conformity with international public policy (Cass. 1re civ., 11 February 2015, No. 13-25.572). A judgment of the Nice commercial court ordering an owner to pay a shipyard is therefore not enforced against a yacht moored in Monaco without going through the Monegasque judge.
Arresting the yacht follows the same logic. If the vessel is at Port Hercule, the arrest is sought from the Monegasque judge, under Monegasque law, through an avocat-défenseur. A French judge has no grip on a quay in the Principality. But a yacht based in Monaco rarely spends the summer in Monaco: it cruises between Saint-Tropez, Cannes and Antibes, and it is often in a French port that the creditor waits for it, with the tools of French arrest law that we describe in our analysis of arresting a yacht for a non-maritime debt. Choosing the port of arrest is prepared like a choice of forum, because that is what it is.
What we check for a Monaco-based yacht
The actual residence of the owner and the user, in the customs sense rather than the tax sense; the date on which the yacht entered the customs territory, Monaco included; the characterisation of transactions invoiced from or to the Principality; and, in a dispute, where the yacht will be at the relevant moment. The firm handles the French and EU side of these cases as part of its yacht tax and customs practice and its yachting practice on the French Riviera, and coordinates the Monegasque side with a colleague from the Monaco bar.
Frequently asked questions
Is a yacht based in Monaco outside the EU for customs purposes?
No. The territory of Monaco is part of the customs territory of the Union (Union Customs Code, art. 4(2)(a)).
Can a Monaco resident keep a non-EU yacht under temporary admission?
In principle no, because he is established in the customs territory of the Union (art. 5(31)); only the narrow exceptions of Delegated Regulation 2015/2446 remain available.
Is a charter departing from Monaco subject to VAT?
Yes, under the same rules as a charter departing from France (Directive 2006/112/EC, art. 7).
Can a French judgment be enforced against a yacht in Monaco?
Yes, after exequatur by the Monegasque judge, under article 18 of the Franco-Monegasque Convention of 21 September 1949.