VAT RATE FOR RENTING OR CHARTERING AN OFFSHORE YACHT

We have been approached by a client with a legal question regarding the settlement of VATon the rental of a sea yacht. According to the information obtained from the client, the beginning and end of the rental is to take place on the territory of the Republic of Poland, the yacht is to be registered under the Polish flag, it is to be rented without a crew with the possibility of organizing voyages with a crew in the future, it is to operate in the Baltic Sea and probably the North Sea, and the lessees are to be mainly natural persons from Poland. The client also supplemented his question with the issue of the VAT rate for chartering the vessel.

With regard to the first question, the regulations under Article 83(1)(1) of the VAT Law state that the 0% rate applies to the supply of the service of vessels used for navigation on the high sea sand carrying passengers for a fee. It should be analyzed here whether the situation in question meets both conditions described by the legislator. According to the information provided by the customer, the yacht is to be used for travel in the Baltic Sea, thus the first condition of the Act can be considered fulfilled. When analyzing the second condition, it is necessary to refer to the linguistic interpretation indicated, for example, in the PWN Dictionary of the Polish Language, since the Act does not explain the concept of “passenger.” According to this interpretation, the term “passenger” means “a person using a means of transportation,” which is undoubtedly the aforementioned yacht. There is no requirement here that a passenger use a means of locomotion to move between certain locations.On the contrary, Article 83(1)(1)(a) of the VAT Law states that the 0% rate applies to “seagoing cruise ships and similar vessels for the transportation of persons.” You can read more about this in an interpretation by the Director of National Tax Information dated December 22, 2021, number 0114-KDIP1-2.4012.504.2021.2.RM. Therefore, the second condition for the application of the 0% tax rate should also be considered fulfilled.

In answering the second question, reference should be made to the provision of Article 83(1)(12) of the VAT Law, which states that the 0% tax rate applies to services of renting, leasing or chartering vessels. At this point, however, it is necessary to remember to determine the entity required to tax the transaction, and thus the place where the service is provided. According to Article28b (1) of the VAT Act, the place of supply of services in the case of provision of services to a taxpayer is the place where the taxpayer who is the recipient of the services has its seat of business activity.The situation is slightly different in the case of short-term rental, i.e. for less than 90 days, because according to Article 28j, the place of supply of services for short-term rental of means of transportation is the place where these means of transportation are actually placed at the disposal of the service recipient. In the situation at hand, the yacht is registered under the Polish flag, and the means of transportation will actually be placed at the disposal of the service recipient in a bay inPoland, so in both cases taxation of the service will be in Poland at the 0% VAT rate.

In the situation presented, in the case of both the rental and charter of a yacht, the client, as a service provider, will be a taxpayer obliged to settle VAT in Poland at 0% for the yacht rental or charter service provided. In the present case, both statutory prerequisites for the application of the preferential VAT rate have been met. It does not matter whether it is a short-term or long-term lease, because in both cases the place of rendering the service will be the territory of Poland.

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