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The ECJ has ruled that the hiring of yachts, with a crew, by individuals for leisure purposes may not benefit from the VAT exemption provided for commercial vessels operating on the high seas. (Case number 116/10 - preliminary ruling in Bacino Charter Company delivered on the 22 December 2010).
Bacino Charter Company SA (‘Bacino’) owned a vessel and made it available with crew for consideration to natural persons who used it for leisure purposes. Starting from the assumption that the transaction was exempt from VAT on the basis of the national provision implementing Article 15, paragraph 5 of the Sixth EU VAT Directive, Bacino did not pay any VAT. The Luxemburg tax authorities were of the opinion that the exemption could not apply due to the fact that it did not concern a vessel used for commercial purposes. In this regard, the Luxemburg Court of Cassation referred the preliminary question to the ECJ as to whether the service of making available a vessel for reward with a crew to natural persons for the purpose of leisure travel on the high seas is covered by the exemption of Article 15, paragraph 5 of the Sixth EU VAT Directive. According to the ECJ, it follows from the wording of the Directive that the vessel should be used by the lessee for commercial, industrial or fishing activities. Therefore, the lessee of the vehicle must use it for an economic activity as opposed to private purposes. Considering that the vessel was leased to persons who used it exclusively for leisure purposes, the service is not exempt from VAT.
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