Owning a yacht through a company in France: what is deductible
French law treats yachts as luxury spending: article 39, 4 CGI bars deduction. The narrow charter exception, the separate VAT rules and the audit risk.
The short answer
- Principle: in principle, nothing. Article 39, 4 of the French General Tax Code (CGI) excludes from deductible charges expenditure of any kind arising from buying, hiring or otherwise obtaining the use of a yacht or pleasure boat, and from maintaining it.
- Exception: deduction is not refused where the company shows that its object is the sale or hire of yachts or pleasure boats, or the organisation of cruises for profit. That exception is read narrowly.
- Substance: what counts is the business actually carried on, not the objects clause. A clause added shortly before completion proves nothing on its own.
- VAT: value added tax follows its own rules. A corporate tax disallowance does not settle the input VAT question, and recovering input VAT does not validate the corporate tax position.
- Depreciation: depreciation disallowed under article 39, 4 is still taken into account when the short-term gain is computed on a later sale.
- Timing: the file is decided before the vessel is acquired. Once the boat is on the balance sheet and the season has been sailed, the facts are fixed.
A company is profitable, the director is looking at a boat, and someone suggests the purchase should sit inside the company. The intuition is that the company pays corporation tax, the boat is an asset, so the cost should reduce the tax base. Sometimes the question only arrives later, after a letter from the tax office.
French law gives a blunt answer. Yachts and pleasure boats sit in a small statutory category of expenditure that should never reduce taxable profit, whatever commercial justification is offered. That category, known as luxury or sumptuary expenditure, also covers amenity residences and hunting. The disallowance is not a question of proportion: it operates even where the general conditions for deducting a business expense are satisfied.
There is a genuine exception, and it is why the subject deserves more than a paragraph. A company whose actual trade is the sale or hire of pleasure vessels, or the running of cruises for profit, is not caught. That is also where many structures fail, because the line between a chartering business and a private boat wearing a commercial label is narrower than owners expect. See also our page on French yacht and pleasure boat law.
The starting point: article 39, 4 of the CGI
What the rule actually covers
Article 39, 4 of the CGI lists categories of expenditure excluded from deductible charges when taxable business profit is assessed. Three families appear in it: amenity or holiday residences, hunting and non-professional fishing, and yachts and pleasure boats, sail or motor. The official commentary restates the position plainly: expenditure of any kind resulting from the purchase, the hire, or any other operation carried out in order to obtain the use of yachts or pleasure boats, as well as their maintenance, is in principle excluded.
Two expressions carry the weight. Any kind means the disallowance is not limited to the purchase price and its depreciation: it reaches berthing, insurance, fuel, crew wages, management fees, winter storage, refit and survey costs and delivery voyages. Any other operation carried out in order to obtain the use is the anti-circumvention wording: buying, chartering in, taking a bareboat lease or entering into a finance lease all fall within the same net, because the rule targets the availability of the vessel rather than the legal form used to obtain it.
Why the corporate wrapper does not change the answer
Nothing prevents a company from owning a boat. What corporate ownership does not do is convert private consumption into a business expense. The disallowance applies to the company bearing the cost, whatever trade it carries on, and it applies to companies subject to corporation tax as well as to businesses taxed under the industrial and commercial profits rules.
In practice it takes the form of an extra-accounting adjustment: the accounts may record the depreciation and the running costs in the ordinary way, but those amounts must be added back when the taxable result is computed. The difficult part of the file is rarely the arithmetic. It is the characterisation of the use of the boat, and what follows from it at shareholder level.
The narrow exception: a vessel that serves the company's own trade
What the exception says
The published administrative doctrine states that deduction should not be refused where the undertaking justifies that it has as its object the sale or the hire of yachts or pleasure boats, or the organisation of cruises on a for-profit basis. Object is not read as a reference to the objects clause in the articles of association. It refers to the activity actually carried on: a dealer holding vessels for resale, a charter operator whose fleet is offered to the market, a sailing school, a cruise operator selling passages.
The exception is self-limiting. If the vessel is the object of the trade, the revenue it produces is taxable in the ordinary way and the activity has customers, pricing and competitors. If the vessel simply sits in a company that does something else, the exception has nothing to attach to.
The social purpose carve-out
A second and much rarer carve-out exists. The doctrine accepts deduction where the expenditure has a social character, meaning that it is incurred to run rowing, canoeing or sailing clubs created for the benefit of the whole workforce. That social character is to be assessed strictly. A vessel available to the management team does not qualify.
Racing boats used for promotion
Expenditure on boats specially equipped for racing and used exclusively to promote the business or its products may be examined under the sponsorship regime at article 39, 1, 7° of the CGI rather than under the luxury expenditure disallowance. This is a narrow, fact-dependent route concerning vessels built for competition and campaigned in identified events. It is not a way of recharacterising a cruising yacht.
What an inspector actually tests
An audit on this subject is not an argument about vocabulary. The inspector is testing whether a market-facing business exists. The first indicator is the identity of the customers: an activity that only ever contracts with the shareholder, with group companies or with a small circle of connected individuals is not offering anything to the market. The second is commercial exposure. A vessel genuinely for hire is visible: it has an availability calendar, it appears in the hands of central agents or brokers, and it turns bookings away when it is already taken. The third is pricing: rates far below the market, invoices issued but never paid, or amounts offset against a shareholder current account tell their own story.
The fourth is the economics of the activity over time. A loss in an early season is not fatal, and no business is required to be profitable. What attracts attention is a structural loss repeated year after year, funded by the same shareholder who uses the boat, with no sign of any attempt to price the activity so that it could break even. The question then is not whether the business is doing well but whether there is a business at all.
The fifth is the pattern of use, and this is where the logbook matters. Movement, crew, berthing and fuel records are contemporaneous and hard to reconstruct after the event.
What we see in practice
The structures brought to us usually share the same shape. A holding company acquires the vessel, an objects clause mentioning chartering is inserted a few weeks before completion, and a management agreement is signed with an operator. Then the first season passes: the owner and his guests use the boat in July and August, three weeks are chartered in September below market rate, and the accounts close on a heavy loss covered by the shareholder current account. None of that demonstrates a trade. When an audit opens, the first requests are almost always the logbook, the signed charter contracts with dates and hirers, proof that the vessel was marketed and to whom, and the profit and loss account of the activity taken on its own. Those four items decide most files. They also explain why the discussion belongs before the acquisition rather than three years later, when only the presentation of the facts is left to change.
VAT does not follow the corporate tax rule
Two separate analyses of the same facts
This is the point owners most often get wrong, in both directions. Article 39, 4 is a corporate income tax provision: it disallows an expense against taxable profit and says nothing about value added tax. VAT deduction rests on a different framework, namely whether the person is a taxable person carrying on an economic activity, whether the expenditure is used for transactions carrying a right to deduct, and whether a specific exclusion applies.
Two consequences follow. An expense may be disallowed for corporate tax while the input VAT question is examined on its own footing. And obtaining an input VAT credit does not immunise the corporate tax position. The two files rest on the same facts but are decided under different rules.
The VAT exclusions that apply to vessels
VAT has obstacles of its own. First, a general bar: a taxable person cannot deduct VAT on goods or services used more than 90 per cent for purposes unconnected with the business, under article 206, IV-2-1° of annexe II to the CGI. A boat used almost entirely by its beneficial owner falls straight into that provision.
Second, article 206, IV-2-6° of annexe II excludes from the right to deduct vehicles and craft of any kind designed to carry persons or for mixed use which constitute a fixed asset or are not intended for resale in new condition. The exclusion is assessed by reference to the design of the craft at acquisition, not to the use later made of it, and the published doctrine confirms that the analysis extends to maritime craft. The exceptions are limited. Sailing boats designed exclusively for competition fall outside the exclusion, following Conseil d'État case law, because of their construction, the navigation authorisations they require and the impossibility of certifying them as pleasure vessels. Undertakings carrying on public passenger transport may deduct on craft used exclusively for that purpose, and the doctrine mentions pleasure boats in that context. Outside those situations, the application of the exclusion to a given vessel turns on the characteristics of the boat, its status and the nature of the supplies made with it, and it is a question to settle before rather than after the purchase.
Private use and territoriality
Where a good has given rise to a deduction and is then used privately, French law taxes a self-supply of services under article 257, II of the CGI, and adjustments may be required if the pattern of use changes during the regularisation period. Private use by the beneficial owner is not neutral on the VAT side either.
The place of taxation of the hire has its own rules. The hire of a pleasure boat is taxable in France where the vessel is actually placed at the hirer's disposal in France. Since 1 November 2020 the flat abatement that used to reduce the taxable base of such hires has been withdrawn: only the part of the hire corresponding to actual use outside European Union waters escapes French VAT, and that use has to be established.
What we see in practice
The second recurring pattern involves a foreign company, often set up years earlier for reasons unconnected with boats, into which the vessel is later placed. The owner is told the structure is neutral because the company is not French. It is not neutral. The vessel is based in France, the crew is engaged in France, the charters begin in France, and the beneficial owner spends his summers on board. When we review such files, the first things we ask for are the inspector's own list: the logbook, the contracts, the evidence of marketing, the accounts of the activity. What we generally find is that the commercial story was written after the fact. That is why we say, without any promise as to outcome, that the useful conversation happens before the vessel is bought, while the intended use, the funding and the economics of the activity can still be shaped coherently.
What a reassessment costs
At company level
As a general rule the reassessment period for corporate income tax and for VAT runs until the end of the third year following the year in which the tax became due, under articles L. 169 and L. 176 of the Book of Tax Procedures. Within that window the disallowed costs and depreciation are added back to taxable profit, corporation tax is recalculated, and late payment interest applies under article 1727 of the CGI. Where the breach is treated as deliberate, the 40 per cent penalty at article 1729 of the CGI may be applied, and the 80 per cent penalty is reserved for fraudulent conduct and for abuse of law. The abuse of law procedure at article L. 64 of the Book of Tax Procedures targets artificial arrangements and arrangements whose sole purpose is tax, while article L. 64 A extends a similar analysis to arrangements with a mainly tax purpose.
There is also a point owners overlook on exit. Depreciation excluded under article 39, 4 is still taken into account when the short-term capital gain is computed on a later sale, under article 39 duodecies, 2-a of the CGI. The company never obtained relief, yet the tax written down value is still reduced.
At director level
The company side is often the smaller half of the problem. Where the vessel has been made available to the director or the beneficial owner without adequate consideration, the value of that availability may be characterised as a benefit in kind subject to income tax and social contributions, or as a deemed distribution. Article 111, c of the CGI covers hidden benefits, and where distributions are established on a reassessment the uplift at article 158, 7 of the CGI may apply to the amounts taxed in the individual's hands. The same facts can therefore produce a corporate tax reassessment, a VAT reassessment and a personal reassessment, each with its own interest and penalties. Non-tax consequences follow as well: the accounts have to be corrected, lenders with balance sheet covenants take an interest, and any later sale is slowed by a purchaser's due diligence.
Foreign companies and non-resident owners
Incorporating outside France does not remove the French questions. Where the company is in fact managed from France, its place of effective management can make it resident for French tax purposes, and an activity carried on through a fixed place of business can create a permanent establishment. The VAT questions attach to the place where the vessel is put at the hirer's disposal, not to the place of incorporation. Crew engaged in France raise employment and social security questions, and the annual tax on maritime craft used for personal purposes applies on its own criteria. Tax treaties allocate taxing rights between states; they do not repair a structure without substance, and they do not stop an inspector asking who actually uses the boat.
The moment the file is decided
There are two coherent positions and a large uncomfortable space between them. The first is private ownership, accepted as such, with the cost treated as personal expenditure and the tax question closed. The second is a genuine commercial operation, structured as a business, offered to the market, priced to make sense, with its own accounts and customers, and with private use of the beneficial owner treated as what it is and paid for. The space in between, where a private boat is dressed in commercial clothing, is where reassessments are made.
Choosing between them is a decision to be taken before the vessel is acquired, because the acquisition fixes most of the facts: the buyer, the funding, the flag and regulatory status of the vessel, the contractual chain and the intended pattern of use. Where the position is genuinely uncertain and the intended activity is real, French procedure allows a taxpayer to seek a formal ruling from the tax authorities before implementing an arrangement, and that route is not available retrospectively. No adviser can guarantee how an audit will turn out. What can be done is to know, before signing, which of the two positions you are in.
Frequently asked questions
Can my company simply add yacht chartering to its objects clause?
Adding a clause is easy and, on its own, achieves nothing. The exception is applied by reference to the activity actually carried on. A clause inserted shortly before the purchase of a vessel that is then used privately tends to attract attention rather than deflect it.
Is the answer different for an SAS, an SARL or a foreign company?
No. Article 39, 4 applies to the taxable result of the business bearing the expenditure, whatever its corporate form. A foreign company owning a vessel based in France faces the same questions, plus others about its residence, any French permanent establishment and French VAT on the hires it makes.
Can I use the boat myself if the company genuinely charters it out?
Owner use is not automatically fatal to a chartering activity, but it is never free. It has to be treated for what it is: either a charter at market rates paid in the ordinary way, or a benefit with income tax, social contribution and possibly VAT consequences. What defeats structures is the scale of owner use relative to third-party use.
If I recovered VAT on the purchase, is the yacht deductible for corporate tax?
No. The two questions are decided under different provisions. An input VAT position does not settle the corporate income tax treatment, and an article 39, 4 disallowance does not by itself determine the VAT analysis. It is possible to be reassessed on one and not the other.
What happens to the disallowed depreciation when the boat is sold?
It is still taken into account when the short-term capital gain is calculated on disposal, under article 39 duodecies, 2-a of the CGI. The relief was never obtained, but the tax written down value is still reduced, so the gain on sale is larger than an owner expecting symmetry would assume.
How far back can the tax authorities go?
As a general rule, for corporate income tax and VAT, until the end of the third year following the year in which the tax became due, under articles L. 169 and L. 176 of the Book of Tax Procedures. Longer periods apply in specific situations, in particular where an undisclosed activity is established.
Is leasing the vessel treated differently from buying it?
No. Article 39, 4 covers the purchase, the hire and any other operation carried out in order to obtain the use of the vessel. Finance lease rentals and charter-in costs fall within the same disallowance, because the rule targets the availability of the boat rather than the route used to obtain it.
Conclusion
The French rule on yachts held in companies is one of the clearer provisions in the tax code and one of the most frequently misunderstood by the people it applies to. The default is non-deduction, the exception is genuine but narrow, and it is tested against the reality of a trading activity rather than against documents. VAT is governed by its own provisions and reaches its own conclusions on the same facts. The consequences of getting it wrong are spread across the company, its shareholder and, on exit, the sale itself. None of this means a boat cannot sit in a company. It means the decision should be taken with the tax analysis in front of you, before the purchase, and with an honest view of how the vessel will be used.
About the author
Guillaume Leclerc is an avocat admitted to the Paris Bar, practising through SELARL Victoris, 34 Avenue des Champs-Élysées, Paris. His practice covers yacht and pleasure boat transactions, financing, tax and disputes, from sale and purchase agreements to charter arrangements, brokerage issues and litigation. He works in French and English and handles files remotely by video conference for clients based in France, Switzerland and abroad. See our page on French yacht and pleasure boat law or get in touch through the contact page.
Last reviewed: September 2026.
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