The Belgian VAT exemption has been restricted since December 2017 upon request of the European Commission. While article 148 of the EU VAT Directive provides in a VAT exemption for “vessels used for navigation on the high seas” the Belgian VAT exemption only spoke of ‘seagoing vessels[1] so that it did not matter whether those vessels were effectively used for an activity on the high seas. This interpretation was considered too broad and thus not in line with the EU VAT Directive.

The change whereby the effective usage of the vessels on the high seas is required is also in line with established ECJ case law (e.g. the Elmeka and Commission v. France cases) which ruled on the scope of this VAT exemption. How the concept of ‘navigating on high seas’ will be tested is unfortunately still unclear as Belgian VAT authorities are currently still working on (much needed) guidelines. Note in this respect that the term ‘high seas’ refers to any part of the sea outside the territorial waters of any country that is beyond the 12 nautical mile limit, measured from baselines defined according to the International Law of the Sea.

The additional criterion of ‘navigating on high seas’ could not only have a major impact on the VAT treatment of the supply of certain vessels, but also on services and supplies provided to these vessels such as maintenance, bunkering and other.