Turnover for maritime shipping is considered a zero-rated turnover. This includes the supply, conversion, repair, maintenance, chartering and rental of watercrafts for maritime shipping or for the rescue of shipwrecked persons as well as items intended for equipping watercrafts covered by the regulation, including their equipment and cargo.
The zero-rating is generally dependent on the fact that the transactions are carried out directly to operators of a seagoing vessel or to the company responsible for rescuing shipwrecked persons. It can only be extended to supplies from previous stages if, at the time of supply, their final use for the needs of a seagoing vessel is certain and the final destination is already traceable on the basis of general compliance with tax accounting and recording obligations (documentary and accounting evidence) and compliance with retention obligations. If further control and monitoring mechanisms are necessary to prove the use of the supply, the zero-rating does not apply and German VAT is due.
In its ruling of 19 December 2024, the Federal Finance Court (BFH) ruled that the leasing of special vehicles (so-called trim caterpillars) to a port handling company that unloads seagoing vessels with the aid of the special vehicles does not fall under the zero-rating. Supplies of services intended for the immediate needs of watercraft are only zero-rated if the entrepreneur provides its service to the ship operator. A supply of service provided by the entrepreneur at a commercial stage preceding this supply is only zero-rated if the supply of the service at the preceding stage can be considered certain for the above-mentioned needs without the introduction of control and monitoring mechanisms. The zero-rating was denied with regards to the leasing of the special vehicles to the port handling company, which was not the operator of seagoing vessels but used the leased special vehicles to unload cargo from seagoing vessels and thus itself supplied services to ship operators, since the determination of the use of the special vehicles for the immediate needs of watercraft, including their cargo, cannot be regarded as certain. The determination could not have been made without the introduction of control and monitoring mechanisms, as rented items can in principle be used for any purpose. This applies even in the case of a contractually agreed exclusive purpose.
Practical implications
The zero-rating for maritime shipping for supplies from previous stages is subject to strict conditions. If it is not possible to dispense with control and monitoring measures, the zero-rating is denied. While the zero-rating for supplies of goods for the operation of a sea-going vessel (e.g. marine diesel fuel) can certainly be achieved via several upstream trading stages, this is not the case for services provided to a ship management company that carries out the zero-rated transactions. It is therefore advisable, particularly for companies in the port industry, to examine all supply and service chains from a VAT perspective.