Taxation of international cruises in yacht charter and passenger transport 

In our previous article – Yacht cruise: tourist service, passenger transport or hire of a means of transport? – we analysed when a yacht cruise may be treated as a passenger transport service, when it may be treated as the hire (charter) of a means of transport, and when it may qualify as a tourist service. We also emphasised that the correct classification of the service is important not only from the perspective of regulatory obligations, but also for VAT settlements. 

In practice, however, classifying the service is only the first step. It is equally important to determine the place of supply and the correct VAT rate. This becomes particularly important in the case of international cruises, where the same service may be taxed under completely different rules, depending on its nature. 

Determining the place of taxation is what most often creates problems when organising international cruises. This applies in particular where the cruise: 

• starts in Poland and ends in another EU member state,
• starts in another EU member state and ends outside the EU,
• starts and ends outside the EU. 

Problems also arise because the rules for determining the place of supply are completely different for: 

• passenger transport services,
• short-term hire of means of transport,
• tourist services. 

In this article, we focus on the VAT rules for passenger transport services and the hire (charter) of yachts. Issues relating to tourist services, including the application of the VAT margin scheme, will be discussed in more detail in the next part. 

Passenger transport services 

Where a cruise is treated as a passenger transport service, the place of supply is the place where the transport takes place, taking into account the distances covered. 

This means that a passenger transport service may be subject to taxation in more than one country if the route passes through the territories of several countries.  

Cruises operated exclusively in Poland 

Where passenger transport takes place exclusively in Poland, the reduced VAT rate of 8% will apply. 

This applies, for example, to cruises starting and ending in Polish ports, where the route runs entirely through Polish territorial waters. 

Cruises between European Union member states 

Cruises operated between EU Member States are considerably more complicated. 

If the transport starts in one member state and ends in another, the place of supply remains the place where the transport is actually carried out, having regard to the distances covered. 

This means that the same service may be subject to taxation in several countries at the same time. This may lead not only to the need to register for VAT in different countries, but also to the need to determine what part of the route passed through the territory of each of them. 

Similar problems may arise where the cruise started and ended in Poland, but part of its route passed through the territorial waters of another country. In such a situation, only the part of the service performed in Poland is subject to taxation in Poland. 

At the same time, it may be necessary to determine: 

• which section of the route passed through the territory of another country,
• which part of the route took place in the territorial waters of individual countries,
• which part fell within international waters. 

International passenger transport services outside the EU 

Separate rules apply to international passenger transport. 

If the transport starts in Poland and ends outside the European Union, or starts outside the European Union and ends in Poland, the 0% VAT rate may apply. 

This is conditional on holding documents confirming the international nature of the transport, such as named tickets issued for a specific transport route. 

If the transport starts and ends outside Poland, the service is not subject to taxation in Poland. In that case, it is necessary to determine the tax rules applicable in the countries in which the transport is carried out. 

This position was confirmed, among others, by the Director of the National Revenue Information Service in the individual tax ruling of 20 December 2024 (ref. no. 0114-KDIP1-2.4012.466.2024.2.RST). 

Yacht hire and charter 

In the case of yacht hire or charter, determining the place of supply is particularly important. Only once this has been established is it possible to determine whether the service is subject to taxation in Poland, and, if so, at what VAT rate. 

As regards the place of supply, different rules apply to short-term and long-term hire. 

Short-term yacht hire and charter 

For short-term hire, the place of supply is the place where the means of transport is actually put at the disposal of the customer. 

The hire of a vessel is treated as short-term hire if it lasts no more than 90 days. 

In practice, the vast majority of yacht charters are short-term. For this reason, the rules on short-term hire are the most important for cruise organisers and charter companies. 

In practice, this means: 

• the place where the contract is signed is of secondary importance,
• the customer’s place of residence is not decisive,
• what matters is the place where the yacht is actually handed over,
• taxation may arise outside Poland, even if the service provider has its registered office in Poland. 

For example: 

• a Polish company may conclude the contract in Poland,
• the customer may be a Polish consumer,
• payment may be made to a Polish bank account,
• but if the yacht is handed over to the customer in Croatia, the place of supply will be Croatia. 

In such a situation, the service is not subject to VAT in Poland. However, it will be necessary to analyse the rules of the country in which the service is deemed to be supplied. 

If, however, the place of supply is Poland, the standard VAT rate of 23% will apply. 

Long-term yacht hire and charter 

Different rules apply to long-term hire, meaning hire exceeding 90 days. 

As a rule, where services are supplied to a consumer, the place of supply is the place where the consumer is permanently resident or usually resides. However, the regulations provide for specific rules concerning pleasure craft, including yachts. If the subject of the hire is a pleasure craft, the place of supply will be the place where the vessel is actually put at the disposal of the customer. This is subject to the condition that the service provider supplies the service from its registered office or fixed establishment located in the same place. 

Example: 

A Polish company operates a charter base in Greece and hires a pleasure yacht to an individual for six months. The customer permanently resides in Germany, while the yacht is handed over to them in a Greek marina from which the company carries out its charter activity. The country of taxation will therefore be Greece. 

Summary 

When organising international cruises, determining the place of supply often becomes much more complicated than classifying the cruise itself as transport, charter or a tourist service. A number of additional issues may then arise, such as: 

• the obligation to register for VAT in other countries,
• the need to determine the proportions of the route,
• documenting the course of the cruise,
• determining the place where the transport starts and ends,
• settling services performed partly outside the EU,
• determining the correct VAT rate. 

An additional risk arises from the fact that tax authorities increasingly analyse not only the formal business model, but also the actual economic nature of the supply. 

As a result: 

• the same cruise route may be taxed in completely different ways,
• organisational elements may be decisive,
• even minor changes to the business model may affect the place of taxation. 

For this reason, cruise organisers should analyse each time: 

• the cruise organisation model,
• the scope of additional services,
• the way in which participants use the yacht,
• the route of the cruise,
• the place where the vessel is handed over,
• the share of own services and services purchased from third parties. 

Only a combined analysis of all these elements makes it possible to correctly determine the VAT consequences and reduce the risk of the tax authorities challenging the adopted settlement model.