VAT exemption not applicable to supply of offshore jackup drilling rigs

By Jeroen in ‘t Hout LL.M – International tax BCTS Netherlands

On June 20th, 2019, the Court of Justice (hereafter: “CJEU”) published its judgment in the case

Grup Servicii Petroliere SA (C-291/18) which has consequences for the VAT treatment of the supply

and provisioning of offshore jackup drilling rigs (hereafter: “jackup rigs”). The ECJ has ruled that

the supply of an offshore jackup drilling rig does not qualify as a sea-going vessel. This means on

the one hand that such drilling rigs cannot be (locally) supplied under the zero VAT rate and on the

other hand that supplies of provisioning goods and services related to such drilling rigs also no

longer qualify for the zero VAT rate. Given the considerable value of drilling rigs in general, the

impact on cash-flow and working capital should not be underestimated.

Businesses operating in the offshore and oil field services industry are advised to review contracts,

invoicing and ERP tax code set-up to ensure standard rated VAT is applied instead of the zero rate.

A wider review of all stationary vessels currently treated as sea-going is also recommended as it

may be expected that local tax authorities will apply a more restrictive view than just to jackup

drilling rigs.