A (very) tricky question about EU VAT

[jjorio]

Hello all,

I'm posting this question after days of phone calls and reading ... so quite desperatly looking for any help or previous experience !

Here I go, I'm about to buy a boat in the Carribean :
- She has a Dutch flag from previous owner
- Always stayed in the Carribean since 1992
- No VAT paid
- Boat is located in Martinique FWI, where the transaction is going to take place
- The future owner is a UK ltd company (I own the company)
- The boat is going to be part I registered, coded (cat2) and used as a commercial vessel
- Charter will take place in the Carribean 6 months a year, and in the Azores and Balears 4 months a year
- I'm french resident

My questions are :
- As long as the boat stays in the Carribean, do I have to pay VAT (knowing that the owner is a UK business) ?
- If I do sail her to EU, to do some charter, will I have to pay any VAT upon arrival ?

Thank you !
Jaad

[atoll]

i would think the vat men would be gleefully waiting for you at your 1st eu port,however since it is uk owned and registered it can be argued that the tax can be paid in the uk,if only doing quick stops till arrival there.

,you can elect to pay vat in another eu country if you choose as we did and get a more favourable rate and appraisal,the main thing is that tax is paid somewhere,at the risk of the boat being siezed by customs in the meantime untill formalities are completed!

[jjorio]

Hi Atoll, thanks for your answer.
If I get this right, you're saying that I will have to pay EU VAT as long as I enter a EU contry ?
What about if I stay in the carribean ?

[boatman61]

Confused... why do you need UK registration... why not register her in Anguila a UK territory then you can do the lot without threat of VAT...

[jjorio]

Hi boatman61, if I register the boat in Anguila or BVI, I will not be able to do any charter in europe (Azores or Baleares).
As I'm trying to set up a business that does charter in the carribean, the Azores and Balears, I'm a bit struggling to find the best way not to have to pay VAT or other taxes in every country I visit ...

[boatman61]

Ok... UK registered boat... UK business... where will you be advertising... your customer base in other words...
From what you've said re 4mths for Azores and Balearic's thats gives you roughly 14 weeks in the EU covering both areas allowing for transit time between.
If your not advertising locally in the Azores etc wheres your problem... your not in Europe long enough... though you should remember that Martinique is French so you could trip up there..
Bite the bullet and pay the 15% in Horta,,

[jjorio]

Advertising on internet ... in french, spanish and soon english.
First customers I have come from france and Canada

[Zanshin]

Originally Posted by jjorio

My questions are :
- As long as the boat stays in the Carribean, do I have to pay VAT (knowing that the owner is a UK business) ?
- If I do sail her to EU, to do some charter, will I have to pay any VAT upon arrival ?

1 - no VAT is due on the boat in the Caribbean. I'm on my 2nd Part I UK registered boat in the Caribbean now. The first one was VAT paid, but I consummated the sale in the BVI so the VAT status disappeared (had I consummated the sale 70 miles further east in the French St. Martin I would have kept the VAT paid status, but I found out too late).

2 - yes, on your first port of entry into the EU they (might/will probably) as for a VAT paid receipt and if that is not forthcoming you will immediately have to pay VAT at the rate of the country where you clear in.

[jjorio]

Thanks Zanshin, that's very clear.
I heard about the sail away boat scheme that let UK resident to save VAT if the boat is kept outside EU. So you mean this also is ok for a company ?
Obviously you seem to be in this situation.
Are you running a charter business in the Carribean with a UK part I registered SY ?

[Zanshin]

jjorio - VAT payment/nonpayment is a factor of the vessel's location, not her ownership. As long as the yacht doesn't enter the U.K. or, by extension, any E.U. country, no VAT is considered due. It doesn't matter whether the owner(s) are natural persons or corporate entities.
I took a Part I registration so that I could show clear and unencumbered title and so that I could, if necessary, put a lien on the boat. I'm not chartering the boat out and thus didn't go for CAT2 coding as it isn't required for me.
The difficulty for you is that as soon as the yacht enters the E.U. and the owner (be it a corporation or natural person) is a resident then VAT is immediately payable. If the owner is a non-resident (I don't know how this can be proved for U.K. citizens) then one has a grace period within the EU before VAT is levied. Since the rules for registration stipulate either a U.K. citizen or a non-citizen residing in the U.K. can register a boat it limits choices, since a corporation can't be a citizen and thus would de-facto have to be a U.K. resident in order to own the boat and thus VAT would immediately be due. Registering the boat in the BVI (a red ensign country) as owned by a BVI corporation might be an option. For about $1000 a year in corporation and registration costs one could then enter the boat into EU for the 18 months (see http://www.eurunion.org/legislat/Art553to562.pdf) months grace period and not have to pay VAT. But I think that chartering in the EU then wouldn't be legal.

[David_Old_Jersey]

Originally Posted by jjorio

Hello all,

I'm posting this question after days of phone calls and reading ... so quite desperatly looking for any help or previous experience !

Here I go, I'm about to buy a boat in the Carribean :
- She has a Dutch flag from previous owner
- Always stayed in the Carribean since 1992
- No VAT paid
- Boat is located in Martinique FWI, where the transaction is going to take place
- The future owner is a UK ltd company (I own the company)
- The boat is going to be part I registered, coded (cat2) and used as a commercial vessel
- Charter will take place in the Carribean 6 months a year, and in the Azores and Balears 4 months a year
- I'm french resident

My questions are :
- As long as the boat stays in the Carribean, do I have to pay VAT (knowing that the owner is a UK business) ? - No. If the Boat is not imported into the EU (either by being based there permanently (no matter if owned by a Non EU person or company - and that would apply from day 1!) or by simply visiting when owned by an EU resident........then ownership is irrelevant).

- If I do sail her to EU, to do some charter, will I have to pay any VAT upon arrival ? This is not advice!, but my gut says yes for a couple of reasons (or a combination of):-

1) A UK company owned by an EU resident would likely be looked through to the ultimate ownership.....to you as an EU Resident.

2) If the UK company is also tax resident in the EU then that would be another reason to slap the VAT on (as soon the boat arrives in the EU) as the Boat would be owned by an EU resident.

3) If you were also picking up / dropping off punters inside the EU then VAT might be the least of your tax problems! - as the UK company would be trading inside the EU and therefore likely it should be a Tax resident somewhere (and making returns / paying tax)............but the good news (?!) is that if you are simply the owner of the UK Company (existing? or new?) then that ownership and it's trading activity probably should be declared to whichever country you make tax returns in (France?), whether or not the boat enters the EU or the trading activity happens in EU waters. Whether that creates a tax bill will depend on the tax rules you are subject to - but my gut says it won't be a tax free thing (if only for the reason that if it was that simple - every b#gger would be doing it ).

How you work around all that (to make sure you don't get any later surprises ($$$$) - if you rely heavily on "No one will find out" ) will be one for a professional tax advisor, not to "evade" any taxes but simply to make sure you don't shoot self in the foot accidently! Likely you will need (or simply want!) a tax accountant anyway .

My gut says using a UK registered company might simply confuse matters - but then again it might actually help! (if you are going for 110% straight). Might even be worthwhile seperating boat ownership from the trading (chartering) activities, and possibly even seperate companies for the EU Charter work and for boat ownership & non-EU business. or it might not .

Thank you !
Jaad

No doubt GBN will be along sooner or later with a better answer........and likely in less than 5 words .

[boatman61]

Originally Posted by David_Old_Jersey

No doubt GBN will be along sooner or later with a better answer........and likely in less than 5 words .

Sweet.....

[jjorio]

Hi all,
Thank you for your replies.
I've already set up a UK company, at least for the boat ownership, as this will let me register the boat in UK. Why ? because I'm holding Yachmaster Ocean STCW certificate, and cannot skipper a SY under a french flag (I'm a french national and resident), it is not an accepted professionnal title

I'm trying to do all this the straightest way, I'm not taking a chance wether I would be "catched" or not Not even talking about insurrance concerns ...

So my conclusions are :
- Keep my UK company for ownership (just received the survey and everything is fine !)
- As David said, ask for tax advice on who will be runing the charter business, maybe a french (Martinique) company as this is tax advantageaous
- Charter in the Carribean and do not pay EU VAT
- If I have enough chartered weeks sold in the Med, sail to the Azores, pay VAT, fill chartering autorization form the Balearic Gov (as this is where I would like to operate), and pay taxes on the business, probably in UK and Balears

Thanks again,
Jaad

[David_Old_Jersey]

Originally Posted by jjorio

If I have enough chartered weeks sold in the Med, sail to the Azores, pay VAT, fill chartering autorization form the Balearic Gov (as this is where I would like to operate), and pay taxes on the business, probably in UK and Balears

Thanks again,
Jaad

You may find that being registered for VAT turns out to be the best solution (one for your tax advisor!) instead of paying the boat VAT as could well be that if you taking on Punters in the EU (even if they travel from outside / are booked elsewhere) that you have to charge VAT anyway . or you might not .

The answer, as always, is out there . Whether it be commercially viable to jump through all the hoops (and write the cheques ) is a seperate thing. Although a PITA and will involve cost to find out the rules of the game, IMO discovering the rules in advance is the far better approach (and that applies just as much whether one is going 110% legit on something or not ). Good luck .

[goboatingnow]

DOJ beat me to it.

As a Uk company thats is using the boat as part of its business, ie charter , You should VAT register the company. Unfortunately when you import the boat from outside the EU, you will have to pay the VAT , but when you make your 3 monthly VAT return, you can reclaim the VAT. The boat remains VAT unpaid, if the company ever sells it ( to you or another VAT registered entity) then the going rate of VAT will have to be charged on the sale.

All costs of running the business ( with a few exceptions) which have VAT on them can also be reclaimed. ( spare parts , repairs, etc) However as a VAT registered company all your sales must charge VAT at the going rate. ie your charters must have VAT added.

You should only pay the VAT on the import , to UK Revenue, not anywhere else in the EU , this is both VAT law and its very awkward to reclaim foreign VAT. You may need a letter from Revenue explaining that you are bring the boat to the Uk for that purpose,

Obviously the business activity must substantiate the claim that this is a business undertaking, Other wise the boat will be deemed to be part of fully "self-supplied" and you will be liable for VAT.


Being a UK business, and having the boat based elsewhere, is a grey area, ensure you only process the money , ie charters fees through a UK address, do not take money locally, ( even so you can still run foul of certain regulations).


The rules often spoken about, regarding VAT, ( 18 month exemptions etc) all apply to non-business activities. You must ensure that your business activity can withstand scrutiny , for example a VAT inspection. ( get teh wife and kids off that day!!!)

( sorry not 5 words)

Dave