Canadians Buying Foreign-Made Boats in US

[DutchProf]

Hi -
I am relatively new on this forum, although I have been 'lurking around'... I have learned much, and appreciate the excellent access to sound info.

Perhaps, I am going off-thread - not intentionally - if excessively so, I apologize in advance: My question is what happens when a US citizen buys a Canadian registered vessel that is physically located in the US (FL), and assumes ownership?

The specific vessel is eligible to be US documented. "Re-registration"? Do import duties apply? What are the pitfalls? Are there "title-issues" one should be concerned about? Am buying through a broker, located in Canada - where should I turn to find info on applicable costs? Problems? Risks?

Thanks for any info anyone may be able to offer!

[Krawdad]

I realize this is an old thread but I wanted to clear up a couple of comments made here that may wrongfully influence the decision of others based on erroneous information . Gord May had it right, a Canadian with his USA boat is at home but the boat is visiting.

A/If a Canadian purchased a boat in the USA and registered it in Canada with the intent to leave it in the USA, there will be no tax or duty payable to anyone providing the vessel has a USA Cruising Permit and it is taken out of USA waters for 10 days each year. However, if you were to bring the vessel into Canadian waters you would be deemed to be importing it and all taxes would be due and payable. (That said, I doubt Canada Customs would hassle anyone who could prove they were only home visiting for a short stay and that the vessel was being immediately taken back out of the country..... but I would get their blessing before I did it) There are instances where it could be brought to Canada in bond for repairs or sale but these instances have too many restrictions to be useful beyond their intended purpose.

B/ If a Canadian purchases a vessel in the USA and registers it in the state of his choice, say Florida and pays the 6% Florida tax (or no tax in the case of Delaware) the boat remains a USA flagged boat. The fact a Canadian owns it is entirely irrelevant. If the Canadian owner of this USA registered and flagged vessel wishes to take it into Canadian waters he may do so anytime he pleases without being hassled for Canadian taxes. However his USA vessel must abide by all the rules and Regs that any visiting yacht from the USA must abide by. That means checking into Canadian customs and abiding by the length of stay requirements that any foreign vessel is subject to.

Some have suggested that a "Canadian owned" USA registered vessel can never be brought to Canada. This is nonsense, there is no such law written anywhere either Federally or Provincially neither could there be. The simple fact is it remains a visiting foreign vessel regardless of the nationality of the owner or captain.

[avb3]

Originally Posted by Krawdad

I realize this is an old thread but I wanted to clear up a couple of comments made here that may wrongfully influence the decision of others based on erroneous information . Gord May had it right, a Canadian with his USA boat is at home but the boat is visiting.

A/If a Canadian purchased a boat in the USA and registered it in Canada with the intent to leave it in the USA, there will be no tax or duty payable to anyone providing the vessel has a USA Cruising Permit and it is taken out of USA waters for 10 days each year. However, if you were to bring the vessel into Canadian waters you would be deemed to be importing it and all taxes would be due and payable. (That said, I doubt Canada Customs would hassle anyone who could prove they were only home visiting for a short stay and that the vessel was being immediately taken back out of the country..... but I would get their blessing before I did it) There are instances where it could be brought to Canada in bond for repairs or sale but these instances have too many restrictions to be useful beyond their intended purpose.

B/ If a Canadian purchases a vessel in the USA and registers it in the state of his choice, say Florida and pays the 6% Florida tax (or no tax in the case of Delaware) the boat remains a USA flagged boat. The fact a Canadian owns it is entirely irrelevant. If the Canadian owner of this USA registered and flagged vessel wishes to take it into Canadian waters he may do so anytime he pleases without being hassled for Canadian taxes. However his USA vessel must abide by all the rules and Regs that any visiting yacht from the USA must abide by. That means checking into Canadian customs and abiding by the length of stay requirements that any foreign vessel is subject to.

Some have suggested that a "Canadian owned" USA registered vessel can never be brought to Canada. This is nonsense, there is no such law written anywhere either Federally or Provincially neither could there be. The simple fact is it remains a visiting foreign vessel regardless of the nationality of the owner or captain.

Thanks for putting it concisely enough that some of us "slow folks" can wrap our heads around it.

I never knew about the 10 days absence from US waters; where does that reg come from?

[Krawdad]

This is an excerpt from the US Customs and Border Protection Web Site regarding Cruising Permits. It essentially says your vessel must leave US waters for 15 days (not 10 as I stated above) when the cruising permit expires and show proof it went to another country (like Canada). It may then return and purchase another permit and your good to go for another year. Read the conditions below carefully.

US Customs and Border Protection
Cruising licenses exempt pleasure boats of certain countries from having to undergo formal entry and clearance procedures such as filing manifests and obtaining permits to proceed as well as from the payment of tonnage tax and entry and clearance fees at all but the first port of entry. These licenses can be obtained from the U.S. Customs and Border Protection (CBP) Port Director at the first port of arrival in the United States. Cruising licenses are normally valid for up to a year.

Resident aliens may apply for successive cruising licenses if their foreign-flag vessel was made in the U.S. or if duty has been paid on its importation provided that the vessel is documented under the laws of one of the countries listed in 19 CFR 4.94(b). Under CBP policy, non-U.S. residents are not eligible for successive cruising licenses. A new license will not be issued unless the following two conditions have been met: (1) at least 15 days have elapsed since the previous license either expired or was surrendered, and (2) the vessel arrives in the U.S. from a foreign port or place. (Customs Directive 3130-006A) CBP will want to see foreign clearance paperwork as evidence that you are arriving from a foreign location.

Non-residents are cautioned to plan carefully so that the mandatory 15-day period does not fall in the middle of a planned stay in U.S. waters. It may make sense to surrender your cruising license to a CBP Officer when you leave U.S. waters and then obtain a new one when you re-enter the U.S. Traveling outside of U.S. waters while your cruising license is still in effect does NOT fulfill the 15-day requirement.

[bgallinger]

There's another wrinkle that may appear for a Canadian operating a US registered vessel. A Canadian is not permitted to drive a US registered car in Canada and I have been told the same law will apply to vessels.

[avb3]

Originally Posted by bgallinger

There's another wrinkle that may appear for a Canadian operating a US registered vessel. A Canadian is not permitted to drive a US registered car in Canada and I have been told the same law will apply to vessels.

As cars are provincially registered, I don't know how the feds would enforce that. in fact, most UHual rentals are registered in Arizona or New Jersey.

[bgallinger]

Originally Posted by avb3

As cars are provincially registered, I don't know how the feds would enforce that. in fact, most UHual rentals are registered in Arizona or New Jersey.

You're right about those AZ U-hauls, but the CBSA (Canada Border Services Agency) will enforce the law to prohibit a Canadian resident/citizen driving a US registered vehicle across the border into Canada. Municipal and provincial police are also aware of this law and will enforce it. Question is...does it also apply to boats as I have been told?

[bonobo]

Hello dear sailing friends !
It has been a wile since I posted my question regarding the registration of a foreign bought vessel under Canadian flag.

I successfully registered my new sail-catmaran (build in France) under Canadian flag and DID NOT pay any taxes / VAT / Custom fees / Import taxes or any fee in eider country's .
I did this legally and with the help of the Canadian customs who give me all the needed information on the subject.

This is my story:

I am a Canadian citizen but NOT a canadian resident . The last is important!
I live in Belgium where I'm a resident.

When ordering my future vessel, the seller / Builder in France, told me I could escape the 21% tax on the boat by registering the boat under a Delaware LLC company and registered it under US flag.

I created a LLC company in Delaware and the boat was build under the name of the company. While in construction, I therefor never paid tax on anything for the boat in europe as the vessel was to be exported.
(I could have avoided creating this Delaware company by immediately reporting the vessel to the French customs as a Canadian vessel and requested a building registration to the canadian registration office, but I did not know this at the time.)
Federal registration in the US was not possible for me as one need to be a US Citizen, I had not been warned for this when creating the Delaware company ....

When the vessel was completed and ready for the tests at sea,the shipyard requested the French customs to give a temporary French registration for tests at sea of a vessel intended to be exported.
This is common practice and done by phone and fax. One just has to show the invoice / Estimate with a non European address.

At that time, I traveled to Canada, Ottawa, so I could visit the registration bureau, the custom headquarters, the Radio canada office personaly instead of by mail, e-mail or phone....
This is always the best option in my opinion ....

At the registration bureau, they informed me off all the documentation , paperwork, etc... I needed to register the vessel.
As a canadian Citizen, there was no problem for me to register a vessel in Canada.
To hurry up the procedure, they suggested me to register in Nunavut, contrary to Toronto where one need weeks or months to register because of the high demand, Nunavut office, ( located in ottawa) do the paperwork in one day

I did the same at the Radio Canada office for the radio license.

At the custom office they explained me that I would not pay any taxes, VAT, import taxes, or any other fees for the vessel under the following conditions:

1) I needed to be a NON resident of Canada.
2) I could bring the vessel into Canadian waters as a visiting vessel ( Canadian citizen, non resident, visiting canada for holiday) for 350 days per year maximum. Same if it where a car.
3) I would need to register at the customs / immigration upon entering Canadian waters as if the boat was a foreign vessel.

The custom officers at headquarters where of a great help and made me a full photo-copy of the custom import regulations and underlined the paragraph related to my case.

The only problem I encountered was the tonnage measurements survey for the boat.
As it is a catamaran, there are no forms for simplified registration so I had to have a expert fill in a specific survey form. "Normally" following the book, this has to be done by a canadian authorized survey person.... IN CANADA .....
But when calling the Toronto survey headquarters the sent me the list of "international recognized " companies; One is off course LLOYD'S register international, who has offices all over the world. I used the Marseille office.
This procedure has cost me 2000 euros.

I'm now on the way to my circumnavigation, my boat registered in Canada, I did not do anything illegal, I'm perfectly legal with the blessing of canadian and European customs and tax-bureau ....

I will happily reply to any questions.
Marc

[goboatingnow]

The only place you can't go is the whole of the EU

Dave

[bonobo]

And why should that be ??? Why do you say this ? This is not true, I can go to the EU for 3 months and 18 months with a extended temporary import license like everybody else who sail in europe with a USA, Canadian, Swiss, brazilian, Australian, and other non EU boats !
There are hundreds of Canadian boats spending the summer in europe ! So please explain your point of view.
Marc

[Krawdad]

Hello Marc,
Many thanks for taking the time to post your experiences on this important topic, I found it quite informative and it will undoubtedly be of great benefit to those who are contemplating purchasing a boat outside the country and registering it here. I recently went through a similar exercise but fortunately escaped the bad advice of setting up a Delaware company. A key point you made that others should take special note of is that a foreign owner can not Federally register a vessel in the USA, however they can State register it. The handicap with State registration is that if you are traveling to countries outside the USA, they generally prefer, or in some cases demand, Federal registration.

A further point that perhaps should be emphasized is that a "resident Canadian" can also purchase a boat out of country and Federally register it in Canada without actually importing it and thereby eliminate any taxes. This strategy only works however if you have no plans to bring the vessel to Canada.

I'm kind of curious Marc, referring to your point #2, does it actually state "non-resident" as one of the criteria in the regulations they gave you? or did they verbally imply this?

Cheers,

[goboatingnow]

Originally Posted by bonobo

And why should that be ??? Why do you say this ? This is not true, I can go to the EU for 3 months and 18 months with a extended temporary import license like everybody else who sail in europe with a USA, Canadian, Swiss, brazilian, Australian, and other non EU boats !
There are hundreds of Canadian boats spending the summer in europe ! So please explain your point of view.
Marc

You have stated you are a Belgian resident. Hence you are presumably a EU tax resident. To own a yacht soley for leisure purposes in the EU you must pay VAT immediately on its purchase. There is no grace period nor does the 18 month apply.

The law uses the term beneficial owner that is clearly you and if you are a Belgian resident and hence a EU tax resident you must pay VAT. You will not survive the first VAT inspection otherwise.


Again as I have said flag registration is irrelevant when it comes to VAT. The VAT laws take no account of it. What counts is the "beneficial" owner tax status

What you have done as far as EU authorities are concerned is bought a boat for export. And quite rightly you are not required to pay VAT. However if you visit the EU and you remain a tax resident. You have in fact imported the boat and VAT is due immediately in the country of arrival.

Anyone who advises you otherwise is misleading you. Penalties for VAT evasion are very high. After all the EU takes a fair hike of each country's VAT to fund itself.

The Canadian boats you mention are not owned by EU tax residents hence they are entitled to VAT exemptions for upto 18 months.


Believe me if EU residents could wrap up boats in foreign flags to escape VAT , you wouldn't see a EU flag for dust. It should also be pointed out ( and I can't remember if Belgium has a mandatory vessel registration , ) you could fall foul of the requirement to register the boat in the country you are resident in. This is certainly the case in France Italy Germany etc.

Of course if you are not a Belgian or EU tax resident I apologise.

Dave

[bonobo]

Krowdad,
You are correct, it do not specifically says NON-Resident to federal register the boat in Canada and not pay tax. You only have to be a Canadian citizen. Just like in the US you have to be a US citizen.
You can with no problem register you (for export VAT exempt) european purchased vessel in Canada and being a Canadian resident; but then you CAN NOT bring the vessel into Canadian waters. Or you have to pay the import and other taxes.
What I was verbally told is that by entering Canadian waters for a visit and with the intention to leave, custom might ask for a warranty / deposit of a % of the TAX than will be returned to you when leaving the country again.
As a NON- Resident you can sail the canadian waters for a year minus one day as I said before.
I met a guy from Winnipeg in La Rochelle ( France) who bought a 55+ feet new lagoon catamaran.
He directly registered the vessel in Winnipeg and saved over 400.000 $ in tax..... by doing this. This allows you to buy a much bigger boat !!!!!! Or to live from this money for manny years ......
Off course, he knew he could not bring the boat into Canada ; buy going off for a circumnavigation of at least 10 years, this was the last of his worry's.
But he still test- sailed for over a year in the Mediterranean befor leaving european waters direction Gibraltar / canary islands / St Lucia .....
Really, when buying a catamaran for the tropics one do "normally" not intend to sail into the Canadian winter

[bonobo]

Dave, I was indeed residing in Belgium at the time of my first mail but I left Belgium at that time also. When I registered the vessel in Canada I became a non-residend in any country but with a "Postal" address for paperwork only in Canada.
I indeed was made this very clear by the French customs that I needed a outside europe address on the canadian registration documents. And for them, I was 1000% OK when this was the case, they would NEVER have let me go otherwise !!! NOT the French

[mikepmtl]

Originally Posted by GordMay

A Canadian (nor any foreigner) cannot obtain US Documentation, but anyone (even Canadians) can get State Registration.
If a Canadian brings his American vessel into Canadian waters, he’s at home, and his boat is visiting, requiring a cruising permit.

Actually, to the best of my knowledge, you can only bring it in Canada under specific circumstances like getting work done in a yard and so on. To bring it in for pleasure, you would have to import it and pay the PST + GST.