Buying a boat EU VAT avoidance

[digitalnomad]

Do we have any tax avoidance specialists?

If a UK person buys a boat in Greece that is not VAT paid (from a commercial person that charters the boat for some weeks a year) for let's say 50k euros. The UK person has the right to not pay tax and start the 18 month clock.

If the UK person then sells (in less than 18 months) the boat to his wife, that has a EU passport for the sum of 1 euro. She then pays the tax on said 1 euro (say 24%). The boat would then in theory be VAT paid?

Then she sells the boat for let's say 50k euros back to her husband, what would be the outcome?

[Joh.Ghurt]

Originally Posted by digitalnomad

If a UK person buys a boat in Greece that is not VAT paid (from a commercial person that charters the boat for some weeks a year) for let's say 50k euros. The UK person has the right to not pay tax and start the 18 month clock.

Correct more or less assuming they aren't residents of the EU.

Originally Posted by digitalnomad

If the UK person then sells (in less than 18 months) the boat to his wife, that has a EU passport for the sum of 1 euro. She then pays the tax on said 1 euro (say 24%). The boat would then in theory be VAT paid?

About your wife, as mentioned above, it only matters if she's an EU-resident, not whether she's a citizen. Lets assume here your bed is rather wide and her side is in the EU so she's an EU-resident and you aren't.

No. the VAT for an item is taken on the value, not necessarily on the price. The price is just a very common indication of the value. So if Mr. Taxman values your boat at 100000€ then you'll have to pay 20% of this number, that's 20 grands, even if you just paid 50000€. This doesn't usually happen, except in cases like this where the price obviously doesn't match the value. Also, Mr. Taxman doesn't like to revalue things in your favour.

This can be annoying if you buy a crappy VAT-paid boat in the EU for 5000€, go to Albania to have it fixed and improved to make it 100000€-shiny and come back to EU waters as a EU-resident. Mr Taxman will charge you 20% of 95000€, which are again 19000€.

Even worse: you have your shiny VAT-paid 100000€ boat and sail around the globe for more than 3 years, it loses the VAT-paid status. You come back, Mr Taxman is impressed how well you took care of the boat, evaluates it to 80000€ and charges you 20% VAT or 16000€ again

[digitalnomad]

Interesting way to look at it. So the <18 month in and out on the EU with the transit log is the only way to avoid having to pay VAT to a EU country for a UK registered boat trying to enjoy the MED.

[digitalnomad]

... do we know the name of the individual responsible for the 3 year rule regarding leaving the UK or the EU to go round the world and then having to pay VAT again? Just so we know who to curse when we cross the equator

[boatman61]

Well.. if your an EU citizen all you have to do is stop in French territorial Islands along the way..
Caribe.. Marquesas etc.. Mayote/Reunion and your good to go..

[Joh.Ghurt]

Digitalnomad,

we yachties mostly seeing the effects standard VAT rules, they aren't even targetted maliciously at us. They just don't care. Most people just never come close to the limits of those rules.

On the positive side, this rule isn't enforced very strictly. You really have to piss off an official seriously and provide also enough evidence that you couldn't have been in EU waters for the past 3 years to have to re-import your boat.

By the way, the Canaries, the French and Dutch overseas Territories in the Caribbean or the Pacific and all the islands full of cold and sheep under Danish flag aren't part of the EU-VAT zone. However the Azores are and there's a good chance that EU-citizen are asked to prove the VAT has been paid when they land in Horta.

Sometimes it's helpful to keep one's mouth shut and just show them the old VAT-proof.

[Joh.Ghurt]

Originally Posted by boatman61

Well.. if your an EU citizen all you have to do is stop in French territorial Islands along the way..
Caribe.. Marquesas etc.. Mayote/Reunion and your good to go..

Sorry, that doesn't help. Although they're French or Dutch, they aren't part of the EU-VAT zone. Just like the Canaries aren't, neither is Greenland. Only the Azores (including Madeira) and the Baleares count.

[digitalnomad]

What I really don't understand is why any old company receipt claiming VAT paid is evidence that VAT is actually paid? When I was show a VAT paid receipt from the 1995 as a photocopied document, mostly hand written, I was a little nervous about accepting its authenticity.

[Joh.Ghurt]

Originally Posted by digitalnomad

What I really don't understand is why any old company receipt claiming VAT paid is evidence that VAT is actually paid? When I was show a VAT paid receipt from the 1995 as a photocopied document, mostly hand written, I was a little nervous about accepting its authenticity.

The system is borked and faking VAT-receipts would probably be an offence you get fined for.

One layer of security is that the tax officials deal every day with these kind of documents while most yachties don't. They also have a pretty good idea how those from Bavaria, Beneteau and other common brands look like. So if you make your first creative try at something like this and you have no idea what it really would look like, then you have a good chance of failing. Little things matter like not printing European invoices on Letter sized paper, use A4 instead. Laserjet documents look different than those printed on a current inkjet.

Also most people don't have the criminal energy to plan ahead. If you print it out today so that you use it tomorrow, it won't look like a 20 year old receipt. Who would have had it printed at least a year ago and sent it for an extended vacation onto the Bimini and into the bilge to make it look like it had a hard life?

[digitalnomad]

How could I check the authenticity of a VAT-receipts with a 1995 date on it?

[Pete7]

Originally Posted by digitalnomad

How could I check the authenticity of a VAT-receipts with a 1995 date on it?

Doubtful you can, especially if the manufacturer has gone bust or been taken over. Tax officials could probably look up the VAT number even if its an old one.

Also there may not be just one VAT receipt. I have a dozen all printed on A5 fanfold paper that was being used in 1988. The reason for a dozen receipts is the first buyer paid in instalments as the build progressed. Also the extras he ordered were billed separately. Originals locked away at home, photocopies on board if we ever need them.

Pete

[Joh.Ghurt]

Originally Posted by digitalnomad

How could I check the authenticity of a VAT-receipts with a 1995 date on it?

You can't and this became a serious problem for some cases like when you get an oddball boat with multiple previous owners and just a big binder of random papers as documentation. The documentation probably in best shape like the registration papers and sales contacts don't count for VAT proof.

On the positive side, the officials know about this and in most cases your give some leeway given to prove that it's been paid - as long as you don't piss them off too much.

For example, it'll often get you off the hook if you can document that your boat was long term in EU waters with some marina invoices while belonging to you or a resident of the EU.

If the boat was self-built by a previous owner and you can prove that major parts like the engine were purchased with VAT, this is usually also a sufficient indication that the VAT was paid.

If you're interested in buying a boat, you really should try to put int the contract that the seller is responsible to provide documentation that VAT has been paid - or assume you have to pay it and budget for it. There were court-cases in Germany where the buyer successfully made the last seller deal with an inquiry from the tax authority and said seller was then provide the documentation by paying the VAT and handing over the receipt. Last big drama was in 2013 when Croatia joined the EU and many Germans, Austrians and Italians had untaxed boats stationed in Croatia.

Another big factor is this becomes less and less a problem, as these rules have been in force for over 25 years. If it weren't for the oh-so-clever British, who threw their wrench into the works with Brexit. If you care about this mess better read up on this on the RYA pages. EU-VAT vs UK-VAT on British-owned boats stationed in Spain is always entertainment.

[Greg K]

Originally Posted by digitalnomad

Do we have any tax avoidance specialists?

If a UK person buys a boat in Greece that is not VAT paid (from a commercial person that charters the boat for some weeks a year) for let's say 50k euros. The UK person has the right to not pay tax and start the 18 month clock.

If the UK person then sells (in less than 18 months) the boat to his wife, that has a EU passport for the sum of 1 euro. She then pays the tax on said 1 euro (say 24%). The boat would then in theory be VAT paid?

Then she sells the boat for let's say 50k euros back to her husband, what would be the outcome?

Not a specialist in tax issues, but I would presume that the 1 euro sale price would not be accepted as assessed value of the boat for VAT purposes.

[George DuBose]

My 1973 US-flagged sailboat was controlled by the French Douane at Belle Isle on the French Atlantic coast.

One of the officers was looking through my ship's papers and saw that my ship's HIN number was not on the VAT receipt from the Dutch. I showed her that the HIN number was on the broker's receipt as they handled the VAT payment.

When she got to the original invoice that I paid to the PO in Connecticut, she said that I paid too little for the boat and that the French could revalue the vessel and charge me more tax.

I told her that she didn't see the boat when I bought her and I had been refitting her for the past 10 years...

So evidently any EU authority can decide what your vessel is worth and charge additional taxes.

Personally, I think "tax" is a four letter word...

[Montanan]

Originally Posted by digitalnomad

Do we have any tax avoidance specialists?

If a UK person buys a boat in Greece that is not VAT paid (from a commercial person that charters the boat for some weeks a year) for let's say 50k euros. The UK person has the right to not pay tax and start the 18 month clock.

As long as the owner, or the user is not a EU resident than EU VAT can be avoided by placing the vessel under temporary admission with the 18 month clock started upon completion of sale in the EU.

If the UK person then sells (in less than 18 months) the boat to his wife, that has a EU passport for the sum of 1 euro. She then pays the tax on said 1 euro (say 24%). The boat would then in theory be VAT paid?





To start with VAT is based on EU residency, not EU citizenship. If the owner is a resident, or the user is a resident then VAT is due, no residency involved no VAT taxation. Second The good [i.e., a vessel] is assessed by customs agency on the value of the yacht at the time of import. Customs will not necessarily rely on the value stated on the invoice or contract, they may seek valuations from brokers if they consider there has been an under-valuation. VAT is based on present value at the time is becomes due, which value additionally includes customs duty, freight and insurance for delivery into the EU.


What you are "theorizing" / contemplating would be where one crosses from tax avoidance to tax evasion and with resultant civil penalties and likely criminal. So under that scheme reasoning, why not just take the matter over the top and pay your wife say 50K euros to take ownership of your vessel, and then ask for 24% credit against the VAT that has never been paid to the EU and seek a payment from the EU. Heck if you wish to scam the system then go all in. Or hey make it say, 100K euros that your wife pays you to take ownership of her ship.



Then she sells the boat for let's say 50k euros back to her husband, what would be the outcome?

Comments above.