Question About VAT for Non-EU Registered Yacht

[PatrickS]

I've contacted the tax and customs folks in the UK, Finland, and the main EU offices with this question, but after two weeks all I've gotten is referrals to the official documentation, from which I can't find a clear answer, and I'm hoping someone here might be able to speak from direct experience...

If I buy a boat in Europe, for which the VAT has already been paid, and register it under a US flag, and then keep it in Europe for longer than 18 months, will I be liable to pay VAT again, or not.

Does the 18 month exemption period only relate to VAT, and is it irrelevant if the VAT has been paid in the past for that yacht, irregardless of the country of registry?

Is there any way a boat for which VAT has been paid in the past, would be liable for VAT to be paid again? What about other kinds of duties/taxes?

Would registering it under a US flag be considered "exporting" the boat from Europe, and after 18 months, could I be liable for some form of import duties or other taxes separate from VAT?

Thanks.

[swisscraft]

Patrick, this is just my understanding and I talked with friends on this - so needs a justification from a tax lawyer for sure. I'm Swiss, so have somehow the same issue if I register a boat under Swiss flag within the EU....so had done some research for myself..

If you export the boat (and most consider US Flag as that) you will have to pay VAT again if you sell it back to someone in the EU or y like to register in the EU – or maybe after 18 Month see below:

The 18 Months is a big question mark - so most of the Swiss I talked to they recommend to leave the EU for at least one night before this period ends to avoid any discussion - usually this is done with a trip to Morocco or Turkey in the med and get a Stamp for one or more night in this country's - nice anyway. And then they come back and this 18 Months starts again as they are considered new embarked under foreigner flag in the EU.

To your other question: in case the EU thinks (for whatever reason) you have to pay after VAT (often more then 20% of the value) and tax as the boat comes from the US. Are you EU citizen? In this case I would not recommend such a game as there as there is lot of tax police on the water in these days.

And last but not least, if you buy/see a boat make sure you have the CEE typification (with all the paper and so on)- otherwise you will have issues to sell you "US" boat back into the EU.

Hope added not to much confusion...

cheers Marco

[goboatingnow]

If I buy a boat in Europe, for which the VAT has already been paid, and register it under a US flag, and then keep it in Europe for longer than 18 months, will I be liable to pay VAT again, or not

No technically as you are not exporting the boat, ie you must not sail out of EU customs waters then the boat is not exported and as VAT was paid it can remain in the EU indefinitely. Ensure you perform the sales transaction in the EU. in theory its easy enough to sail out of those waters and hence with a US flagged boat , you may have a job convincing the local customs otherwise ( thats the main issue, rather than a strict implementation of the law)

The overarching position is this

It matters not whether you register the boat in the US or not, ( see below) If you sail your boat out of EU waters then it is "exported". Hence it is liable for VAT on import. This matters not what flag the boat is or what nationalality your are,

HOWEVER there are two reliefs.

(a) Returned Goods Relief.

As long as you bought the boat in The EU, and it was VAT paid ( and you can show this). Then as long as you dont sell it outside the EU, you can apply for RGR. Its best to get a stamp from customs when you intend to leave to show the boat was validly in the EU. This relief is available as standard for 3 years , but is extendable alomost indefinately.

(b) Temporary Import Relief.

IF the boat is deemed exported, ie removed from teh EU customs terrority, Then if you are not a EU tax resident, you can available of TIR, this is 18 months before the import VAT is due, but you can leave for a day and get another 18 months.


Hence buying an EU VAT paid boat by a non Tax resident there are actually two approaches. However, if you reflag the boat, it can be harder to convince customs that the boat was never in the EU and was VAT paid. If you have good documentation then thats fine. If you intend to sale around the EU then I woulld consider leaving the reg as is , unless this causes other issues.

NOte that despite what the previous poster says , CE certification will be there as standard on any boat boat commercially in the EU since 1996. The CE documentation is part of the owners manual usually.

any other questions let me know

[PatrickS]

Originally Posted by goboatingnow

...

(b) Temporary Import Relief.

IF the boat is deemed exported, ie removed from teh EU customs terrority, Then if you are not a EU tax resident, you can available of TIR, this is 18 months before the import VAT is due, but you can leave for a day and get another 18 months.

...

any other questions let me know

If I am an EU tax resident, and I sail outside the EU tax area, even for a day, and then back into the EU, does that mean the boat is exported and then reimported? E.g. If a Portuguese sailor sails to Gibraltar and back, do they have to mess with VAT issues? Is the key point whether one is an EU tax resident or not?

[multihullsailor6]

PatrickS,

I am a South African national and bought my secondhand catamaran in the EU. After the purchase I registered the boat with the South African registration outfit, it is marked as per South African rules, showes Cape Town as home port and I proudly fly the South African flag. I have a Dutch certificate confirming that VAT had been paid on my boat and also stating that this receipt is transferrable.

I have been checked by Dutch, French and three times by British customs people and there was never any discussion on the VAT issue after they saw the VAT confirmation (which by the way I translated myself into English) - they were more interested in the VAT situation than in my passport! It is my understanding that my boat can stay indefinitely in the EU area without me paying VAT again - exporting it and returning is another issue. Hope this helps.

[PatrickS]

Originally Posted by multihullsailor6

PatrickS,

I am a South African national and bought my secondhand catamaran in the EU. After the purchase I registered the boat with the South African registration outfit, it is marked as per South African rules, showes Cape Town as home port and I proudly fly the South African flag. I have a Dutch certificate confirming that VAT had been paid on my boat and also stating that this receipt is transferrable.

I have been checked by Dutch, French and three times by British customs people and there was never any discussion on the VAT issue after they saw the VAT confirmation (which by the way I translated myself into English) - they were more interested in the VAT situation than in my passport! It is my understanding that my boat can stay indefinitely in the EU area without me paying VAT again - exporting it and returning is another issue. Hope this helps.

Thanks for the info.

This exporting/importing simply by leaving the EU tax area worries me. A popular local cruising destination here in the Baltic is the Aland Islands, which are outside of the EU tax area, albeit part of Finland (similar, I think, to Gibraltar's relationship with the UK). I'd hate to think that on each regular casual visit to the Aland Islands I'd have to mess with exporting and re-importing my boat.

And I'm wondering if/how being an EU tax resident (permanent resident of Finland) affects all of this.

[multihullsailor6]

Originally Posted by PatrickS

Thanks for the info.

This exporting/importing simply by leaving the EU tax area worries me. A popular local cruising destination here in the Baltic is the Aland Islands, which are outside of the EU tax area, albeit part of Finland (similar, I think, to Gibraltar's relationship with the UK). I'd hate to think that on each regular casual visit to the Aland Islands I'd have to mess with exporting and re-importing my boat.

And I'm wondering if/how being an EU tax resident (permanent resident of Finland) affects all of this.

I do not think, based on my past Customs experiences, that being an EU tax resident has anything to do with this, we are talking about the physical thing of a boat being exported and re-imported, the owner's personal situation cannot play a role in this context. I do not know the exact tax situation of the Aland Islands, I was more referring to leaving the EU in say Malta and sailing to Tunisia and the boat staying there for a short time. Of course you have to be able to prove your / the boat's departure and return dates somehow!

[goboatingnow]

Thread is 6 months old

[savoir]

VAT is only payable a second time if the boat is sold outside the EU while US registered. If the person who bought the EU VAT paid boat returns with it then no more VAT is payable. No 18 month rule. The original VAT receipt must be shown as proof of payment. If you buy from the person who took the VAT paid boat to USA then the 18 month rule applies to the new owner and VAT might be incurred.

UK VAT rules for yachts here

HM Revenue & Customs

[PatrickS]

Originally Posted by savoir

VAT is only payable a second time if the boat is sold outside the EU while US registered. If the person who bought the EU VAT paid boat returns with it then no more VAT is payable. No 18 month rule. The original VAT receipt must be shown as proof of payment. If you buy from the person who took the VAT paid boat to USA then the 18 month rule applies to the new owner and VAT might be incurred.

UK VAT rules for yachts here

HM Revenue & Customs

This is correct, and I have a letter (finally) from UK customs stating exactly that, in similarly simple terms (the official documentation is not quite as clear as it could be).

[goboatingnow]

Obviously the 18 month rule never applies to a EU tax resident
Dave

[savoir]

Not necessarily. There are some exotic exemptions like diplomats and military but for average people the 18 month rule might apply.

X buys a VAT paid boat in EU and takes it to USA. Y is an EU resident and buys the boat in USA. On return to EU, Y will face a VAT assessment on the boat but might use the 18 month rule to delay a little.

The only exemption that could save Y would be returning home to Europe from 1 year plus official US residency and 1 year plus ownership of the boat.

Take a look at the UK rules that I posted. Maybe the rules of some other EU country can help. I don't know them all.

[goboatingnow]

X buys a VAT paid boat in EU and takes it to USA. Y is an EU resident and buys the boat in USA. On return to EU, Y will face a VAT assessment on the boat but might use the 18 month rule to delay a little

Absolutly not the case, If you are established or a tax resident of any EU state, the Temporary Import provisions DO NOT apply to you. In that case above the EU person would be liable to pay VAT IMMEDIATELY on return to the EU.

The fact that the previously VAT paid boat was sold outside the EI invalidates the Returned Goods Relief provisions. I would reccomend that the sale in such a circumstance take place in the EU, whereupon its difficult for any customs to claim or prove that the boat was outside the Union.

If that person qualifies for TOR ( transfer of residence), They can bring back their boat free of VAT under these rules. However TOR requires them to be first establised elsewhere not in the EU. ( even so the 18 month rule again doesnt apply here).

teh Tempory Import provision solely apply to non tax esidents of teh EU.

dave

[savoir]

The best thing about all this business goboatingnow is that you are not my adviser, nor would you ever be based on that post.

Should you, being an EU resident, ever want to know how to get your VAT unpaid boat some VAT free time in the EU I would be pleased to tell you - for a fee of course. There are several ways even if you are not a diplomat. I accept that sooner or later your boat must leave EU or the VAT man will get you.

I am not Mandrake.

[goboatingnow]

If you are a normal tax resident of an EU state, There is no legal way that does not involve deception of some kind, I have been involved in this process commercially for some time. There are some loopholes which might allow a yacht to be present in teh EU for "some time" but these are not under the TI rules and they are the are up to individual customs authorities to rule on and there is xyz stipulation and in all cases they only apply to the specific EU country in question. In no case is the yacht re-imported.

That does not include situations where the TI rule was apllied incorrectly by customs in one case I know off, Customs actually get it wrong quite often. ( But that doesnt make it right).

I am quite satisified that I know what Im talking about based on numerous interaqctions with various EU countries Customs authorities.

If you know different then please enligten us, otherwise typefaces are cheap!!

Dave