VAT free in Europe?

[driver0606]

I have been told all privately owned vessels used by EU residents within the EU are required to pay Value Added Tax. I do not know the actual legal text. Consequently a British owned yacht on a British flag can cruise in Europe and be outside of this requirement for a period of 18 months and then leave (even for one day), or pay the tax. However, does it remain so if a Monaco resident uses the boat?

 

[Portofino]

No .
Assuming this resident owns it , when you say uses .

 

[jrudge]

The boat must be owned and used by a non eu resident.

there are some exemptions that I can’t recall but for example you can have an eu skipper move it.

if it was not for this rule then the boat would be owned in jersey and used by its eu owner and that is not allowed.

 

[JB]

Even though Monaco isn’t in the EU, I think it may be the case that Monaco counts as being within the EU for tax purposes ...

Some boats are owned by companies, registered in Cayman Islands, or registered as commercial boats which I think all qualify to make one not liable for VAT but obviously it is a very technical subject that everybody needs to get right!

 

[Hurricane]

I have been told all privately owned vessels used by EU residents within the EU are required to pay Value Added Tax. I do not know the actual legal text. Consequently a British owned yacht on a British flag can cruise in Europe and be outside of this requirement for a period of 18 months and then leave (even for one day), or pay the tax.

As I understand it, that is correct but I don't think the flag of the vessel makes any difference.

I believe that it is the residency of the owner in this case that avoids the requirement for VAT - not the user of the boat.
The scheme is called TA and allows goods to be taken into the EU by non-EU residents for a period of 18 months without paying VAT.
Until recently, this included UK residents.
But, of course, the UK is outside the EU now so the TA rules can now be used by UK residents.
The difficulty is getting a boat into the EU without paying VAT on it in the first place.
I don't believe that you can reclaim any previously paid VAT.
A new boat supplied/built in the UK could be delivered to the new owner outside the UK tax system (say Guernsey) and then taken into the EU under the TA rules thus not paying VAT on the boat for (at least) 18 months.
At the end of the 18 month period (or before) the boat must leave the EU.
But it can return immediately for a further 18 months.
This can go on for as long as you like as long as the boat doesn't stay in the EU for more than 18 months at a time.

However, does it remain so if a Monaco resident uses the boat?

I suspect that JB is correct and that Monaco counts as being within the EU for tax purposes so a Monaco resident probably can't use the TA scheme - but I don't know this for definite.

 

[driver0606]

The boat would certainly be owned by a non EU resident person or company. The question is whether there is a problem if a Monaco resident USES it. The wording, if accurate, seems to say that the USE by an EU resident brings it into the tax net. There are a number of used boats already in Italy for sale that have had no tax paid on them, whether by fair means or foul! I do think it would be most unwise to try and have one over on the tax people, even if the Italians have been doing it for years! It sounds as if I am going to need some very professional expert advice! Thank you for all of your advice.

 

[Portofino]

Now you have introduced a company in the equation .
A charter co can avoid VAT and claim back vat etc but it has to be real .Not a faux co .
A real will advertise charters , probably hire crew , management agent and have a bank account .It’s run as business.
If you own said co and want to us the boat you have to book and pay like Joe public , there needs to be evidence of your market value cash going into the co bank account ( via the agent ) .
So you cant just turn up and go out .I will explain later .Also its a grey area but there needs to be evidence it’s actually not a faux co .Ie charted out a significant number of times .Not just once in February by a mate , then totally used by you in the summer .
A faux co is one set up to make it look like a legit charter co but there’s only ever one client the owner who benefits from the tax breaks .So if you start just turning up and not going through the hassle of of booking and payments , they will find out .
They will ask to see the books , all the books and you have to prove to them it’s not a faux co .They will try to defeat your arguments “ nobody’s booked except the guy in February “ and hand you a VAT bill + fine + costs etc .

Having said that it’s perfectly do able with the right boat to charter it out correctly in the eyes of the Douanes or Italian Gardia Finanza . Any profit on the Co will be put to tax , and increased wear n tear , engine hrs etc lowering residuals at the back end .

As for the other option ending up with a Brit reg boat .....they use the term “beneficial owner “which I think you mean by user ??
So your say brother s name ( resides outside the EU ) is on the VAT not paid invoice , it’s on the reg cert where ever that is say U.K. flag and you berth it in the SoF .You use it weekly throughout the summer and live in and around Monaco with residency status . Its never charted .You use it like a private individual does .Even your brother happens to take two weeks with his kids in August .
All the bills are paid by you , some pretty large .Even if you attempt to disguise those by asking the Marina and engine service yards to send them to your brother etc ,they will chase the payment trails , it’s you who arranges everything on the ground , it’s you who hired the gel coat guy or replaced the lost gear etc .
They the Douanes after inspecting your boat while anchored of Cap Ferat will see your passport / ID is different from the name on the reg cert and VAT invoice ..Next they ask where the boat is from ?ie the berth , then where you live? .....alarm bells will ring and trigger an investigation when they find out a Monaco address or wider EU address .

When they find you used your brother like this who technically is the legal owner , they do not dispute that they will accuse you of being the “beneficial user “ and present a VAT bill to you as you are effectively under EU VAT regs .

They never say where the boundaries are , eg if your ” brother “ uses it for [ insert time ] Its up to you choose not pay the VAT , bill, later in court under oath to explain why you should not pay the VAT + costs etc .

This is different from you being a guest on a friends a U.K.reg VAT free ( under the 18 m rule ) boat while his aboard .
He will show the Douanes his London address , his Invoice VAT free , his reg doc U.K. , and say he lives in the U.K. and is on holiday.
After all he IS the real owner and nothing to hide .

What are you trying to do?,

 

[JB]

Surely if a UK owner owns a boat and an EU resident uses it it cannot immediately create a VAT liability ?

 

[Portofino]

Surely if a UK owner owns a boat and an EU resident uses it it cannot immediately create a VAT liability ?

Talking VAT fee on TI new boat since 1-1-21 when the U.K. citizens became a 3 rd party outside the EU for VAT purposes with boats .Or a existing VAT free used boat purchased after 1-1-21 .
They will follow up with an investigation to establish the EU resident and “user “is not abusing the system .
Depends what you mean by “ uses “ ?

If it’s a EU engineer taking it to the ship yard for a lift to sort out a seacock replacement in the pissing rain then , no it’s obvious he’s not the “beneficial owner “ .

If it’s £4.5 M 90 Ft new Sunsseker delivered in April on the TI scheme and its now early June anchored off Cap Ferat with the EU guy his wife n kids a few more EU guests .Water toys all out .No crew ( not charted ) the guy lives nearby , the berth is Cap d Ail , As I say the name on the private owned boat s VAT not paid invoice does not match the EU ( inc Monaco’s ) ID they are highly likely to trigger an investigation which one way or another will end up recovering the VAT .
Plenty of Marina CCTV footage to establish the “ beneficial owner “

If it’s legitimately charted on a one off ( you have not said ) , then fine there will be a paper trail to a legitimate charterer , If it’s your company as well then can you establish its not a faux co ? They may enquire . But this is not what you are asking .

If it’s a new 60 ft Princess U.K. owner VAT free , TI scheme being offloaded from a seven stars transport ship in Nice .Then DLB yachting the French Prinny concessionaire sends a couple of local French guys round to del it back 25 miles to HQ in la Napoule for its PDI prior to handover and its hauled up by the Douanes as it passes the Lerins ( a popular lurking ground for Douanes ) then it’s obvious theses French lads are not “ beneficial owners “: Secondly it will have the TI paperwork on board , or in the office @ DLB .

What do you mean by “ uses “ what examples do you have in mind for his U.K. reg d and owned VAT free private boat on TI based in the SoF ,Who are the “ users “ in your mind ?

Basically they use the elephant test .If it large grey has big ears , two tusks and a trunk it’s an elephant .At the zoo you might swap labels in the pen .Put a giraffe sign by the pen and call it a giraffe .Ie the paper work , it’s berth cert , it vet bill let headings it’s pen label says giraffe .
A official from the minister of animal s comes around .There is a zoo tax to access .Giraffes are £ 0.0 pa , while elephants are £500 .You present all the paper work in the office for this “ giraffe“ .
” let’s go and look at it “;says the inspector.......walks round the corner and sees a what ?
” Thats an elephant “ blurts out the inspector .


I guess since Brexit U.K. passport holders resident in the EU are thinking of somehow jumping on the U.K. 3rd party VAT free TI rule .Wether a new boat or taking on a used already VAT free boat .
If they find out you live in the EU indeed pop up on any EU ( inc Monaco ) fiscal radar( excluding holiday homes ) and get caught as a “ user “ of a VAT free TI U.K.owned boat , you can’t blame them for “ looks like an elephant to me “

 

[jrudge]

Notice 8: sailing your pleasure craft to and from the UK

Read the temporary importation section. This is the U.K. legislation. For now it mirrors the eu.

a long as the non eu resident remains in the eu an eu resident may occasionally use it. Occasionally is not defined.

so firstly will the non eu resident be in the eu or back in the U.K. ?

secondly is it really occasional. Bear in mind if they get the bit between their Teeth they will be asking the marina etc.

 

[Hurricane]

Notice 8: sailing your pleasure craft to and from the UK

Read the temporary importation section. This is the U.K. legislation. For now it mirrors the eu.

a long as the non eu resident remains in the eu an eu resident may occasionally use it. Occasionally is not defined.

so firstly will the non eu resident be in the eu or back in the U.K. ?

secondly is it really occasional. Bear in mind if they get the bit between their Teeth they will be asking the marina etc.

That makes sense
There is using the boat and USING the boat.

It seems to me that the TA scheme is there to allow other goods and boats is a byproduct if the legislation.
For example, if you own a caravan and want to tour Europe, you wouldn't be expected to import it and pay VAT.
TA therefore gives you 18 months to do your tour.

So if you were the only USER of a boat under TA, you would be breaking the spirit that allows TA to exist.
I suggest that in this case, OCCASIONALLY can only be use occasionally and not be the reason for using TA.

 

[JB]

Talking VAT fee on TI new boat since 1-1-21 when the U.K. citizens became a 3 rd party outside the EU for VAT purposes with boats .Or a existing VAT free used boat purchased after 1-1-21 .
They will follow up with an investigation to establish the EU resident and “user “is not abusing the system .
Depends what you mean by “ uses “ ?

If it’s a EU engineer taking it to the ship yard for a lift to sort out a seacock replacement in the pissing rain then , no it’s obvious he’s not the “beneficial owner “ .

If it’s £4.5 M 90 Ft new Sunsseker delivered in April on the TI scheme and its now early June anchored off Cap Ferat with the EU guy his wife n kids a few more EU guests .Water toys all out .No crew ( not charted ) the guy lives nearby , the berth is Cap d Ail , As I say the name on the private owned boat s VAT not paid invoice does not match the EU ( inc Monaco’s ) ID they are highly likely to trigger an investigation which one way or another will end up recovering the VAT .
Plenty of Marina CCTV footage to establish the “ beneficial owner “

If it’s legitimately charted on a one off ( you have not said ) , then fine there will be a paper trail to a legitimate charterer , If it’s your company as well then can you establish its not a faux co ? They may enquire . But this is not what you are asking .

If it’s a new 60 ft Princess U.K. owner VAT free , TI scheme being offloaded from a seven stars transport ship in Nice .Then DLB yachting the French Prinny concessionaire sends a couple of local French guys round to del it back 25 miles to HQ in la Napoule for its PDI prior to handover and its hauled up by the Douanes as it passes the Lerins ( a popular lurking ground for Douanes ) then it’s obvious theses French lads are not “ beneficial owners “: Secondly it will have the TI paperwork on board , or in the office @ DLB .

What do you mean by “ uses “ what examples do you have in mind for his U.K. reg d and owned VAT free private boat on TI based in the SoF ,Who are the “ users “ in your mind ?

Basically they use the elephant test .If it large grey has big ears , two tusks and a trunk it’s an elephant .At the zoo you might swap labels in the pen .Put a giraffe sign by the pen and call it a giraffe .Ie the paper work , it’s berth cert , it vet bill let headings it’s pen label says giraffe .
A official from the minister of animal s comes around .There is a zoo tax to access .Giraffes are £ 0.0 pa , while elephants are £500 .You present all the paper work in the office for this “ giraffe“ .
” let’s go and look at it “;says the inspector.......walks round the corner and sees a what ?
” Thats an elephant “ blurts out the inspector .


I guess since Brexit U.K. passport holders resident in the EU are thinking of somehow jumping on the U.K. 3rd party VAT free TI rule .Wether a new boat or taking on a used already VAT free boat .
If they find out you live in the EU indeed pop up on any EU ( inc Monaco ) fiscal radar( excluding holiday homes ) and get caught as a “ user “ of a VAT free TI U.K.owned boat , you can’t blame them for “ looks like an elephant to me “

I understand what you are saying. The moral of the story is to make sure everything is legitimate because they WILL find out if it’s not. They have no problem if it’s for charter but if it is make sure it really is for charter

 

[jrudge]

I have had one vat check in about 8 years in there med. it was bonafacio and they wanted proof of vat paid. And passports.

a friend bought a berth in Club de mar Palma. You have to register the transfer and that included passports, residence and boat papers. He is Australian. Boat vat unpaid.They believed he lived in the eu. I did not ask the outcome but he did have expensive lawyers on the case.

occasional is not defined but the key thing is the real owner must be in the eu at the time not sitting in a non eu country.

chance of being caught. Low. Penaltg if caught. V high - double the tax as I recall

 

[driver0606]

Clearly the TI scheme cannot work for me.

Thanks again, guys.

 

[JB]

I have had one vat check in about 8 years in there med. it was bonafacio and they wanted proof of vat paid. And passports.

a friend bought a berth in Club de mar Palma. You have to register the transfer and that included passports, residence and boat papers. He is Australian. Boat vat unpaid.They believed he lived in the eu. I did not ask the outcome but he did have expensive lawyers on the case.

occasional is not defined but the key thing is the real owner must be in the eu at the time not sitting in a non eu country.

chance of being caught. Low. Penaltg if caught. V high - double the tax as I recall

In Corsica they are checking all the time, we had 2 checks in 1 week there. Never once at the lerins, Villefranche, st tropez

 

[Portofino]

I have been inspected by Fr Douanes iirc 3 maybe 4 times in about 15 years all around the Cannes ,Villfranche areas .
Its a patrol boat bit like UKs P boats about 59/60 ft .On the back is a black rib maybe 8 pax ?
They pull up anchor the mothership and launch the rib , usually 4 pax packing a side arm too fwiw .

We have a doc folder so after they have boarded we just tip it out on the cockpit table .Bearing in mind they are busy a lot of boats to go at and I guess some sort of target to meet inspections wise .They have never actually asked directly for proof of VAT this forum favourite of “ VAT paid invoice “ but that doc tips out as well . It was U.K. VAT paid btw .The old Sunseeker.
They ask for the boat reg , your passport which tally’s and where ( Marina you are from ) insurance .
The table has my French boat qualifications and the Sunseeker invoice in full view as well .
The last few seasons of ownership it’s as if they logged the boat on the tablet .They have approached from the bow seen the name at the stern , hovered about heads down at tablets and then gone off to “ do “ some one else .I guess we came up as ok ?

In Italy with a Italian boat full decals , just purchased boat on temporary ticket as the Roma port authorities still processing the transaction.
First day of ownership blasting up N to Cannes from Naples , pulled into Porto Roma to refuel .
They were waiting outside the port entrance and pounced .Gardia finanza .Passports , all the old reg docks the original blue book , the temp, cert , the Bos , the insurance etc etc .They do not board they pass a fishing landing net and you drop the stuff in .
40 mins hovering about , heads down on the guardia Finanza boat , a lot of key board tapping and a lot of phone calls with guys holding our documents.
Handed them back .Off on our way .It still had the IT flag as was not removed from the It register , ironically the port we were having about the entrance .
What they could not deduce was the part cash payment I did for the boat , the invoice price was different to the amount I paid or the fact on the morning of the bank transfer element the broker phoned me up and requested I transfer the balance a 6 figure sum to the owners “ sisters account “ .Some cock and bull story the owner was having a acrimonious divorce .
Any how from the GF s eyes as it was a private individual to get it registered in the first place the VAT was paid .The blue book proved that .
And it was 24 hrs after I bought it .

Second time last year .Just having breakfast on the berth in Loano and the cars + van pull up and out they all get out , not quite running down the pontoon but get the urgency . We are second from the start so first .See our red ensign and speak Italian , I converse back in Eng apologising for not understanding.( wifeys digging out the file ) he just asks is this your boat and do you live in Italy .Ans Y and N .Then says thank you and flounces off .
About 8 pax working in pairs going down the jetty , it’s the Italian nationals they seem more interested in .
After a while the inspector boss guy stands at the end of our passerelle and I strike up a conversation.His Eng is almost perfect.
I open the batting with something like “ we are the only Eng on here with a red ensign “ and “ How come these Italian s are flying red ensigns “
You see when I arrived I erroneously would walk up to other red s in a friendly manner to strike up a conversation....as to do .Only to find out they spoke little Eng and were indeed locals .Cars from Turin / Milan .
I sort of dropped it changed the subject, dog tried to cock his leg up on his nice uniform and I quickly departed.

Here you are imagine waking up to theses guys . Another Itama owner .What is it about us ?

 

[jrudge]

We have a doc folder so after they have boarded we just tip it out on the cockpit table .Bearing in mind they are busy a lot of boats to go at and I guess some sort of target to meet inspections wise .They have never actually asked directly for proof of VAT this forum favourite of “ VAT paid invoice “ but that doc tips out as well . It was U.K. VAT paid btw .The old Sunseeker.

In Bonafacio it was specific to VAT - they were only interested in

1. the VAT status of the boat

2. The last time it left the EU

3. The passport of the owner

They went down the quay doing every single boat.

 

[JB]

I assume this season as long as you can prove the boat was in the EU which i can from marina letter and AIS data , there are no more questions to ask ? The boat is EU VAT paid so there is nothing more they can get

 

[JB]

When we had them in Corsica , once we were berthed at Ile Rousse (nice place, but the port not so nice next to the ferry berth), they came onboard and we had a captain who we bring for long trips, they didn’t care who was onboard , all they wanted to know was the VAT paid and once satisfied that is was they were on to the next one.

Second time, we were anchored close to St Florent and at about 10am they arrive into the anchorage in a Tempest rib completely unmarked, looked normal until I saw ‘DOUANE’ on their tops. They pulled up to the back of the boat , stayed on their rib (maybe because of COVID they don’t board boats anymore?) , we handed them the files and even after showing all the documents they were not satisfied the VAT was paid .. they wanted to know did the previous owner charter , where did they take delivery etc ... we did not know but eventually after close to an hour they left and went on to the next boat

 

[Portofino]

Wonder if they have been prodded by Paris to give U.K. boaters a bit more stick this season ?

We are staying at least another 2 y in Italy btw .Not really this extra aggro more just prefer it and because of Covid last summer there are few more itches to scratch .

Feels like the Italian GF have enough local fish to fry if I am honest .

Interested to see if the red ( blue ) ensign turns into a target this season ? Hope not .Or if so they are IT literate and keep your details on a shared data base .One can hope .