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

 

[westernman]

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

1) My understanding is that if the boat stays in the Carribean there is no VAT to pay. Also there is no VAT to collect on any charters you do there, although there may be some other local taxes you might have to pay there.

2) If the boat comes to the EU for anything other than a temporary stay, the VAT will have to be paid. If the owner is a VAT registered business, this VAT may be offset against the VAT which will have to be paid on charter fees (or even recovered in advance if HMRC believe the charter business is real and will make money - but they are probably hard to convince as many boat owners have tried the trick of registering a company and just chartering a couple of times a year to friends and making a loss year after year).

However, if you are really in the chartering business and trying to make money, I would guess that your (small??) business is not VAT registered (I don;t know the requirements for this) and in that case the VAT is not recoverable or offsetable.

All IMHO. Better check with an expert!!!

 

[dt4134]

1) My understanding is that if the boat stays in the Carribean there is no VAT to pay. Also there is no VAT to collect on any charters you do there, although there may be some other local taxes you might have to pay there.

Remember that some French overseas departments are classed as part of the EU. I think that includes Martinique.

 

[Ex-SolentBoy]

Martinique is not in the VAT zone.

 

[dt4134]

Martinique is not in the VAT zone.

Interesting. Being deliberately vague to maintain customer confidentiality: a job I was doing recently I queried some aspects of the VAT configuration of a system and it ended up having to go to a specialist VAT consultancy and it came back that the particular transactions in question in overseas French departments were chargeable for VAT whereas they wouldn't be chargeable outside the EU, even though other activities were VAT chargeable when carried out anywhere in the world. The split was illogical, but there we are.

Given how complex (half-baked!) VAT is I suspect the OP is going to need specialist advice too.

 

[westernman]

Martinique is not in the VAT zone.

Martinque is a potentially an interesting situation - particularly since the OP is a French resident and Martinique is kind of like a part of France (it is a DOM rather than a TOM) and as such is in the EU (but indeed not part of the EU VAT zone).

Hence he might have to pay VAT there on the purchase (Martinique has a VAT system) as the purchaser (his company) is registered in the EU.

Or may be not, as it is not treated quite the same way for VAT as the rest of France or the EU (it is outside the EU VAT zone). Or it might been he has to pay VAT but cannot recover it as an input tax for his UK company.

The OP needs an expert who understands thoroughly all the special situations for Martinque!!!!

 

[Nick_H]

- If I do sail her to EU, to do some charter, will I have to pay any VAT upon arrival ?

It depends where in the EU you are doing the charters. If the yacht is based in France, and meets the conditions of the French commercial exemption, then you don't have to pay VAT on the yacht, or any ancilliaries and services, nor do you have to charge VAT on the charters themselves.

In simple terms, to qualify the yacht must

1. have a commercial registration
2. have at least one full time crew member (that can be you)
3. only operate commercially (to use it privately you have to charter it from the company)
4. be capable of "navigation on the high seas"

It seems possible that the same exemption may apply in Martnique, but I have no idea whether it does.

The French are under severe pressure from the EU to drop this exemption, but it's still in force at the moment.