Another (ex)VAT topic: German charter company, boat in Spain, no VAT paid

[jvardy]

Sorry to add to the myriad of tax-related topics but after digesting all I could find, I am still slightly stuck.

The situation: the boat I am looking at (SO45.2 from 2000) is owned by a German charter company. The boat is German flagged (and registered in the ADAC registry) but moored in Spain. We have agreed on a price but the owner states that they cannot sell me the yacht including VAT. They want to sell me it excluding VAT and suggest I then pay the VAT in the country I bring it to.

The reason (and I quote the seller) is: When we bought the boat 7 years ago, we tried everything to pay the VAT at the German Customs because we are a German Company. But we were told from the officials, that the boat has to be physical in Germany to pay the taxes. So the only way we know how it works is, you buy the boat without VAT and pay it in whatever country you choose/sail to.

The selling broker has never run into this and most of the literature I have found mentions that the selling business has to charge VAT on the transaction.

I have asked where they originally bought the boat and am still waiting for the answer but I expect the boat was bought from outside the EU. If that's the case then by the looks of it, they never paid tax on import into the EU.

What are your thoughts? Can I buy it without VAT, then pay it in Spain for example? I have read that Spain's VAT valuation is attractive so could it actually be an advantage? Or is this a liability? Will they even allow me to pay VAT given that it was sold to me by an EU vat-registered company?

 

[Quandary]

It is normal that charter boats are not vat paid and that when they are sold on vat is due, it is amazing that the broker does not know what to do, I would presume you will be obliged to pay vat in the country where you intend to keep it but there will be other suggestions in a minute.

 

[davidej]

Are you sure that is right?

Isn't the situation that a charter company buying a yacht does pay VAT. But it can add it to the VAT it has paid on its inputs thus effectively reclaiming it.

Then when it sells it it has to charge VAT to the buyer

EDIT: this is assuming all parties are in the EU. The OP suggests that the original seller might not have been in the EUand thus might not have charged VAT

 

[Graham376]

It's a good few years since I sold my business and VAT rules may have changed but, my understanding is the same as the OP's in that a VAT registered business selling the boat has to charge VAT and the new owner can reclaim it if a business but not if a private individual. If they have brought it in from outside the EU under the radar, is it RCD compliant or will you have to sort that as well?

 

[lw395]

When I was in Germany many years ago, I got slightly 'involved' with the German MWST or VAT system. It made the UK system seem like a nice cosy place!

The only way I can imagine they can sell you the boat without charging VAT is if they've virtually ceased trading and de-registered???? Do they still have a VAT number?
Of course another possibility is that the charter company does not actually own the boat, as happens with lots of charter boats, they merely manage the purchase, running eventual sale for various owners.
I do not understand this scenario.
I would want to be assured of the complete chain of ownership from new I think?

 

[Quandary]

Before I was registered I had to charge and pay vat on everything, once registered I was able to buy equipment vat free, you paid it and recovered it. Most quarters we still had more to pay in than to recover. Occasionally we bought something big like a big printer and got some money back.
Vat will be payable on current value.

 

[PlanB]

I know someone who bought a new Rodman from the UK but had it delivered to Spain free of VAT and then paid the VAT in Spain. Indeed, my own boat was bought in the Channel Islands (VAT free) and then later had the VAT paid in Spain when it arrived there (still on Part1).
So in theory I don't see a problem as long as you have a paper trail of ownership from new = after all, you are volunteering to pay the tax.
But (and there has to be one) the Brexit thing could make it more complicated depending on where you are and for how long. So it might be an idea to wait and see what happens over the next few weeks.

 

[jvardy]

It's a good few years since I sold my business and VAT rules may have changed but, my understanding is the same as the OP's in that a VAT registered business selling the boat has to charge VAT and the new owner can reclaim it if a business but not if a private individual. If they have brought it in from outside the EU under the radar, is it RCD compliant or will you have to sort that as well?

Yes, it's RCD compliant and they can provide a Declaration of Conformity.

All the information I can find indicates that they should sell it to me with VAT, with the only exception being if they never reclaimed VAT after paying it initially but that's certainly not the case.

The RYA FAQ has this to say:

A9. If a UK/EU VAT registered company sells a vessel it owns to a private individual, must it charge VAT on the sale?
Normally ‘Yes’. VAT is due on the sale of business assets (which could include a yacht) if the business has reclaimed the VAT it was charged when the item was purchased. If the business chose not to recover the VAT (input tax) because, for example, the yacht was purchased for the private use of a company Director, then no VAT need be charged.

Whether or not VAT is, or needs to be charged, is entirely the responsibility of the vendor. If VAT is not charged on the sale, the purchaser is advised to obtain documentary evidence from the seller that the vessel is VAT paid or deemed VAT paid as set out in HMRC

As I don't know the ins and outs of the German tax systems, I can't really find out on what basis I can convince them of this, or whether I am actually right. If I can't convince them to add VAT, then I need to find out what happens if try to pay the VAT in Spain.

My worst case fear at this point is that as they have imported it from outside the EU under the radar and not paid VAT (as they indicate), that when I try and pay the VAT in spain, it turns out to all be illegal and they impound the boat.

When I was in Germany many years ago, I got slightly 'involved' with the German MWST or VAT system. It made the UK system seem like a nice cosy place!

The only way I can imagine they can sell you the boat without charging VAT is if they've virtually ceased trading and de-registered???? Do they still have a VAT number?
Of course another possibility is that the charter company does not actually own the boat, as happens with lots of charter boats, they merely manage the purchase, running eventual sale for various owners.
I do not understand this scenario.
I would want to be assured of the complete chain of ownership from new I think?

This is a small operation and it's more of a skippered charter that they offer, not a rental type business. This was their first boat and have just bought two more boats. They want to sell this one as it's getting on a bit. They are active as far as I can understand. They have an active website with a schedule of trips for 2020 and facebook page where I can track the whole history back to when they started the business in 2012 with this boat and expanded with the two new boats.

I know someone who bought a new Rodman from the UK but had it delivered to Spain free of VAT and then paid the VAT in Spain. Indeed, my own boat was bought in the Channel Islands (VAT free) and then later had the VAT paid in Spain when it arrived there (still on Part1).
So in theory I don't see a problem as long as you have a paper trail of ownership from new = after all, you are volunteering to pay the tax.
But (and there has to be one) the Brexit thing could make it more complicated depending on where you are and for how long. So it might be an idea to wait and see what happens over the next few weeks.

I forgot to mention, I live in The Netherlands and have dual nationality so I have to deal with the Dutch tax authority. Was it advantageous to pay the VAT in Spain? I read somewhere that they use a value from a government 'gazette' and then take a percentage of that based on age, and then charge VAT on that. This could be a great saving vs the Dutch flat fee of 21%.

 

[JumbleDuck]

If they have brought it in from outside the EU under the radar, is it RCD compliant or will you have to sort that as well?

That wouldn't be the buyer's problem, as far as I know. RCD conformity only applies when the vessel is first put into use in the EU. After that - ten seconds after, if you want - you can make it as non-conformant (non-conformist?) as you like.

 

[jvardy]

Ok, small update:

The Dutch customs department specialised in yachts has indicated it is indeed possible for a German company in this situation to sell me the boat ex-VAT. Unusual but possible.

It has also turned out that the current owner bought the boat ex-VAT in 2012 from a German charter company in Croatia, before they were part of the EU. So no VAT has been paid. The Dutch customs said I should look for a customs agent in Spain to help me to basically import the boat and pay the VAT.

Can anyone verify this comment from Noonsite? PlanB?

By far the best place to import your boat into in Europe is Spain. The valuation of the boat is based on the "blue book" price (or if your boat is not listed, then listed sale price of your model boat or similar found on the internet). This was the case with my sailboat. Of course there were a number of different boats for sale. They took the middle of the road price. The procedure is then to take 10% of that price and charge VAT/IVA on that. So for example, if your boat is valued at $50,000 then you pay VAT/IVA on $5,000. The whole process took place at the customs office in Barcelona. This was the only office we had to visit. Officials were very friendly.

 

[PlanB]

The VAT on mine was paid long before I took ownership (in the days of the peseta) and it really was based on a low value as it seemed impossible at first sight that the number on the VAT invoice was actually the VAT! From the days when matriculation tax was a hot topic, their "book" of prices certainly seems to offer good value.
My understanding is that you can "import" and pay the VAT in any country, so Spain shoud be a goer. There is an occasional reference on here (search) to a guy based in, I think, Barcelona - Alex Chumillas - who should be able to help.

 

[Baggywrinkle]

I bought a VAT unpaid boat from a charter company in Croatia (before Croatia joined the EU). I did this on purpose to avoid paying VAT as I knew the boat would be imported to the EU and deemed VAT paid when Croatia joined the EU in 2013. It worked and I have EU VAT paid status but have not paid VAT, just a nominal import fee.

So I can only relay my experience as that of a buyer of a VAT unpaid boat.

The procedure was as follows.

I paid for the boat and got a reciept and sales contract with no indication of VAT paid. I registered the boat in the UK (part 1) and sorted out insurance etc. giving the boat a new identity.

I picked the boat up and sailed the boat from the marina to the customs pier at the nearest port of entry and exported the boat (under its old identity and paperwork) - still no VAT paid.

I sailed 12 miles offshore, turned round, and came back under UK flag with a new UK identity for the boat and imported it under a temporary import. (Croatia was still not in the EU at this point so it was allowed)

I would have paid the import duty and VAT if I had been a Croatian citizen, but as an EU citizen it was not necessary and the boat sat on temporary import to Croatia for a couple of years. In 2013 Croatia joined the EU and after a bit of paperwork and a small fee my boat was declared VAT paid in the EU.

If you intend to do the same thing in Spain, I would suggest going to the nearest Spanish port of entry and explaining the situation to the customs officials. You could probably just turn up with the boat, VAT unpaid and sort out VAT payment and the paperwork in a morning. It took me about 3-4 hours in total.

The Germans are right, they are unable to accept a VAT payment because the transaction is not in their country - it is in Spain, so that is where the VAT needs to be paid. If you think about it, this makes perfect sense or everyone would be trying to push their VAT payments through the EU country with the lowest VAT rates.

I always knew that if I took the boat to any EU port before Croatia joined the EU I would be required to pay import duty and VAT at the port of entry. The customs officials at the ports of entry are used to dealing with payment of VAT etc. on imported boats.

So my advice is, contact the Spanish customs officials at the nearest port of entry to the location of the boat and ask them what the process to pay VAT is and how much you might be expected to pay. The most important thing to know is how they will value the boat for the purposes of VAT collection. If the price is still right, buy it without VAT and pay the VAT to the Spanish customs officials as per their instructions and they will provide you with the necessary paperwork for VAT paid status in the EU.

Hope this helps. I know nothing about companies charging VAT and how that works, I can only post as a consumer who bought a VAT unpaid boat.

 

[Sea Devil]

You will certainly have to pay 12% matriculation tax in Spain on top of the VAT however that also will be based on the Spanish Book price which as previous posts have said is normally low

 

[jvardy]

You will certainly have to pay 12% matriculation tax in Spain on top of the VAT however that also will be based on the Spanish Book price which as previous posts have said is normally low

Not sure why that would be, that tax is for if you live in Spain, or flag the boat Spanish, or have it as a charter boat in Spain (as far ad I can see). By the time I go to the customs, it will be Dutch flagged.
http://www.nauticalegal.com/en/repo...atriculation-tax-and-foreign-registered-boats

 

[Sea Devil]

Not sure why that would be, that tax is for if you live in Spain, or flag the boat Spanish, or have it as a charter boat in Spain (as far ad I can see). By the time I go to the customs, it will be Dutch flagged.
http://www.nauticalegal.com/en/repo...atriculation-tax-and-foreign-registered-boats

If you ímport the boat to Spain then you will have to pay VAT. (IVA) If you import any major item, Cars, Boats, Planes etc to Spain you have to pay matriculation tax irrespective of the or the EU country or origin. Naturally you should take legal advice from someone like Alex Chumillas, Tax Marine Marina Port Vell C/Escar, 18 08039 Barcelona +34 667 663 521
+34 932 218 201
Website: www.taxmarine.com
Email: alex@taxmarine.com

You are trying to register somewhere to pay the VAT so if you register in Spain then I would suggest you are actually importing it to Spain and if importing then matriculation tax of 12% of the book value is liable. However book values are still low so the total of 33% might still be less than paying say 21% in France. But of course you should take proper legal advice - which will not be a freebe

 

[jvardy]

If you ímport the boat to Spain then you will have to pay VAT. (IVA) If you import any major item, Cars, Boats, Planes etc to Spain you have to pay matriculation tax irrespective of the or the EU country or origin. Naturally you should take legal advice from someone like Alex Chumillas, Tax Marine Marina Port Vell C/Escar, 18 08039 Barcelona +34 667 663 521
+34 932 218 201
Website: www.taxmarine.com
Email: alex@taxmarine.com

You are trying to register somewhere to pay the VAT so if you register in Spain then I would suggest you are actually importing it to Spain and if importing then matriculation tax of 12% of the book value is liable. However book values are still low so the total of 33% might still be less than paying say 21% in France. But of course you should take proper legal advice - which will not be a freebe

I have already contacted Alex on this matter and matriculation tax didn't come up. I am not registering this boat in Spain, I am paying the VAT on import in the first port of arrival within the EU. The boat is currently German registered and will be NL registered after sale.

 

[PlanB]

I think he's right - if he is not resident in Spain, Matriculation tax is irrelevant. He's not importing the boat to Spain, just paying the VAT.

 

[Sea Devil]

I think he's right - if he is not resident in Spain, Matriculation tax is irrelevant. He's not importing the boat to Spain, just paying the VAT.

I suspect you are probably right. if Alex says so then as a nautical lawyer who specialises in this area then I would absolutely follow his advice.

 

[jfm]

There is quite a lot of incorrect info above. No time to correct each point

1. This looks like a B to C sale by a German business registered for German vat. But the goods are in Spain so it is a "distance sale" in tax law jargon.

2. If the total distance sales in this year by the German co are over €35k then German co must by law register for Spanish vat and charge you Spanish vat. If their total distance sales are under €35k then thry are not required to register for Spanish vat and they should charge you German vat and give you a German vat invoice.

3. That's the law and there is no doubt about it if the facts are B to C sale by a hitherto correctly vat accounted boat - but see 5 below because if it has been smuggled into the eu then everything changes.

4. I have no idea whether you're paying >€35 k for this boat or whatever else germanco sells B to C in Spain. The €35k number is easily verified e.g. https://www.avalara.com/vatlive/en/e...hresholds.html

5. The point of concern is that it appears from OP that the boat was smuggled into EU several years ago. In that case the unpaid tax is German co's primary liability but the boat is by law seizable as security pending payment, even if you bought it in good faith unaware of the smuggling. Thing is, you're not unaware- see OP. So imho don't contract to buy it unless there is a contractual condition that this is cured. Don't even pay a deposit imho.

6. Now to practicalities. It seems that the boat might be smuggled and/or that German co can't be bothered to register for Spanish vat on distance sales when they should. The unpaid vat on the first of those is your problem, but not the vat on the second which is only German co's problem. Either way you'll have hassle with odd paperwork, difficult resale, zealous impound-trigger- happy officials. So in this case imho a sensible choice is to get a good guy like Alex to broker a deal with Spanish tax office and offer to pay Spanish vat on the book price in return for a nice vat receipt. Spain will give you this at lowest cost of any eu country. Worth it for an easy life imho, but you need a good representative i.e. Alex. Critically, Alex's deal with vat office must cover in writing BOTH vat on your purchase of the boat now AND a release of any prior importation VAT claim so far as it is a claim on you or an impounding claim on the boat.

7. In this "Alex process" the German co's name will be disclosed to Spainish vat officials, so the Germans need to buckle up. Don't tip them off because spooking them might kill the deal. I'll delete relevant parts of this post if you ask.

8. As already covered, there is no matriculation tax here.

9. The general problem with yacht vat is that 90% of what is written on the internet about non straightforward cases is incorrect, so tread carefully. All innocent of course, but people write based on hunches, what brokers say, or talk about cases that are merely similar rather than the same. Hardly anyone writing all this on the internet has ever actually read the law. There is devil in the detail.

 

[Elessar]

It's a shame the boat isn't Spanish registered. I bought a Spanish registered boat and the registration documents give you full ownership history, name change history and clearly states the IVA status. Saves a lot of guessing.