Buying an ex VAT yacht

[sighmoon]

If you buy a second hand yacht inside the EU, where VAT has not been paid, where should VAT be paid, and hence at which country's rate? Where she is at the time of the transaction? The country where she is registered? Where the vendor is resident / registered? An arbitary place that has the lowest VAT?

Note to Dan - the search seems not to be working; it says no results for 'VAT'.

 

[Tranona]

Suggest you go onto the RYA site where there is a complete guide to VAT matters that covers most normal situations.

Basically, however, if you are buying the boat from a private EU citizen there is no VAT involved. The only ways you have to pay VAT on a boat is if you are buying from a VAT registered person or business such as a dealer, charter company or enterprise where the boat was a business asset, or if the boat is being imported from outside the UK when the person importing it is responsible for paying VAT at the first port of entry into the EU. There are a number of exceptions - for example if the boat is in the EU but belongs to a non EU resident where VAT does not have to be paid subject to specific conditions, but VAT is due if it sold in the EU. Soi, if you buy a boat from a US resident in Greece, then you pay VAT in Greece - unless you immediately export it outside the EU.

You will find, however, that particularly on older boats, evidence that VAT has been paid may not exist, mainly because it is only in recent years that it has become an issue. If you are buying from a private individual the lack of evidence is largely irrelevant, because it is very difficult for any offence to actually be committed by an individual.

You need to look at the specifc history of the boat and test it against the criteria published by HMRC as to whether VAT is due. The key things to look out for are ownership by a business, periods of ownership outside the EU and possibly self build.

So if a boat was built in the EU or imported by way of business, sold to a private owner and then subsequently changed hands through a series of private owners, it is almost impossible for VAT not to be accounted for, although as there is no legal requirement to keep evidence for more than 6 years (and that is only by the VAT registered vendor) proof may be difficult.

If a boat has been privately imported or owned by a VAT registered business then it is important to check the history of ownership changes to ensure that VAT was accounted for if a change was a chargeable event.

Note that these general observations apply to boats sold or in use in the EU after 1985 and different rules apply to earlier boats - again all explained in the RYA material.

Hope this helps.

 

[jimbaerselman]

As Tranona has suggested, it all depends on the status of the vendor. So, who or what is offering the vessel for sale, and why has VAT not been paid or proven paid?

 

[Bobobolinsky]

As has been mentioned, if the boat has been built to be a sole acommodation, it is eligible for a refund of VAT, although that scheme with houses means you have to live in it for five years to get the full entitlement. Why worry the scheme is almost unworkable anyway. To work there must be a full history on the boat and a fixed registration scheme, backed up by positive identification. There are so many loop holes, this VAT scheme does not float a boat. I can think of lots of ways to circumnavigate the system.

 

[fireball]

You can use Google to search these forums:

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[jfm]

for example if the boat is in the EU but belongs to a non EU resident where VAT does not have to be paid subject to specific conditions, but VAT is due if it sold in the EU. Soi, if you buy a boat from a US resident in Greece, then you pay VAT in Greece - unless you immediately export it outside the EU.

Tranona that isn't correct. The VAT would be due to the EU country into which the US resident first imported the boat, which might not be greece. And there is absolutely no relief from the VAT if buyer immediately exports it from EU. The VAT in this case is levied on the seller not the buyer, but in some countries (UK included) the VAT is "mortgaged" on the boat so this is one of the very few cases where an innocent buyer can have his boat siezed by customs if a previous owner didn't correctly pay VAT

To OP, we need more detail. Nature of the seller and his basis for not paying VAT on the boat. There are some circs where VAT doesn't have to be paid and some where seller has to pay and some where you might have to pay. Devil is in the detail

 

[sighmoon]

THanks all.

It turns out the reason there's no VAT is that it's an ex-charter yacht, which has put me off.

But academically, a Greek registered boat, currently in Greece, being purchased by a British national, living outside the EU

 

[Tranona]

Tranona that isn't correct. The VAT would be due to the EU country into which the US resident first imported the boat, which might not be greece. And there is absolutely no relief from the VAT if buyer immediately exports it from EU. /QUOTE]

Can you clarify that bit? I was assuming it was a non EU resident who was, say cruising with temporary importation and sold the boat to an EU resident, so VAT would be payable in Greece as the country of first entry). Would a non EU resident be able to buy without paying VAT and either apply for temporary importation or export it? Or could an EU resident buy it and immediately export it?

(Not that any of this is directly applicable to the OP!)

 

[jfm]

Can you clarify that bit? I was assuming it was a non EU resident who was, say cruising with temporary importation and sold the boat to an EU resident, so VAT would be payable in Greece as the country of first entry).

VAT is prima facie due to first country of importation to EU. If importer is a non EU person and meets the TI conditions, he is relieved by THAT country from that VAT, under the TI rules. One of the conditions of TI is that importer doesn't sell boat while TIed. In your scenario, the US seller would have breached that condition, resulting in withdrawal of the TI given by the first country of import, to whom the previously relieved VAT then becomes payable. In the piece of your post I quoted, it wasn't at all clear that Greece was the first country of entry, so it was incorrect to say Greek VAT payable. You have in your more recent post said that Greece is first country of entry (unlikely in practrice for geographical reasons!) but that's a goalpost move

Would a non EU resident be able to buy without paying VAT and either apply for temporary importation or export it? Or could an EU resident buy it and immediately export it?

No to your first question, at least not usually. The sale in and of itself normally constitutes a breach of the TI conditions in all EU countries, thus triggering a VAT liability for the original TI er. In many countries that particular VAT liability (as opposed to VAT in general) is "mortgaged" on the boat by operation of law, so caveat emptor. However, in some countries it is possible to transfer the boat (in very specific circs) from TI relief to one of the other reliefs prior to sale, and would result in a "yes" answer to your first question. The most likely one I think is inward processing relief. Devil in detail here and I'd have to look up the law on transferring between relief regimes; I don't remember the detail and it wouldn't be easy. The customs officer you asked would likely not know the rules for starters, due to the rarity and complexity of this.

Answer to your second question is same. Normally an EU resident could not buy it even if immediately exporting it, without triggering VAT for the seller in the first country of import; the sale would trigger an end to the original TIer's TI relief. But if the boat could (unusually) be moved to say inward processing relief then an EU buyer could benefit from that just as easily as a non EU buyer

Inward processing relief wont apply generally. It's a relief where something is imported to EU to have work done on it, then it must be exported when the work is done. Eg a refit. So the American would have to put the boat into refit, then apply to have the TI changed to IPR, then sell it mid refit, then the buyer would have to export it when the refit is done. All a bit of a faff for a 40 foot Jeanneau but perfectly possible for a Lurssen

 

[Tranona]

Thanks for the detail explanation - seems a good reason to pop across to Turkey or Croatia to do the deal - assuming the boat is not going to used in the EU.

 

[jfm]

Thanks for the detail explanation - seems a good reason to pop across to Turkey or Croatia to do the deal - assuming the boat is not going to used in the EU.

Yup, or Albania if you're feeling lucky!

Incidentally, Turkey and Croatia are EU candidate countries, but I've no idea when they are expected to join. Montenegro isn't a candidate though, so that should remain a handy nice non EU Med location

 

[Bobobolinsky]

VAT is a point of sale tax, the tax is not due until the sale, so surely the point of entry for an item, is where it is located

 

[jfm]

VAT is a point of sale tax, the tax is not due until the sale, so surely the point of entry for an item, is where it is located

That's way off the mark; it's nothing like that simple. As explained above, for (say) a boat imported to EU by (say) an American, it is not due in the country of sale and it's not a point of sale tax

 

[Tranona]

Yup, or Albania if you're feeling lucky!

Fond memories of my trip from Corfu to Albania to visit the Butrint site. Not sure I would want to go there for any other reason, though!

 

[snowleopard]

A nasty can of worms. The nasitest bit of all is that if you buy a VAT-paid boat outside the EU then bring it back to the EU VAT is payable a second time, in fact there is no limit to the number of times VAT can be charged on a boat!

 

[Tranona]

A nasty can of worms. The nasitest bit of all is that if you buy a VAT-paid boat outside the EU then bring it back to the EU VAT is payable a second time, in fact there is no limit to the number of times VAT can be charged on a boat!

You need to understand that the tax is not a tax on the boat per se but on the transaction. The same would apply to any other asset that is imported into the EU. The use of terms such as "VAT paid" "VAT Exempt" etc in respect of boats is misleading. You can only determine if VAT is payable by looking at the nature of the transaction. To make matters complicated there are a number of reliefs which mean that in two apparently similar transactions, one may result in a chargeable event and another not.

So, in your example, if the boat was imported into the EU by the person who exported it (and assuming VAT was originally paid in the EU), normally, no VAT would be payable. If, however, it changed hands outside the EU, VAT would be payable on re-importation. However, the person importing it might qualify for relief if s/he were taking up residence in the EU and the boat was a personal possession.

It has to be complicated otherwise people like jfm cannot become rich and afford to buy a Squadron 78! Only a little bit envious.