Croatia EU Accession VAT - Information Pool

[Deleted User YDKXO]

Karl-Heinz Beständig, editor of the '888 Hafen' handbooks issues a regular newsletter (in German) and has addressed this subject. He reported early this year that the Croatian finance ministry has already made a statement on VAT payments for EU-registered boats, ruling out the Malta solution and that all owners will be taxed at 23% of the 2013 value.

I take it that means that Croatia will not adopt the sale/leaseback arrangement available in Malta rather than boats that have paid VAT in Malta in this way will not be deemed VAT paid in Croatia? Any idea on what basis the Croatian tax authorities will calculate the 2013 value because that is as critical as the tax rate applied?

 

[BrianH]

I take it that means that Croatia will not adopt the sale/leaseback arrangement available in Malta rather than boats that have paid VAT in Malta in this way will not be deemed VAT paid in Croatia? Any idea on what basis the Croatian tax authorities will calculate the 2013 value because that is as critical as the tax rate applied?

Yes, of course the estimated value will be key. No doubt there will be tax experts who will be tasked on valuations, the new price against depreciation with age and condition - easy enough for standard models - similar to the Blue-Book or Glass's Guide for vehicles. Here in Switzerland the tax authorities have taxable values for vehicles as wealth - usually lower than used-car prices.

I'm sorry, the Beständig news letter had no more details than those I posted but I would expect that, as an involved EU-flagged boat owner, you have every right to be informed. A letter to the ministry of finance, Zagreb, would be appropriate and opportune.

Edit: Because if you did know your expected tax demand at 25% it could be well worth it to get launched before the date and high-tail it to Cyprus to enter the EU at 15%. But check valuation there first ....

 

[Deleted User YDKXO]

Yes, of course the estimated value will be key. No doubt there will be tax experts who will be tasked on valuations, the new price against depreciation with age and condition - easy enough for standard models - similar to the Blue-Book or Glass's Guide for vehicles. Here in Switzerland the tax authorities have taxable values for vehicles as wealth - usually lower than used-car prices.

I'm sorry, the Beständig news letter had no more details than those I posted but I would expect that, as an involved EU-flagged boat owner, you have every right to be informed. A letter to the ministry of finance, Zagreb, would be appropriate and opportune.

Edit: Because if you did know your expected tax demand at 25% it could be well worth it to get launched before the date and high-tail it to Cyprus to enter the EU at 15%. But check valuation there first ....

In Spain they have some kind of an official book used by customs authorities to estimate boat values for VAT and matriculation tax purposes and the depreciation % they apply for older boats seems to be quite generous in that older boats are often valued at well under market value. I had to pay matriculation tax on my previous boat when it was in Majorca and although I was very angry at having to pay it, the value they put on my boat was well under market value. I know politicians don't think like this but if the Croatian govt acted in the same reasonable manner when it came to putting valuations on boats, they might actually not decimate their own pleasure boating industry. As it is, if they're going to be aggressive about valuations and with a VAT rate of 25%, boats are going to be leaving Croatia in droves to pay VAT elsewhere and many won't come back.
I'll leave the letter to Zagreb to somebody else thanks. I dont want to make my boat a particular target in Croatia

 

[RupertW]

The valuation questions worries me too. We bought the boat in Croatia in a terrible state and have been doing it up, largely with supplies bought in Croatia with VAT paid there on those things. I would ideally have paid British VAT there and then to get it over with but not possible without sailing the boat back to the UK.

I suspect therefore that we will get stung for the value at 2013 price or worse based on the state of the boat (up to average wear and tear ) then rather than the very poor state we bought it in.

Currently thinking of sailing the boat to Malta at the end of the year as their VAT is lower and they won't be running a nice new money-earner like Croatia.

 

[BrianH]

I know politicians don't think like this but if the Croatian govt acted in the same reasonable manner when it came to putting valuations on boats, they might actually not decimate their own pleasure boating industry. As it is, if they're going to be aggressive about valuations and with a VAT rate of 25%, boats are going to be leaving Croatia in droves to pay VAT elsewhere and many won't come back.

I put it to you Mike, since when have you known Croatian authorities acting in "a reasonable manner" where costs and payments are concerned?

I certainly have not experienced it in the 30 years I have been cruising there. The latest 'sejour tax' rip-off should be a good indicator.

I'll leave the letter to Zagreb to somebody else thanks. I dont want to make my boat a particular target in Croatia

- I see your point. Why not subscribe to the 888 Hafen Handbook and write to the editor - he seems in contact and publishes informative updates.

 

[Seven Spades]

The reason boats are a special case is as follows:

You can buy cars, TVs, HiFis etc. in Croatia as an EU citizen and claim back the VAT when you export the goods (take them across the border back to EU land). Unfortunately because this is normally done by road there is someone waiting to nab you on the EU side to pay the EU VAT or Import duty.

With a boat you can buy in Croatia VAT free and export the boat. You don't then however necessarily need to cross an EU border and import, you can turn round and go back into Croatia and enjoy a VAT free boat, kept in Croatia as you are not a Croatian subject.

It's a moot point if you can have VAT free jewelery, cars, TVs etc in Croatia as an EU citizen.

Of course all Croatians have already paid croatian VAT on their possessions so will be unaffected.

You completely miss the point I am making. I can go to Croatia and buy myself a nice Partek Philippe watch before Croatia joins the EU. After they have joined I can bring it back to the UK and it will be deemed VAT paid this is not the case with Yachts it seems.

 

[Deleted User YDKXO]

I put it to you Mike, since when have you known Croatian authorities acting in "a reasonable manner" where costs and payments are concerned?

Well they are all ex Communists so you're right, you shouldn't expect them to act reasonably! I suppose I'm trying to be optimistic. I guess the marine industry in Croatia must be lobbying their govt for some kind of favourable treatment on VAT otherwise there are going to be a lot of empty marinas and a lot of unemployed staff. Also it doesn't make sense to propose more lenient VAT rules for one part of the tourist industry ie the hotel industry and crucify another part. After all, tourism is just about the only industry Croatia has got

 

[Deleted User YDKXO]

Currently thinking of sailing the boat to Malta at the end of the year as their VAT is lower and they won't be running a nice new money-earner like Croatia.

That is certainly an option for new boats and the effective rate of VAT levied in Malta is between 5.4% and 7% depending on length but I'm sure you know it involves a particular sale and leaseback structure. Any idea how it works for secondhand boats?

 

[BrianH]

Well they are all ex Communists so you're right, you shouldn't expect them to act reasonably! I suppose I'm trying to be optimistic. I guess the marine industry in Croatia must be lobbying their govt for some kind of favourable treatment on VAT otherwise there are going to be a lot of empty marinas and a lot of unemployed staff. Also it doesn't make sense to propose more lenient VAT rules for one part of the tourist industry ie the hotel industry and crucify another part. After all, tourism is just about the only industry Croatia has got

They'll squeeze whomever they can as hard as they can. Higher VAT rates on the hotel industry would be hitting Croats until they can pass it on to the tourists, which could be a sensitive market, while EU-flagged boat-owners are all foreigners. And they are all as rich as Croesus, no?

And they are basically captive customers with nowhere to go. All this talk of Montenegro and Malta - there are precious few berths available, certainly not enough for a mass exodus. Of course, a short visit to declare EU entry in Malta and pay VAT is probably on, then back to Croatia to pick up your old berth ....? Maybe, but I wouldn't bet on it. Might as well keep going for Turkey for a permanent place, but may not be so convenient for the short term visit.

Italy is out because of the new annual boat tax on top of having to fork out 23% VAT. Greece seems the logical choice as far as accessibility and available berths are concerned but VAT is also 23% there.

You guys are somewhat over a barrel ... then again, you can look on it as having had a good run for your money.

 

[Deleted User YDKXO]

They'll squeeze whomever they can as hard as they can. Higher VAT rates on the hotel industry would be hitting Croats until they can pass it on to the tourists, which could be a sensitive market, while EU-flagged boat-owners are all foreigners. And they are all as rich as Croesus, no?

And they are basically captive customers with nowhere to go. All this talk of Montenegro and Malta - there are precious few berths available, certainly not enough for a mass exodus. Of course, a short visit to declare EU entry in Malta and pay VAT is probably on, then back to Croatia to pick up your old berth ....? Maybe, but I wouldn't bet on it. Might as well keep going for Turkey for a permanent place, but may not be so convenient for the short term visit.

Italy is out because of the new annual boat tax on top of having to fork out 23% VAT. Greece seems the logical choice as far as accessibility and available berths are concerned but VAT is also 23% there.

You guys are somewhat over a barrel ... then again, you can look on it as having had a good run for your money.

Well certainly at the moment the Malta option is still viable although how long for is questionable. Just out of interest do you have to pay VAT where the boat is located? For example, if you had a UK reg boat in Croatia could you elect to pay VAT in the UK or do you physically have to be in a country to create a VATable transaction?

 

[BrianH]

Well certainly at the moment the Malta option is still viable although how long for is questionable. Just out of interest do you have to pay VAT where the boat is located? For example, if you had a UK reg boat in Croatia could you elect to pay VAT in the UK or do you physically have to be in a country to create a VATable transaction?

Others, such as Tranona, are better informed than I on this but I am quite sure the VAT becomes payable as the boat physically enters the EU country's taxable jurisdiction.

Or, as in the case of Croatia, when that country accedes to the Union it is committed to collect the tax of all unpaid, VAT-eligible EU-registered boats in its territory.

Edit: So no, you may not elect to pay UK VAT on your Croatian-based yacht. I am prepared to be corrected on that though - not a tax expert.

 

[RupertW]

Edit: So no, you may not elect to pay UK VAT on your Croatian-based yacht. I am prepared to be corrected on that though - not a tax expert.

P

Which is very annoying for a UK reg boat bought there as it means my financial outlay on VAT just keeps getting bigger, but not so big that it's worth spending months getting the boat to the Uk and back again. Hence my idea going to Malta and saying "here I am importing my boat into the EU" as their standard VAT rate is 15% I believe, which is less than Croatia, Greece or Italy and I'm more likely to get paperwork which is real, rather than paying all the money plus agent/lawyer fees and find I've been shafted, and am somehow still liable for VAT.

 

[BrianH]

Hence my idea going to Malta and saying "here I am importing my boat into the EU" as their standard VAT rate is 15% I believe, which is less than Croatia, Greece or Italy

Maltese VAT rate is currently at 18%. As I posted earlier, the cheapest available in the Mediterranean is Cyprus at 15%. It also may be easier to get a berth there, Malta is chock-a-block, I understand.

However, just as Deleted User comments, the most important factor is the valuation and that is more difficult to know because depreciation/condition can be so subjective. 10% VAT difference can be a less important consideration when applied on a significant valuation difference.

 

[Baggywrinkle]

VAT update in Croatia.

Just read this ....

http://www.yacht.de/reise/news/deadline-fuer-eigner-juli-2013/a67755.html

For non-german speakers point google translate at the URL above.

The interesting bit is ...

"Juli 2013 is the deadline. If they (yacht owners) have a yacht, than is 8 years or younger where on purchase, no VAT was charged, this would then become due. This will be calculated on the boats value in 2013, not on the original purchase price. Currently VAT is charged at 23%; Until now all attempts to secure a reduced tarif from the government have failed."

Does anyone else have another source for this info? Is the 8 year old rule true?

 

[Deleted User YDKXO]

Just read this ....

http://www.yacht.de/reise/news/deadline-fuer-eigner-juli-2013/a67755.html

For non-german speakers point google translate at the URL above.

The interesting bit is ...

"Juli 2013 is the deadline. If they (yacht owners) have a yacht, than is 8 years or younger where on purchase, no VAT was charged, this would then become due. This will be calculated on the boats value in 2013, not on the original purchase price. Currently VAT is charged at 23%; Until now all attempts to secure a reduced tarif from the government have failed."

Does anyone else have another source for this info? Is the 8 year old rule true?

I don't have any corroboration of this story but if it is true, then I'm in the clear because my boat will be 8yrs old by this date so here's hoping! However it does seem a rather arbritrary cut-off date and you have to wonder why there should be any cut off date and why it should be 8yrs. Also, being devious for a moment, how will anyone determine what age a boat is? CE plates can be forged, HIN numbers can be ground out and documentation can be faked. The other thing that my Google translation seems to suggest is that the valuation for VAT purposes will be carried out by a surveyor; if thats the case, there is obvious scope for corruption there too

 

[mjcoon]

I don't have any corroboration of this story but if it is true, then I'm in the clear because my boat will be 8yrs old by this date so here's hoping!

Reading the translated quote, it would have to be nine years old to escape...

Mike.

 

[Baggywrinkle]

You completely miss the point I am making. I can go to Croatia and buy myself a nice Partek Philippe watch before Croatia joins the EU. After they have joined I can bring it back to the UK and it will be deemed VAT paid this is not the case with Yachts it seems.

In theory yes, sounds plausible but in practice there is the following problem. The person selling you the watch must charge you Croatian VAT. As a foreigner you claim the VAT back at your point of departure, otherwise there would be a thriving business in Croatia for foreigners buying VAT free goods for Croatians. As in other countries you can only buy VAT free if you are a VAT registered company.

Once you have claimed the VAT back at the border, and have your VAT free watch, your only choice is to enter the EU, at which point you have to declare the goods and pay EU VAT. Turning round and going back into Croatia will get you nabbed by the Croatian customs people.

The only way it works with a boat, is that the purchase is combined with an export, so no VAT is charged. You can then go in to international waters and don't actually enter the EU. You can then enter Croatia again, from 'open water' and you have a VAT free boat.

You could combine this export with a large purchase of luxury goods, claiming VAT back at the export, but you may well get flagged for an investigation if you re-enter too soon. The Croatians tolerate the yacht export/import business because it helps their charter companies offload old boats, and brings another customer to their marine industry.

 

[Baggywrinkle]

How will anyone determine what age a boat is? CE plates can be forged, HIN numbers can be ground out and documentation can be faked. The other thing that my Google translation seems to suggest is that the valuation for VAT purposes will be carried out by a surveyor; if thats the case, there is obvious scope for corruption there too

Very true, but would you do that to an expensive asset and effectively destroy it's resale value? Anything younger than 8 years and CE marked should have a builders certificate issued by the original builder, these can be requested from the original builder as they retain records (it's always a good idea to request one for any boat you intend to purchase, just to check that it is genuine). With a fake HIN, the original builder will be unable to supply a copy of the certificate, and for production boats, determining the model year without the HIN is relatively easy, low volume production boats are even easier.

I got one from Bavaria Yachtbau recently for my 1999 boat in order to complete the paper trail for part1 registration.

The articule assumes the valuation will be carried out as in Slovenia, which required a surveyor - but it goes on to say that the valuations were in the owners favour.

 

[BrianH]

Reading the translated quote, it would have to be nine years old to escape...

Correct, and tallies with what the editor of the 888 Hafenhandbuch wrote in last year's newsletter.
"bei allen Yachten, die am 1. Juli 2013 älter sind als acht Jahre, auf eine Versteuerung zu verzichten"
All yachts, on 1st July 2013, older than eight years will be tax-free.

 

[Baggywrinkle]

Correct, and tallies with what the editor of the 999 Hafenhandbuch wrote in last year's newsletter.
"bei allen Yachten, die am 1. Juli 2013 älter sind als acht Jahre, auf eine Versteuerung zu verzichten"
All yachts, on 1st July 2013, older than eight years will be tax-free.

Excellent news for owners of older boats. Do you know any more sources of this info?