Croatia EU VAT - New Advice!?

[d4raffy]

Completely agree, this path could be fraught with unseen and potential difficulties, both from the original registration authorities and the Croatian one. It would be unlike the latter to leave such an obvious loophole open. If anyone knows how to squeeze the lemon until the pips squeak, they do. There just has to be a snag somewhere.

Having myself, as an expatriate, jumped through so many hoops with flags of convenience and researching legal solutions - eventually ending up with the MCA Part I at some cost and inconvenience, I would be very reluctant to relinquish it. Even Part III (SSR) appears to be more rigorously controlled recently for new applicants, judging by reports here.

.... sure ... there could be a trap here ... need to investigate.... but stated earlier

Baggy quoted
"Thank you for your enquiry .... If you re-register within 12 months of closure you will not need a new survey"
" That's why I had to export my boat, swap the Flag to U.K. and re-enter. If I'd left it Croatian registered I would have got a VAT bill on purchase.

Does that mean you originally took your boat off the Croatian register before exporting it ... Where there any consequences in that ?
and ... it seems as long as you pay the de-registration cost (bound to be some) ... we should be able to take it back off the Croatian register and back on to UK within 12 months ??

 

[BrianH]

I've contacted the Ships Register in the U.K. as I am also part 1 registered. They informed me if I re-applied within 12 months and had made no modifications to the boat then the tonnage survey would not need to be repeated. Other than that, just re-submit all the paperwork and pay again

Hmm, why am I so cynical? Could it be that the goalposts could always be changed, mid-game? Could it be that proof may be asked for de-registration (as most other countries, including Croatia, do) before UK re-registration and that would invoke full VAT payment by Croatian authorities before granting - or that it takes a year for processing?

Dunno, can't help thinking of that old adage - 'confidence is what you feel before understanding the situation'.

 

[d4raffy]

Some more info ... from a friend who has received a vague offer .. from our Marina

Looks like Croatian registry expires after 5 years ... as in the UK.

Agent costs are !

For the services of the whole operational process which are necessary from the beginning to the end of the registration at the Croatian boat registry according to the attached flowchart including also the costs of the forwarding agent who carries out the import customs clearance:

Boat / Yacht 7 – 12m 12 - 15m over 15m
Services Marina Frapa and forward agency 15.900 21.200 27.500

""""""""""""
Finally the real costs are available. You can find them in this e-mail and the attachments to this e-mail, as well as the procedure and many other questions.

The law on the reduction of VAT for sport and leisure boats from 25% to 5% during the period from January 1st to May, 31st 2013 has been passed. In the meantime the regulation which has completely abolished the special tax for boats is on force and takes now for all boats 0%. Also, a few days ago the reduction of the custom duties rates from 8% to 1,7% for sailing boats and motor boats, and from 12% to 2,7% for rubber boats has been passed (only for temporarily imported recreational boats that have been previously in the procedure of the temporary import and which are cleared till May, 31st 2013, for all other the duty and VAT rate remain the same – 8% and 12% / 25%).

....

I also want to inform you that you should let us know which navigation category is suitable for you. Specifically, your boat must have a specific safety equipment (according to the SOLAS Convention). I will also send you these navigation areas in Croatia if you decide to change your flag.

Unfortunately I have not yet received an answer from the Ministry of maritime affairs whether your sailing permit after the change to the Croatian flag will be valid or if you will need a Croatian license.

In addition to the documents that we have from you at the reception, we kindly ask you to prepare the following documents, if you decide to change to the Croatian flag:
Original proof of ownership or original extract from the boat register (before the boat registration)
Original boat license or original extract (for the customs clearance)
Copy of the Declaration of Conformity to 94/25/EC Directive
Copy of the EC Type Examination to 94/25/EC Directive
Copy of the insurance policy (we should have it at the reception)
Proposal for a name, if your boat is longer than 12 m (1. desired name, 2. desired name if the first one is not available, 3. desired name)

Together with our forwarding agent we have prepared for you again some questions with answers.
1.) Which text has to be written in the power of attorney? Does this power of attorney has to be signed at a notary in Germany / Austria / England … or in Croatia and does is has to be translated by a court translator?
The text of the power attorney has to be according the regulations, we will send you this. The power attorney has to be signed at the notary, in your country or in Croatia. It would be the best for you to come personally to Croatia and to sign here the power of attorney, because than for example an apostille would not be necessary. However, it is also no problem if you sign it in your country and send us the documents.

2.) What if the boat has 3 owners? Is this a problem?
This is not a problem; the power of attorney has to be signed by all owners.

3.) Limitation – we have received a lot of questions regarding this topic. Do the owners have to pay VAT and customs whose boats are older than 10 or 20 years?
The limitation is (as well as the question of flag changing if the owner is a foreign legal person) is one of the major unresolved issues. According to some information we have there is a chance that the limitation can exist in accordance to the durance of staying in Croatia, but it is still not known how to proof that. Also, you can only exempt from the tax from the moment when Croatia officially joins the EU (that means from July, 1st 2013), but the benefits only apply till May, 31st 2013. It is possible, therefore, that the benefits are no longer valid and the limitation is not accepted. We ask those owners who may be affected by the limitation for a little more patience.
And something very important: until the end of May there are not only financial benefits but also benefits regarding the registration as the EC-certificates will not be necessary for older boats. After Croatia joins the EU all EC-certificates are going to be demanded. Many of the older boats do not have those certificates and it is (almost) impossible to get them retrospectively; attesting scattered boats is very expensive.

4.) The owner will pay the 5% VAT to the Republic of Croatia before joining the EU. Will the EU (or Croatia) require more taxes on behalf of the EU? What happens when Croatia becomes an EU member?
All boats declared in Croatia before the entry in the EU become with the day of entry domestic goods or goods of the Union (EU goods)!

5.) Do I pay charges on the purchase or present value of the boat? Who calculates the value of the boat?
The duty basis is the present value of the boat (without taxes).
The value of the boat is calculated by the customs catalog, this is a catalog published by SCHWACKE, a member of the Eurotaxglass Group.
Our forwarding agent «JADRANTRADE» will determine the value and calculate the final price which is to be paid. (In case of self-construction or if the boat is not listed in the catalog it can come to discrepancies between the declared price and the price that is accepted by the customs duty).
Since there is no purchase/sale, instead of an invoice you will attach a certified Declaration about the value of the boat.

6.) What is subject to registration?
Registration subjects are all boats longer than 2,50 m or boats with motors of 5kW or more (that means that you will have to register also dinghies if they meet some of the criteria).

7.) I am buying a new boat that is not yet in Croatia, it will probably arrive in February. Can I also only pay 5% VAT?
The tax (and customs) benefits apply only to boats for sport and leisure, which were formerly in the procedure of temporary importation. That means that they do not apply to new boats, because the condition is that the boat has been register previously outside Croatia.
Even so, there is no time limit, so it is enough to register first outside Croatia (in a way where you do not pay taxes) and do the whole procedure – with privileged rates.

8.) Boat registration procedure?
(See attached file)

9.) Boat registration costs?
(See attached file) We would like to mention that this is an approximate cost overview because there are a lot of factors that can cause variations in prices. For example the fee for the boat inspection depends on the one side on the safety equipment which on the other side depends on the navigation area that you have chosen, it also depends on the inspection place and the boat length. Also the costs for the court translator depend on the amount of text that you will translate. The fee for the boat registration has been reduced in regard to the specified amounts, but this is not official yet. But in principle, you can count on with the costs specified in the table.

10.) How much is the fee for the boat registration in the Croatian registry?
There are differences in the price, depending on whether the boat is up to 12 m long or longer than 12 m and on the place of building (boats built in the EU or in Croatia are in a more advantageous situation compared to boats built in the USA or Asia). The fees are at the moment still valid, but as described under 9.) we are told and hope that they will be reduced.

BOAT REGISTRATION FEE (in HRK):

up to 7 m from 7 -12 m from 12 to 15 m over 15 m
built in the EU/Croatia 50 150 10.000 25.000
built outside the EU 2.000 10.000 30.000 50.000

(according to the latest, not yet formal, information the proposal with the modifications of these high fees is in procedure, the fees for boats, irrespective of the building place, will be: <7m: 50 HRK, 7 – 12m: 500 HRK, 12 – 24m: 2000 HRK, >24m: 5000 HRK !)

11.) What are the costs after I have registered the boat?
A vignette has not to be paid or obtained, but a fee for the use of the radio frequency spectrum on the boat in the amount of 300 HRK has to be paid on annual basis, a fee for using the maritime domain (in accordance to the boat length and engine: 15kn/m plus 5kn/kW over 4kW) as well as the tax for boats according the type and length of the boat and power of the engine:

12.) After how much time do I have to extend the boat license?
Pleasure boats up to 12 m get a permanent license, while those over 12 m have to renew it every 5 years (after the boat is inspected again).

13.) Do I keep upon the registration the name of my boat?
Boats with a length up to 12 meters must have a mark (combination of numbers and letters from the port of registry) and can also have a name (which is set by the owner).
However, yachts (longer than 12 m) must have a name – and it has to unique in whole Croatia.

"""""""

 

[Baggywrinkle]

Had an e-mail yesterday about the 8 year rule, it doesn't exist. All boats, regardless of age will be taxed, either through this scheme or at 25% on the 1st July 2013. My agent has also sent me the document which was linked to above.

However, the notes supplied state ......

if the vessel originates from the EU, CEFTA, EFTA countries or Turkey and an evidence of preferential origin has been produced (EUR1 form or an adequate statement on reciept), the preferential rate of duty in the amount of 0% shall be charged.

The way I figure it, it's movement of EU manufactured goods (assuming boat built in EU) within EU countries so the 1,7% and 2,7% mentioned above should not apply if the boat was built in Europe or sourced in Europe.

 

[BrianH]

Had an e-mail yesterday about the 8 year rule, it doesn't exist. All boats, regardless of age will be taxed, either through this scheme or at 25% on the 1st July 2013.

So all the official information given to the German yachting press and the 777/888 pilot book publisher a year ago by the Croatian Finance Ministry was false. I wonder why I am so surprised by that - I shouldn't be.

Does anyone have any idea how to obtain a EUR 1 for a boat based in Croatia that is going to be exported to Croatia? The way I figure it, it's movement of EU manufactured goods (assuming boat built in EU) within EU countries so the 1,7% and 2,7% mentioned above should not apply if the boat was built in Europe or sourced in Croatia.

There may well be a universal 'Gotcha' in the quote from d4raffy's post, point 3) if you replace "exempt from the tax" with any relevant EU regulation.

"you can only exempt from the tax from the moment when Croatia officially joins the EU (that means from July, 1st 2013), but the benefits only apply till May, 31st 2013."​

5% + 1,7% + Fees may be more than the 20% VAT of a neighbouring EU country for less valuable boats - with the fees mentioned above it makes no sense to go for this if your boat is worth less than €20,000 euros IMHO.

When you add in survey (for conformance checks) and VAT assessment costs for non-standard yachts, in the "Fees" I would expect even more. I wonder why I am not surprised at this one.

 

[Dave100456]

Quote from D4Raffy's post:....

"I also want to inform you that you should let us know which navigation category is suitable for you. Specifically, your boat must have a specific safety equipment (according to the SOLAS Convention). I will also send you these navigation areas in Croatia if you decide to change your flag."

To comply with the survey (safety inspection) anyone know what safety gear will be needed if category A and over 12 metres? This is a cost that needs to be included in your calculations.

 

[Baggywrinkle]

My boat was removed from the Croatian registry in the weeks before I bought it by the charter company. They were required to give a reason which was export. Other than that it seemed quite straightforward, it was done at the Harbourmasters office and had nothing to do with the Customs people. (It's under 12m)

I was taken back to the Harbourmasters during export to get a temporary vignette to allow me to leave Croatian waters.

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My personal view is .... so far, all EU countries have an 8 year rule from their date of entry to the EU, why? I think that due to EU laws you can only retrospectively claw back taxes to a maximum of X years - I'd love to see this confirmed.

I therefore think that there will be an 8 year rule for Croatia too, even if the Croatians deny it - they don't want to publicise the fact because people like me will just sit tight and wait.

They want to collect VAT from everyone, regardless of boat age so have created this Croatian VAT window, ending on the 31st of May.

They can't legally collect VAT from EU registered boats until 1st July so they need us to register in Croatia for the boats to come under their taxation laws as EU citizens. Hence the registration requirement - and they seem to be going out of their way to drop the price on this.

I think they have calculated that 5% from all boats will be more than 25% from those that are left in Croatia and are under 8 years old on 1st July.

They are relying on uncertainty and confusion to attract as many boats as possible to their VAT window scheme. After 1st July I don't really think they will give a monkeys about the registration any more (and due to the EU right of determination they can't force boats to be Croatian registered), they'll already have a considerable amount of our money - mission accomplished.

 

[d4raffy]

Baggy - I have contacted your agent. Replied quickly and seems to know his stuff. His initial approx quote is 'competitive' compared to others I have seen. But still painful if the value of your boat is low.

I have another chap mulling the VAT with me ... could be worth getting a 'consortium' of ?UK? owners together ?? - for a group price ??
or a group flotilla down to Turkey

BTW .. quizzed over the EUR1 - my boat is definitely EU but he seems to think I need the actual EUR1 form. Which I dont have .... and I think back tracking the export process 7 odd years is gonna be tough ! ... Other fellow has just asked his builder for a retrospective EUR1 issue - they have said NO ! :-(

 

[Baggywrinkle]

So all the official information given to the German yachting press and the 777/888 pilot book publisher a year ago by the Croatian Finance Ministry was false. I wonder why I am so surprised by that - I shouldn't be.



There may well be a universal 'Gotcha' in the quote from d4raffy's post, point 3) if you replace "exempt from the tax" with any relevant EU regulation.

"you can only exempt from the tax from the moment when Croatia officially joins the EU (that means from July, 1st 2013), but the benefits only apply till May, 31st 2013."​

This is already in force as Croatia is already an associate member of the EU. The free trade rules already apply even though Croatia is not yet fully 'in'

Countries where a EUR1 currently applies are listed here.

http://www.londonchamber.co.uk/lcc_public/article.asp?aid=105.

A footnote on the rules posted earlier says that with a EUR1 the Customs Duty is 0%.

Costs of vessel reregistration:

VAT at the rate of 5% on the customs value of the vessel
Customs duty at the rate of 1.7% or 2.7% on the customs value of the vessel (if not accompanied by EUR1 form)

My agent has also told me that if I have a EUR1 form the Customs Duty is zero.

 

[Tranona]

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My personal view is .... so far, all EU countries have an 8 year rule from their date of entry to the EU, why? I think that due to EU laws you can only retrospectively claw back taxes to a maximum of X years - I'd love to see this confirmed.

I therefore think that there will be an 8 year rule for Croatia too, even if the Croatians deny it - they don't want to publicise the fact because people like me will just sit tight and wait.



They can't legally collect VAT from EU registered boats until 1st July so they need us to register in Croatia for the boats to come under their taxation laws as EU citizens. Hence the registration requirement - and they seem to be going out of their way to drop the price on this.

I think they have calculated that 5% from all boats will be more than 25% from those that are left in Croatia and are under 8 years old on 1st July.

Not sure where the idea of 8 years comes from. If you import a boat into the EU in any state you pay VAT at the ruling rate irrespective of the age of the boat.

Is it perhaps connected to the date when VAT as a tax was introduced in Croatia and they are saying that any boat bought and registered in Croatia before that date does not have to pay?

 

[BrianH]

In theory, on accession to the EU on 1st July, 2013, Croatia will have the mandate to collect 25% VAT from any EU-registered, leisure boat/yacht that is within its territory and cannot prove it is VAT-paid or Deemed VAT-paid. This raises two relevant points.

1. To whom belongs the funds so collected from non-Croatian yachts, Croatia or the yacht's flag state?
2. Would it be prudent for a yacht, such as mine, that was constructed before 1985, the cut-off year for the flagged state, UK, (provable) and in the EU (Holland) in 1992 (unprovable) to avoid cruising Croatia after June this year?​

In the case of 1. and the funds collected do not belong to Croatia, this would be another reason for them to persuade foreign-flagged yachts to take their 5% offer.

Italy only started to take an interest in the VAT status of non-Italian registered yachts after Brussels had made a strong issue of it. I suspect Italy does not profit from non-Italian yacht VAT collection because the Guardia di Finanza does not seem so dedicated in collecting from them in my marina, where they certainly do focus strongly only on Italian-flagged vessels.

 

[Baggywrinkle]

Baggy - I have contacted your agent. Replied quickly and seems to know his stuff. His initial approx quote is 'competitive' compared to others I have seen. But still painful if the value of your boat is low.

I have another chap mulling the VAT with me ... could be worth getting a 'consortium' of ?UK? owners together ?? - for a group price ??
or a group flotilla down to Turkey

BTW .. quizzed over the EUR1 - my boat is definitely EU but he seems to think I need the actual EUR1 form. Which I dont have .... and I think back tracking the export process 7 odd years is gonna be tough ! ... Other fellow has just asked his builder for a retrospective EUR1 issue - they have said NO ! :-(

You can apply for one yourself, it doesn't seem that difficult.... not sure you need to back-track anything. Have a read - I'm not able to contact them directly so if someone in the U.K. could mabe ask the question of the London Chamber of Commerce?

http://www.londonchamber.co.uk/lcc_public/article.asp?aid=105

We are effectively exporting EU boats to Croatia IMHO.

 

[d4raffy]

HOW TO COMPLETE MOVEMENT CERTIFICATE EUR 1 FORM

http://www.londonchamber.co.uk/docimages/1292.pdf

Seems like you can but you need 'Supply a copy of the export invoice or alternative acceptable evidence'
Is this for exporting from the UK only tho ??

"
Insert these words if the goods have left the country before application for a EUR 1 is made. Also add, on page 4 under paragraph 1 of the application,“and that no EUR 1 for these goods has previously been issued”.

Give details of the place and date of exportation.
Supply a copy of the export invoice or alternative acceptable evidence.
"

 

[Tranona]

In theory, on accession to the EU on 1st July, 2013, Croatia will have the mandate to collect 25% VAT from any EU-registered, leisure boat/yacht that is within its territory and cannot prove it is VAT-paid or Deemed VAT-paid. This raises two relevant points.

1. To whom belongs the funds so collected from non-Croatian yachts, Croatia or the yacht's flag state?
2. Would it be prudent for a yacht, such as mine, that was constructed before 1985, the cut-off year for the flagged state, UK, (provable) and in the EU (Holland) in 1992 (unprovable) to avoid cruising Croatia after June this year?​

In the case of 1. and the funds collected do not belong to Croatia, this would be another reason for them to persuade foreign-flagged yachts to take their 5% offer.

Italy only started to take an interest in the VAT status of non-Italian registered yachts after Brussels had made a strong issue of it. I suspect Italy does not profit from non-Italian yacht VAT collection because the Guardia di Finanza does not seem so dedicated in collecting from them in my marina, where they certainly do focus strongly only on Italian-flagged vessels.

Think you will find the flag state is irrelevant to VAT. What determines a VAT liability is the transaction and the responsibility is in the state where the transaction took place. In your case you presumably bought it in a state that was already a member of the EU (Holland?) so any VAT issues would be the responsibility of that state's authorities. So when Croatia becomes a member you can freely visit without paying VAT, and indeed keep your boat there permanently.

The reason the Italians make little effort to check the status of other EU boats is because they have no jurisdiction over them. As above that lies with the state where the last transaction involving the boat took place. If, however they discover the boat was purchased outside the EU then they can charge VAT and that belongs to them. Think you will find their main efforts are directed at boats that have been bought through leasing schemes that avoid VAT but are being used for purposes not covered by the concessions and boats owned offshore but being used for purposes not covered by the exemption under which they were allowed entry into the EU. A very different world from the one us ordinary folk inhabit!

 

[Baggywrinkle]

BINGO!!!!! Found it ....

EU VAT Directive covering accession to the EU, Article 410.

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32006L0112:EN:NOT

Article 410

1. By way of derogation from Article 71, the importation of goods within the meaning of Article 408 shall terminate without the occurrence of a chargeable event if one of the following conditions is met:

(a) the imported goods are dispatched or transported outside the enlarged Community;

(b) the imported goods within the meaning of Article 408(1)(a) are other than means of transport and are redispatched or transported to the Member State from which they were exported and to the person who exported them;

(c) the imported goods within the meaning of Article 408(1)(a) are means of transport which were acquired or imported before the date of accession in accordance with the general conditions of taxation in force on the domestic market of one of the new Member States or of one of the Member States of the Community or which have not been subject, by reason of their exportation, to any exemption from, or refund of, VAT.

2. The condition referred to in paragraph 1(c) shall be deemed to be fulfilled in the following cases:

(a) when the date of first entry into service of the means of transport was more than eight years before the accession to the European Union.
(b) when the amount of tax due by reason of the importation is insignificant.

That's where the 8 years comes from .... Need some legal advice on this me thinks .... now I really think they're trying to scare people with older boats to register and pay up before accession.

 

[d4raffy]

BINGO!!!!! Found it ....

EU VAT Directive covering accession to the EU, Article 410.

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32006L0112:EN:NOT

That's where the 8 years comes from .... Need some legal advice on this me thinks .... now I really think they're trying to scare people with older boats to register and pay up before accession.

Whats this mean ? "imported before the date of accession in accordance with the general conditions of taxation in force on the domestic market of one of the new Member States" - does that mean you have to import it into Croatia first - and pay the import tax ? - then it will be VAT exempt when Croatia joins the EU cos it is over 8 years old.

Aahhhh - but your saying ... if you have EUR1 form then you don't even have to pay import tax !?

 

[BrianH]

In your case you presumably bought it in a state that was already a member of the EU (Holland?) so any VAT issues would be the responsibility of that state's authorities. So when Croatia becomes a member you can freely visit without paying VAT, and indeed keep your boat there permanently.

Yes, bought in Holland, registered in UK and berthed in Italy. All EU states. Built in Sweden in 1981, imported to Holland and changed hands there three times until I bought in 2005. I have the builder's certificate and my own bill of sale plus the previous owner's notarized statement that the boat was in Holland in 1992, all of which satisfied the MCA for part I registration - not that they seemed interested in VAT compliance. That also reflects Italian interest, no one has queried any of my yachts' VAT status in 30 years of keeping them there.

Thanks for your clarification on the Italian VAT focus, they seem to zero in on only the newer, luxury motor yachts and never on the likes of my modest, older craft. I still think I will give Croatia a miss this year, unless I can be away before the 1st July.

 

[Tranona]

Think you are probably wise for this year if only because there will be confusion and a lack of clarity and understanding of the rules at local level. Hopefully after a year it will settle down and be like other EU countries.

 

[Baggywrinkle]

Whats this mean ? "imported before the date of accession in accordance with the general conditions of taxation in force on the domestic market of one of the new Member States" - does that mean you have to import it into Croatia first - and pay the import tax ?

My interpretation is as follows, it may be incorrect as I'm no lawyer which is why I suggested it might be worth getting some legal advice.

Imported into Croatia before 1st July 2013 and duly processed by Croatian customs with all duties paid.

This effectively prevents a chargeable event on the date of accession for all those who have already paid Croatian customs duty and VAT. This is what we are doing if we go for this registration scheme.

Currently we don't fulfill this requirement because although the boat does have customs clearance to be in Croatia (it's part of the checking in process to get in when you get the vignette.) we haven't paid any Croatian import duties or taxes.

However, this is the bit that lets older boats off the hook ....

2. The condition referred to in paragraph 1(c) shall be deemed to be fulfilled in the following cases:

(a) when the date of first entry into service of the means of transport was more than eight years before the accession to the European Union.

This says, if the boat hasn't fulfilled all the requirements or has a VAT exemption etc. but was in service in Croatia before 1st July 2005 then it is deemed to have been fulfilled.

The key is that the boat must have been in service in Croatia before the 1st July 2005. Question is how to prove it and what the Croatians will accept as evidence.

 

[Tranona]

That would sort of make sense as in the UK the dates are pre 1986 and in EU in 1992 - the accession date.

So following that logic just import the boat and register it then it will be deemed VAT paid at the accession date. Sounds too simple to me and not sure that would go to the expense of importing and registering without official confirmation that will be the case.

Perhaps better to pop across to Italy or Greece get a friendly valuation and pay VAT there.