EU VAT Advise Please!!!

[Bryn123]

My wife & I are looking to buy a Cat and an opportunity has arisen that we are very keen to take up. It’s a 50% share in a new boat which will be ready out of France at the end Apr this year. My question relates to VAT. I am British and my prospective partner is from Oz. He has ordered the boat and is registering it in Australia. I am buying a 50% share. Clearly we do not want to have to pay VAT if we can avoid it.
I am seeking legal advice with the contract as you can imagine. There seems to be some question as to whether VAT would be applied by the French company based on the fact that I am a 50% owner and I am from the EU. At the moment as the potential co-owner wishes to register the boat in Australia and then only when he enters their waters the VAT would be paid.
We intend to sail in the EU, i.e. the Med for 2 to 3 seasons and then the same in the Caribbean and do not want to fall fowl to the authorities if we sail into Spain or Portugal etc for example on our way from France and for that matter when we sail into the med for a few seasons.
I am a British resident & passport holder; do you think we would be asked to pay VAT due to being on a Non EU & Non VAT Paid yacht? If so is there any way of avoiding this?
Any help you can give would be appreciated.
Many thanks
Bryn

 

[Tranona]

My wife & I are looking to buy a Cat and an opportunity has arisen that we are very keen to take up. It’s a 50% share in a new boat which will be ready out of France at the end Apr this year. My question relates to VAT. I am British and my prospective partner is from Oz. He has ordered the boat and is registering it in Australia. I am buying a 50% share. Clearly we do not want to have to pay VAT if we can avoid it.
I am seeking legal advice with the contract as you can imagine. There seems to be some question as to whether VAT would be applied by the French company based on the fact that I am a 50% owner and I am from the EU. At the moment as the potential co-owner wishes to register the boat in Australia and then only when he enters their waters the VAT would be paid.
We intend to sail in the EU, i.e. the Med for 2 to 3 seasons and then the same in the Caribbean and do not want to fall fowl to the authorities if we sail into Spain or Portugal etc for example on our way from France and for that matter when we sail into the med for a few seasons.
I am a British resident & passport holder; do you think we would be asked to pay VAT due to being on a Non EU & Non VAT Paid yacht? If so is there any way of avoiding this?
Any help you can give would be appreciated.
Many thanks
Bryn

The answer is probably very simple. If you want to use the boat in the EU you cannot avoid paying VAT. The nationality of the buyer has only a very limited impact on that. Your partner could buy the boat VAT free, but he could only use it for a limited time, and for his own personal use before exporting it. You could not use it, even if you are a part owner.

The relevant rules are under "temporary Import" which apply to non residents only and the boat must be registered outside the EU. The person granted temporary importation must be non EU resident and take the boat out of the EU after 18 months. If the boat is subsequently sold in the EU it must be officially imported and VAT paid.

As you will appreciate, if a UK resident could avoid VAT simply by having a non resident part owner and registering the boat abroad, everybody buying a new boat would do it! Not sure HMRC would like that.

So, sorry, the only way you can buy a new boat without paying VAT is to use it outside the EU - and even then you will find the rules very stringent to ensure that the boat is exported and not used in the EU.

 

[jimbaerselman]

To enlarge a little on Tranona's very clear description:

(1) EU residents may not use a non-VAT paid leisure boat within the EU (except in very limited circumstances)
(2) Boat's visiting the EU but registered outside the EU are subject to crew checks from time to time.

See http://www.jimbsail.info/going-foreign/docs-and-VAT#VAT for appropriate references - and the conditions for temporary import of non-EU boats into the EU.

 

[vyv_cox]

We met an Australian couple who had bought a new boat in France. They were heading quite quickly to Turkey to avoid the VAT payment. I thought it was a shorter duration than the 18 months shown on Jim's website but that is from memory.

 

[AndrewB]

You might try setting up a company outside the EU (of which you are each 50% shareholders) to own the yacht. I think this would allow it a maximum 18 months stay in the EU with temporary VAT and import relief. There are Channel Islands companies specialising in this sort of thing who could give you advice. Beware though that some countries place prohibitive charter regulations on yachts not owned by the skipper.

 

[Tranona]

That only applies if you are a non resident. Residents cannot get temporary import. If it were otherwise every new boat buyer would buy a boat in that way.

 

[Bryn123]

That's really great advice, many thanks! Unpalatable as it is !!
So if it cannot be avoided then I guess the next question is, which way can we register the boat so the VAT payable is minimised? I have read about schemes in places like Madeira and Malta, is this a possibility with our arrangement? If so what are the likely rates applicable?
Any advise is very much appreciated!

 

[Tranona]

That's really great advice, many thanks! Unpalatable as it is !!
So if it cannot be avoided then I guess the next question is, which way can we register the boat so the VAT payable is minimised? I have read about schemes in places like Madeira and Malta, is this a possibility with our arrangement? If so what are the likely rates applicable?
Any advise is very much appreciated!

Easy to google VAT rates in other EU countries, although most are higher than UK. The lowest practical rate is Malta, but that is only 2% lower than UK.

Just to get it absolutely clear, registration has nothing to do with VAT. VAT is levied in the state the transaction takes place, so your boat will need to be commissioned in Malta to benefit from that lower rate. Do the sums and you will probably find it is cheaper overall to pay in the UK or even France where the rate is the same as UK.

There are schemes available in both France and Malta involving leasing that claim to reduce overall VAT, but they are illegal in UK and come with restrictions on use that most people find unacceptable. Another alternative is to buy the boat as a Greek charter boat, but to get the benefit you have to commit to a long term contract to actually charter it. This is how I bought my last boat, but it is only viable if the terms of the contract suit you. For most the loss of use is not worth the saving in tax.

EU states have made great efforts to make VAT payment on boats consistent across the union, so think you will have to accept that like death, it is difficult to avoid.

 

[Sybarite]

Easy to google VAT rates in other EU countries, although most are higher than UK. The lowest practical rate is Malta, but that is only 2% lower than UK.

Just to get it absolutely clear, registration has nothing to do with VAT. VAT is levied in the state the transaction takes place, so your boat will need to be commissioned in Malta to benefit from that lower rate. Do the sums and you will probably find it is cheaper overall to pay in the UK or even France where the rate is the same as UK.

There are schemes available in both France and Malta involving leasing that claim to reduce overall VAT, but they are illegal in UK and come with restrictions on use that most people find unacceptable. Another alternative is to buy the boat as a Greek charter boat, but to get the benefit you have to commit to a long term contract to actually charter it. This is how I bought my last boat, but it is only viable if the terms of the contract suit you. For most the loss of use is not worth the saving in tax.

EU states have made great efforts to make VAT payment on boats consistent across the union, so think you will have to accept that like death, it is difficult to avoid.

If a boat is classed as ocean going in France and is bought through a leasing scheme it is deemed to pass half of its time outside of French waters and the rentals payments are therefore subject to TVA at half the normal rate. I'm not sure exactly what the situation is for non residents but it might be worth looking into the possibility of setting up see-through tax structure called a 'quirat'. If possible then it is useful to make sure that the option payment at the end is as small as possible as it is subject to the 20% rate.

 

[Tranona]

If a boat is classed as ocean going in France and is bought through a leasing scheme it is deemed to pass half of its time outside of French waters and the rentals payments are therefore subject to TVA at half the normal rate. I'm not sure exactly what the situation is for non residents but it might be worth looking into the possibility of setting up see-through tax structure called a 'quirat'. If possible then it is useful to make sure that the option payment at the end is as small as possible as it is subject to the 20% rate.

That was the scheme I was referring to - not accepted by the UK authorities as being legal. Think boat has to be French manufacture and French registered. Lease probably means buyer does not have ownership until the end of the lease.

Like all schemes that seek to avoid or reduce tax on a private boat there are constraints and only the OP can decide if those are acceptable to him and his partner.