Help find some VAT regulations for Yacht build before 1985

[Ivantheterrible]

Hi

I currently own a US registered Yacht and wish to import it to the EU (Italy to be specific) and although I am aware that pre-1985 pleasure boats are deemed VAT paid, I can't find exactly where these regulations are. If someone can show me the exact location of these regulations, I will be eternally grateful.

Thanks

 

[KevB]

Section 4.2 HERE may help.

 

[Ivantheterrible]

Section 4.2 HERE may help.

Thanks KevB

I am looking for the European-wide legislation/directive that all Eu countries use to exempt pre-1985 boats. The boat is currently moored in Italy and I might have to apply for the VAT paid status from there.

So, if anyone can direct me to that particular law, I would be quite pleased

 

[Tranona]

Hi

I currently own a US registered Yacht and wish to import it to the EU (Italy to be specific) and although I am aware that pre-1985 pleasure boats are deemed VAT paid, I can't find exactly where these regulations are. If someone can show me the exact location of these regulations, I will be eternally grateful.

Thanks

You would have to pay VAT as the pre 1985 bit only applies to boats in the EU in 1993. Any new import is treated the same irrespective of the year of manufacture, so will be liable for VAT and duty.

More seriously it will also have to meet the requirements of the RCD unless it was built in the EEA. It will likely be expensive and difficult to make an old American boat comply, so it will be illegal to use it in the EU/EEA and the person who puts the boat into service is responsible, and failure to comply is a criminal offence.

You can, of course try to avoid this and I don't know how strict they are about it in Italy, but it is difficult to avoid in the UK.

For further information on VAT and RCD compliance look on www.RYA.org.uk although obviously aimed at UK people the law and regulations are the same throughout Europe.

Hope this helps.

 

[Ivantheterrible]

You would have to pay VAT as the pre 1985 bit only applies to boats in the EU in 1993. Any new import is treated the same irrespective of the year of manufacture, so will be liable for VAT and duty.

More seriously it will also have to meet the requirements of the RCD unless it was built in the EEA. It will likely be expensive and difficult to make an old American boat comply, so it will be illegal to use it in the EU/EEA and the person who puts the boat into service is responsible, and failure to comply is a criminal offence.

You can, of course try to avoid this and I don't know how strict they are about it in Italy, but it is difficult to avoid in the UK.

For further information on VAT and RCD compliance look on www.RYA.org.uk although obviously aimed at UK people the law and regulations are the same throughout Europe.

Hope this helps.

Thanks Tranona.

I have documents that can prove that the boat was moored in EEC in 1992 so that is not a problem. It's in a pretty good condition and I would like to give it a try. The only problem is finding the exact law that allows exemption from VAT for pre-1985 Yachts.

 

[Puggy]

Hello,

I looked into this very extensively last year, looking to import a US flagged, 1986 yacht residing outside the EU (Marmaris, Turkey) into the EU and i came to the conclusion that there is no hard and fast rules. So I may have got some of this wrong, so please check out before you act on what I write here - caveat emptor.

However, the conclusions I came to were thus: A boat that has been outside the EU for a significant period of time (7 years I think) it automatically becomes VAT liable, regardless of flag. This VATable event is also triggered if the boat changes hands outside the EU (again regardless of flag). So when you bring a vessel back into the EU in either scenario, you trigger what HMRC call a VATable event.

Therefore I came to the conclusion that VAT was going to have to be paid however I looked at it. You need to speak to HMRC to understand how this is done as there are options and to a certain extent you can choose where you pay VAT by importing the boat either through agents (and posting a bond) or having the boat in transit using a delivery crew and showing a delivery contract. It would appear to be tricky if the owner is on board - you could be liable to pay VAT in the first point of entry into the EU if you are on board as it is not deemed to be in transit. You will also have to pay import duty of around 1.7% I think. It is worth shopping around for VAT rates, especially as they are now 20% in the UK, however I couldn't find any of the "special deals" mooted at on (mainly US) boaty discussion sites, including Malta etc.

The more tricky area is RCD. If your boat was built outside the EU and you do not have evidence of her being in the EU prior to 1998 (marina receipt) you will have to get an RCD certificate (CE mark) and I was quoted about £3500 plus VAT for this - however I was warned that some vessels (I think mainly motorboats) might need their engine replacing to be compliant.. If you vessel was built in EU prior to 1998 and you can produce evidence for this (yard certificate, marina receipt) then you can go for an RCD exemption certificate at at approx £350. There are agencies who do this and I was quoted by an (english) agency based in Bodrum, Turkey to carry out the survey and produce a report.

I found the RYA website and their advisory staff very helpful (you need to be a member).

I can send you some more info if you contact me by PM with an email address.

Please don't take what I say as gospel as I may have got things wrong and it is a very murky area.

I am afraid I pulled out of the purchase of the boat as I got cold feet and couldn't face all the hassle.

Best wishes

Piers

 

[Puggy]

Thanks Tranona.

I have documents that can prove that the boat was moored in EEC in 1992 so that is not a problem. It's in a pretty good condition and I would like to give it a try. The only problem is finding the exact law that allows exemption from VAT for pre-1985 Yachts.

Have you read the RYA leaflet "PRE 1985 BOATS UK AND EU ACCESSION COUNTRIES DEEMED PAID STATUS"? that is very useful. It refers to HMRC Notice 8 Sailing your pleasure craft to and from the UK. I can email to you if you need - send me a PM (too big to attach to this thread).

 

[jonic]

If a VAT paid or deemed VAT paid boat leaves the EU and is not re-imported by the person who took her out she loses VAT paid status.

If she was deemed VAT paid and then sold overseas VAT paid status is lost.

See part of text below taken from Q&A paper between the RYA and HMRC

"
Vessels that were in use as private pleasure craft prior to
1 January 1985, and that were in the EU on 31 December
1992, have deemed VAT paid status under EU Single
Market transitional arrangements.
Any vessel granted this ‘deemed VAT paid’ status will retain
it unless and there is a chargeable event.

A5. If a vessel that qualifies
for deemed VAT paid status
changes hands outside
the EU, for instance in the
Channel Islands, does it lose
it’s deemed VAT paid status?

Yes. If the vessel is sold (changes hands) outside the EU
it will lose its deemed VAT paid status and will no longer
be entitled to returned goods relief. This means that the
vessel will be liable to VAT upon importation into the EU.

A6. Does a pre 1973 vessel
which subsequently changes
hands outside the EU lose its
deemed VAT paid status?

Yes. If the vessel has changed hands outside the EU the
importer is not entitled to any returned goods relief and
VAT (and if applicable import duty) will be due at the time of
import."


You can claim transfer of residence relief in some circumstances but you must be out of the UK for at least 12 months and have owned the yacht for at least six months and can not sell the yacht for a further 12 months

 

[Tranona]

Thanks Tranona.

I have documents that can prove that the boat was moored in EEC in 1992 so that is not a problem. It's in a pretty good condition and I would like to give it a try. The only problem is finding the exact law that allows exemption from VAT for pre-1985 Yachts.

If you can prove that the boat was in the EU on that date then you should be OK. The relevant rules are on the RYA site. If you buy (or have bought) the boat from an EU resident and it was located in the EU when you bought it then there is no VAT payable as it is not a "chargeable event". VAT is nothing to do with where the boat is registered, it is solely based on the nature of the transaction.

If you want to claim that is is considered "VAT exempt" under the transition arrangements, then you need to collect your trail of evidence to comply with the requirements - although in practice, nobody (in the UK at least) is particularly bothered about old boats.

You may have some difficulties, though, in registering a boat in Italy as I believe providing evidence of VAT payment or exemption is a requirement for registration. This comment is not based on fact but on what I have been told by people who have bought boats in Italy, but it may be worth checking. In the UK there is no compulsory registration so no sytematic way of checking any documentation.

The RCD issue is perhaps more complex - and more simple. If the boat was in the EU before 1998 it does not need to comply. Even if it came in after that date it was the responsibility of the importer to gain compliance. If it has changed hands since then the risk of any problems is very small. You can get a certificate of exemption from a commercial organisation such as CE Proof in the UK if you have documentation showing the history in the EU.

So you need to read the rules - Customs notice No8 for VAT, which is on the HMRC website and the RCD regulations on the RYA site, assess how your proposed purchases matches up against the rules and then decide if it is worth pursuing.

 

[Ivantheterrible]

Piers, Jonic and Tranona.

Thanks for your responses, you are far too kind.

I figured that the custom officials will ask what legal provisions am I relying on, and that's why I am very keen to know which is the law that allows for VAT exemption for pre 1985 boats. I have indeed come across many of the articles by HMRC and RYA which explain the current position on pre-8 boats. But, frustratingly, none of those articles say which provision of the EU law they are relying on (logically, there must be such a EU-wide law since the position across the EU seems uniform). I have been looking for them for a while without success.

On paper, my boat should qualify for the exemption, or rather for the deemed-paid status. The boat hasn't changed hands since 1984, and has been in Europe for most of the time. RCD regulations are not a worry at this point and I would be willing to make sure that it is compliant.

My biggest worry is knowing what law and what provision allows for this paid status.

Please feel free to make any further suggestions, I am greatly benefiting from your input.

Thanks

 

[Tranona]

Just thought I would clarify a few issues that might help you.

Section 4.2 of HMRC notice No8 deals with pre 1985 boats and it is written in a way that implies that the boat was not only built before 1985, but in use as a pleasure craft, and then in the EU in 1993. The problem you may have is proving that it was in use in the EU. Simply being physically located in the EU may not be enough as it can be in the EU under a range of temporary importation exemptions. In use could probably be interpreted as imported and all duties and VAT paid (if it came in after these were required).

If the boat was indeed imported, then it will have been liable for VAT, depending on the date. The person doing the importing would be responsible for paying, and would receive a receipt from Customs. One of the little quirks of VAT on boats is that, although the responsibility for accounting for VAT lies with the vendor (or importer if privately imported), the liability for unpaid VAT stays with the boat.

Just a couple of observations. If you are going to try and show that it is exempt, then you will need to find the trail of ownership going back to when it was first imported (if indeed it was) and determine whether VAT was paid by the importer. Unfortunately the legal requirement for keeping the receipt is only 6 years, so you may have difficulty here. However that difficulty will also apply to customs in trying to prove that VAT has not been paid!

The second observation is why are you concerned? If you have a trail of Bills of Sale showing that the boat has been owned by EU residents, and you bought it off an EU resident, then there is no real reason why customs should be interested. There are thousands of old boats (in the UK at least) that do not have any evidence that VAT has been paid and nobody really worries. It is difficult to imagine why Customs should be interested in pursuing somebody when the amount involved is small and the level of work high. There is also an issue of jurisdiction. That lies with the state where the transaction that is being questioned took place, which may not be where the boat is located. For example, my boat is in UK but I bought it in Greece so my Bill of Sale and VAT receipt are Greek - of no interest to HMRC.

Hope the above helps you decide whether you do have an issue. Note that the HMRC Notice it is based on is not the law, but advice on how it is implemented in the UK. You may well find, therefore that you need to get advice from a VAT law expert in Italy about how the authorities there would deal with your situation.

 

[Ivantheterrible]

Just thought I would clarify a few issues that might help you.

Section 4.2 of HMRC notice No8 deals with pre 1985 boats and it is written in a way that implies that the boat was not only built before 1985, but in use as a pleasure craft, and then in the EU in 1993. The problem you may have is proving that it was in use in the EU. Simply being physically located in the EU may not be enough as it can be in the EU under a range of temporary importation exemptions. In use could probably be interpreted as imported and all duties and VAT paid (if it came in after these were required).

If the boat was indeed imported, then it will have been liable for VAT, depending on the date. The person doing the importing would be responsible for paying, and would receive a receipt from Customs. One of the little quirks of VAT on boats is that, although the responsibility for accounting for VAT lies with the vendor (or importer if privately imported), the liability for unpaid VAT stays with the boat.

Just a couple of observations. If you are going to try and show that it is exempt, then you will need to find the trail of ownership going back to when it was first imported (if indeed it was) and determine whether VAT was paid by the importer. Unfortunately the legal requirement for keeping the receipt is only 6 years, so you may have difficulty here. However that difficulty will also apply to customs in trying to prove that VAT has not been paid!

The second observation is why are you concerned? If you have a trail of Bills of Sale showing that the boat has been owned by EU residents, and you bought it off an EU resident, then there is no real reason why customs should be interested. There are thousands of old boats (in the UK at least) that do not have any evidence that VAT has been paid and nobody really worries. It is difficult to imagine why Customs should be interested in pursuing somebody when the amount involved is small and the level of work high. There is also an issue of jurisdiction. That lies with the state where the transaction that is being questioned took place, which may not be where the boat is located. For example, my boat is in UK but I bought it in Greece so my Bill of Sale and VAT receipt are Greek - of no interest to HMRC.

Hope the above helps you decide whether you do have an issue. Note that the HMRC Notice it is based on is not the law, but advice on how it is implemented in the UK. You may well find, therefore that you need to get advice from a VAT law expert in Italy about how the authorities there would deal with your situation.

Howdy,

I am looking for these provisions because there is inconsistency, especially in France and Italy, in the application of the law on VAT on boats. I would be in a much more solid ground if I knew the exact law that applies in order to get a paid-status certificate.

Thanks so much. I have found the EU law that allows for the paid status and for the benefit of others that might be looking for them, the law is found in Article 28n of the COUNCIL DIRECTIVE 92/111/EEC. It doesn't specifically talk about pleasure graft but "means of transport".

However, I still haven't found the Italian act of parliament that domesticated the provisions of the treaty, and there is virtually no book, case or article discussing the implications of the above provisions.

I am wondering if the fact that I am still an American citizen will influence the outcome (I am entitled to Italian citizenship but I haven' applied yet).

Thanks all for your input. I really appreciate it.

 

[Tranona]

Don't think your citizenship would formally have any influence, residency might - but I am not even sure whether you have to be resident to pay VAT.

Think the important issue is that VAT is not a tax on a boat (or means of transport). Liability is based on the nature of the transaction - so if no transaction takes place there is no liability.

In the early days post 1993 our HMRC did issue letters confirming "exemption" to pre 1985 boats based on a review of the evidence that it met the requirements. However it stopped doing that years ago on the basis that is served no useful purpose and was not "proof" that a VAT offence had or had not been committed. Indeed a boat with such a "certificate" could subsequently become involved in a transaction where VAT was due, for example if it left the EU, was sold and then re-imported.

I have heard that other state customs authorities do still offer letters of confirmation based on evidence, but given that customs in general seem to have no interest in old boats, and that any VAT issues are the responsibility of the state where the last transaction took place, one questions why such things are necessary.

Really, the only outstanding issue for you is knowing how the Italian authorities would handle the "problem", and I guess the only way you are going to find out is to ask them, or seek expert advice (if there is such a thing). You cannot change the facts, nor the law, which on layman's reading and based on what you have said about your boat would indicate that it is exempt.

Good luck!

 

[alant]

Don't think your citizenship would formally have any influence, residency might - but I am not even sure whether you have to be resident to pay VAT.

Think the important issue is that VAT is not a tax on a boat (or means of transport). Liability is based on the nature of the transaction - so if no transaction takes place there is no liability.

In the early days post 1993 our HMRC did issue letters confirming "exemption" to pre 1985 boats based on a review of the evidence that it met the requirements. However it stopped doing that years ago on the basis that is served no useful purpose and was not "proof" that a VAT offence had or had not been committed. Indeed a boat with such a "certificate" could subsequently become involved in a transaction where VAT was due, for example if it left the EU, was sold and then re-imported.

I have heard that other state customs authorities do still offer letters of confirmation based on evidence, but given that customs in general seem to have no interest in old boats, and that any VAT issues are the responsibility of the state where the last transaction took place, one questions why such things are necessary.

Really, the only outstanding issue for you is knowing how the Italian authorities would handle the "problem", and I guess the only way you are going to find out is to ask them, or seek expert advice (if there is such a thing). You cannot change the facts, nor the law, which on layman's reading and based on what you have said about your boat would indicate that it is exempt.

Good luck!

So, as an obvious expert, what would be the VAT etc, on a Westerly Fulmar, indicated on another thread for sale in Florida @ about £16,500, built 1983.

Would arriving in Europe via Horta, make any difference?

 

[Tranona]

So, as an obvious expert, what would be the VAT etc, on a Westerly Fulmar, indicated on another thread for sale in Florida @ about £16,500, built 1983.

Would arriving in Europe via Horta, make any difference?

Not a VAT expert at all - just read the freely available information on the subject and have some undersdtanding of how the law works from a previous life!

"Rules" are that you have to pay VAT on the first point of entry into the EU. Therefore if you land in the Azores with a view to importing boat into EU, that is where you pay.

"Rules" say that VAT is based on value of used item, but inevitably it allows different ways of establishing "value". If it is recently purchased then it is difficult to argue that the value is any different from what you paid in an open market transaction. However, value would also include any work done or equipment added since purchase. The get out for customs (and maybe for the owner) is that customs can place their own valuation on the item. Remember that VAT is a transaction tax, not a tax on boats, and importing a boat is a "chargeable event" that takes place when money does not change hands. Remember also that individual states (and individual officers) may well have motivations for maximising or minimising their tax take.

A long winded way of saying that nothing in this life to do with VAT is certain. Word on the street says that Horta is a lax place for enforcement of VAT rules and that valuations can be very advantageous. Rates of VAT have in the past also been lower than elsewhere, but not sure they are now.

So, bottom line is that you have to do your homework on the ground before taking your decision - remembering that all this will not be conducted in English!

Top dog Fulmars sell in the £25-30k range in the UK so your £16.5k Florida based boat will land at around £20k plus your time and cost of preparing it for a 3000 mile passage to mainland Europe (or between £5-8k if you ship it). Do the sums and you will understand why it is still in Florida and not cluttering up the Hamble.

 

[alant]

Not a VAT expert at all - just read the freely available information on the subject and have some undersdtanding of how the law works from a previous life!

"Rules" are that you have to pay VAT on the first point of entry into the EU. Therefore if you land in the Azores with a view to importing boat into EU, that is where you pay.

"Rules" say that VAT is based on value of used item, but inevitably it allows different ways of establishing "value". If it is recently purchased then it is difficult to argue that the value is any different from what you paid in an open market transaction. However, value would also include any work done or equipment added since purchase. The get out for customs (and maybe for the owner) is that customs can place their own valuation on the item. Remember that VAT is a transaction tax, not a tax on boats, and importing a boat is a "chargeable event" that takes place when money does not change hands. Remember also that individual states (and individual officers) may well have motivations for maximising or minimising their tax take.

A long winded way of saying that nothing in this life to do with VAT is certain. Word on the street says that Horta is a lax place for enforcement of VAT rules and that valuations can be very advantageous. Rates of VAT have in the past also been lower than elsewhere, but not sure they are now.

So, bottom line is that you have to do your homework on the ground before taking your decision - remembering that all this will not be conducted in English!

Top dog Fulmars sell in the £25-30k range in the UK so your £16.5k Florida based boat will land at around £20k plus your time and cost of preparing it for a 3000 mile passage to mainland Europe (or between £5-8k if you ship it). Do the sums and you will understand why it is still in Florida and not cluttering up the Hamble.

Yes understand Horta as 'first port of entry' VAT is payable - have done it there, since as you mention, the VAT rate is/was beneficial.

Just to clarify for others, if you have no intention of reselling a yacht 'imported' from without the EEC, will VAT still be chargeable?

 

[jonic]

Just to clarify for others, if you have no intention of reselling a yacht 'imported' from without the EEC, will VAT still be chargeable?

Yes unless you are non-resident and are in transit in which case the boat will get 18 months cruising time VAT free.

Or you are claiming transfer of residency relief-see below:

If you are moving your normal home from a non-EU country to an EU country,
including the UK, you may import your vessel free of customs duty and VAT
providing you:
• have lived outside the EU for a continuous period of at least 12
months; and
• have possessed and used the vessel outside the EU for at least
6 months prior to importation; and
• did not get the vessel under a duty/tax free scheme
and
• declare the vessel to our officer; and
• will keep the vessel in the EU for private use; and
• do not sell, lend, hire out or otherwise dispose of the vessel in
the EU within 12 months of importation unless you notify us first
and pay duty and VAT on disposal

 

[Tranona]

Yes understand Horta as 'first port of entry' VAT is payable - have done it there, since as you mention, the VAT rate is/was beneficial.

Just to clarify for others, if you have no intention of reselling a yacht 'imported' from without the EEC, will VAT still be chargeable?

If you have already done it, why are you asking me?

Cannot understand why you are asking the second question. The HMRC Note No 8 is very clear on the subject, as is the advice given by the RYA. As john says, there is the possibility of exemption if you are a returning resident, but that would not cover just going to buy a boat in Florida and importing it.

 

[alant]

If you have already done it, why are you asking me?

Cannot understand why you are asking the second question. The HMRC Note No 8 is very clear on the subject, as is the advice given by the RYA. As john says, there is the possibility of exemption if you are a returning resident, but that would not cover just going to buy a boat in Florida and importing it.

Asking, because the rules continuously change & you seem to keep abreast of them.

 

[Tranona]

Asking, because the rules continuously change & you seem to keep abreast of them.

Don't think they do - and all freely available on the HMRC site or in summary form on the RYA site.

The only thing that will change (unless there is an EU wide change) is as a result of a case coming to court to test the law, or rather the way it is interpreted. Not that I claim to know the detail of any such law cases, don't recall any cases of sufficient importance to be reported in the yachting press, which, for all its faults is usually pretty good at picking up any controversy.

Although VAT avoidance is a big issue at one level - I saw a report recently that there is an estimated 2Billion Euros unpaid VAT across Europe related to yachts, it is concentrated on a very limited part of yachting activity. Italian customs impounding Flavio Briatore's yacht last year for alledgedly unpaid VAT of 1.3 million Euros gives you a flavour of where the action is. The fact that he is still swanning around the Med in his boat and was at Monaco for the GP this year suggests that he has resolved it. (Even if, according to the Daily Mail the stress of it all caused his new wife to have to give up breastfeeding her child). You see VAT problems can be exciting if they provide copy for the Daily Mail.