Paying VAT on a used boat in Europe

[Newbuyer]

I hope someone can help with some advice. I have been offered a used boat by a Bank in Italy. The boat was seized after non payment of a leasing agreement and the VAT remains unpaid. As I want to keep the boat in Croatia and register it under the UK flag, can I buy it without paying the VAT, or at least can I recover the VAT from the Italian authorities?

 

[puckertoe]

VAT
I rang the VAT and offered to pay VAT on a yacht. As there was no paper work but the the BIll of Sale. They told me I couldn't pay any! They had no way for me to pay VAT voluntarily, saying that I would only become liable if I took it out of the country, then it would be liable in either the EU ccountry I visited or back here in the UK if I took it out to a non EU country and came back. I suggested that I took it to the Channel Islands and came back at which time It would be liable for VAT and be able to pay it and get my VAT certificate. That flummoxd them completely. BTW the yacht is worth only £2000. I did point out that there web site said that since I had a Bill of sale between two British citizens and a SSR number that their website said that it was the buisness under the UK Customs Authorities, at which point they passed me to the Customs office.. They said that as I had never been out of Britain It was the VAT office that should deal with it!
BTW I could also sail to Isle of Man and back as that is not in the EU either.

 

[macd]

BTW I could also sail to Isle of Man and back as that is not in the EU either.

You could certainly sail to the IoM and back, but it wouldn't make any difference to the vessel's VAT status. The Island is in a commaon VAT area with the UK (although you're right that it's not part of the EU except in a loose associate sense).

 

[haydude]

The British culture remains a mistery to me even after so many years. Elsewhere you would never read of anyone INSISTING to pay tax even when the authorities are not interested!

 

[Adrian_]

The OP wants to keep the boat in what is now a non-EU country, this is why he's asking all these questions.
However Croatia is joining the EU in 2013 and within a ahort period of time there's a "special offer" of 5% VAT for boats registered there.

 

[Tranona]

I hope someone can help with some advice. I have been offered a used boat by a Bank in Italy. The boat was seized after non payment of a leasing agreement and the VAT remains unpaid. As I want to keep the boat in Croatia and register it under the UK flag, can I buy it without paying the VAT, or at least can I recover the VAT from the Italian authorities?

When the leasing company sells it to you it will charge VAT on the sales price at the ruling rate. If you are a private citizen then you have no way of reclaiming this. VAT is a tax on transactions, not on the boat, so if the transaction (as this would seem to be) is a "chargeable event" then VAT is payable and the vendor accounts for it to customs.

It may be possible to reclaim VAT if the boat is sold outside the EU - it is possible to do this if you buy a new boat, but the rules are very specific and intended to cover the export of new boats, so you would need to seek specialist advice as to whether it is possible in this scenario. Exporting to Croatia would not help you as that state is in the process of joining the EU and will be applying VAT to any boats in its territory.

Registration is unconnected with VAT, or with the location of the boat. It depends solely on the eligibility of the owner(s). So, if you qualify by residence you can register the boat on the SSR or if by nationality on the Part 1. Eligibility for registration can be found on the MCA site.

 

[Tranona]

VAT
I rang the VAT and offered to pay VAT on a yacht. As there was no paper work but the the BIll of Sale. They told me I couldn't pay any! They had no way for me to pay VAT voluntarily, saying that I would only become liable if I took it out of the country, then it would be liable in either the EU ccountry I visited or back here in the UK if I took it out to a non EU country and came back. I suggested that I took it to the Channel Islands and came back at which time It would be liable for VAT and be able to pay it and get my VAT certificate. That flummoxd them completely. BTW the yacht is worth only £2000. I did point out that there web site said that since I had a Bill of sale between two British citizens and a SSR number that their website said that it was the buisness under the UK Customs Authorities, at which point they passed me to the Customs office.. They said that as I had never been out of Britain It was the VAT office that should deal with it!
BTW I could also sail to Isle of Man and back as that is not in the EU either.

You misunderstand what VAT is about. It is a tax on transactions, not on boats. As your boat was not involved in a transaction that was a a "chargeable event" no VAT is due, so you can't pay it.

"They" were not "flummoxed" by your plan, except to wonder why you would be so daft as to want to pay a tax that you are not required to. Equally there is no legal requirement for you to keep the VAT receipt. If you have a Bill of Sale that says you bought the boat from a private EU citizen then no VAT is due and you legally own the boat.

 

[SailorBill]

If you have a Bill of Sale that says you bought the boat from a private EU citizen then no VAT is due and you legally own the boat.

That's not necessarily correct. If the private EU citizen sold the boat outside the EU then VAT is due again if the new EU owner brings the boat back to the EU.

 

[Tranona]

That's not necessarily correct. If the private EU citizen sold the boat outside the EU then VAT is due again if the new EU owner brings the boat back to the EU.

That is correct, but irrelevant in the context of the OPs situation.

 

[SailorBill]

That is correct, but irrelevant in the context of the OPs situation.

Yes but anyone reading your post might be misled hence my correction.

 

[winsbury]

to the OP: my understanding is this...( I am NOT an expert so this is offered purely as my understanding and not as legal advice )

Assuming you are buying from a VAT registered business as part of their business:

If you are a EC citizen and buying from a VAT registered vendor I think you'll find you will have to pay VAT on the purchase price in the EC territory in which the sale takes place at whatever their prevailing rate is - I think Italy is currently 21% but is going up to 22% soon.

If you permanently export it from the EC and make it very clear at the time of purchase you MIGHT be able to reclaim the vat but you will need some forms from HMRC or possibly the Italian equivalent and the seller will need to fill them in correctly etc. If you then subsequently import it into the to EC you will have to pay the VAT at the prevailing rate of the country you import it to. I'm not sure of the time allowed between a 'permanent' export and reimporting but again HMRC should be able to advise but I would guess 6 months or so would be a minimum to not be considered a blatant VAT avoidance exercise. This might not be long enough for your purposes as Croatia is due to become a full EC member in July 2013 and I have no idea how they will handle VAT issues such as this.

If you are a VAT registered company and importing VATable goods from another EC member state you can do so without paying VAT at the point of purchase via the existing VAT Intrastat agreements, you will need to advise the vendor of your VAT number and business status and they will report the sale accordingly which will match up to your import declaration on your VAT return to HMRC. However you will still need to pay VAT on the sales price when you sell the item or wind up your business as it will be considered as stock or capital goods for your business. This might sound like a loophole, but I would be very wary of using the item for non-business purposes as that would clearly be tax evasion and therefore illegal.

All this applies to goods in general, but for boats I believe there are other rules about sailing it into EC ports as to whether it is treated as a permanent import or just a temporary visit from a non-ec registered vessel, but how one goes about the paperwork for that I'm not sure and judging from other EC legislation is likely to have subtle variations depending on which countries port you visit and how pedantic they wish to be.

The extra complexity in your situation is that I presume you are buying it at less than the original purchase price although you indicate a larger amount of VAT is owed to the Italian government based on its original full sales price. You'll need to consult with an expert to clarify this, but from my understanding the history is irrelevant assuming that your purchase is from from the Bank acting as a vendor; they will declare the price they sell to you at and your liability of the VAT will based be on that amount. Any dealings and outstanding vat revenues they have with prior owner / lessor / vendor is their problem to resolve. Unless of course the bank are acting only as a broker on behalf of the vendor, in which case you might indeed be taking on someone elses responsibilities.

Bottom line is this is very complicated and you need some proper professional advice - HMRC have an advice line and are extremely helpful and document eveything so you will have a record to fall back to should the need arise.

 

[Tranona]

Yes but anyone reading your post might be misled hence my correction.

Hardly a correction, more additional information that might be useful to somebody in a different situation from the OP. Have not "misled" anybody.

As I think you know there are other factors to take into account, for example you could qualify your simplistic statement by referring to returning resident relief which might allow the boat to be brought back into the EU without paying VAT if the buyer is eligible.

If anybody is interested in the finer details of VAT in relation to boats they can always read the RYA and HMRC material on the subject.

 

[Tranona]

All this applies to goods in general, but for boats I believe there are other rules about sailing it into EC ports as to whether it is treated as a permanent import or just a temporary visit from a non-ec registered vessel, but how one goes about the paperwork for that I'm not sure and judging from other EC legislation is likely to have subtle variations depending on which countries port you visit and how pedantic they wish to be.

It is not the registration per se, but the ownership that determines whether temporary importation is possible. The normal temporary importation is for visiting non EU residents and has restrictions on time and usage. Other temporary importation arrangements are in relation to work being carried out in the EU and the boat then leaving again. Unlikely these arrangements would be available in the situation the OP describes.

As you say, specialist advice is needed, and from Italy, not HMRC as, although in theory the rules are the same there are detailed differences - for example the lease arrangements acceptable (and common) in Italy and used to reduce VAT are not allowed in the UK.

 

[puckertoe]

Surely... thats the fact, bizarrely. As it is my yachts VAT status -is as it is... and as it was built in 1975 is VAT exempt. But not if I take it out of Uk and bring it back again,then the HM Rvenue would want me to pay tax, but I can't pay tax if I want to voluntarily, to get a VAT paid status.

 

[puckertoe]

Equally there is no legal requirement for you to keep the VAT receipt. If you have a Bill of Sale that says you bought the boat from a private EU citizen then no VAT is due and you legally own the boat.

You tell that to the first French Customs Officer you meet...

 

[Tranona]

Surely... thats the fact, bizarrely. As it is my yachts VAT status -is as it is... and as it was built in 1975 is VAT exempt. But not if I take it out of Uk and bring it back again,then the HM Rvenue would want me to pay tax, but I can't pay tax if I want to voluntarily, to get a VAT paid status.

You seem to be confused. Your boat is so old VAT is irrelevant - anywhere in the EU. If you did take it out of the EU you could bring it back under returned goods relief without paying VAT. The only situation where VAT would be payable is if you sold it to somebody outside the EU and then somebody else tried to import it again.

You need to forget all about having any proof of "VAT paid status" - you already have it by virtue of the boat's age - although to meet the requirements strictly you should have some evidence that the boat was in the EU in 1992. However, nobody cares and nobody is ever going to chase you.

This is all explained in the RYA FAQ sheet on their website.

 

[Tranona]

You tell that to the first French Customs Officer you meet...

There is just no evidence that they are the least bit interested. All they want to see is your registration document and your passport. Forget all the scare stories and get on with life and enjoy your boat.

 

[puckertoe]

Have you personal experience of taking a yacht abroad of this age?
I haven't and it wold be good to know that I am not going to find my boat impounded in an EU country because they choose to interpret regulations differently. I know what the RYA say, but every year we hear of people being caught out by petty jobs worths. I have not documents other than my SSR number and a Bill of Sale, nothing to say when it was built either.
I'd really like to hear from anyone who has had any experience of this situation.
Thanks for all you input BTW.

 

[winsbury]

As you say, specialist advice is needed, and from Italy, not HMRC as, although in theory the rules are the same there are detailed differences - for example the lease arrangements acceptable (and common) in Italy and used to reduce VAT are not allowed in the UK.

A very good point, indeed advice will definitely need to be from someone well versed in Italian VAT law and practices; I certainly hadn't appreciated there could be localised VAT incentives for leasing companies, this isnt my field of expertise so that could have quite an impact. In fact given the state of flux in Croatia and that the OP is a UK citizen it seems all three tax authorities will come into play... thats far too complicated for me and unless huge savings are afoot sufficient to pay the lawyers for suitable advice I think I would run a mile from the deal rather than get tied up in so much red tape that sailing could become a distant memory.

 

[Adrian_]

Exporting to Croatia would not help you as that state is in the process of joining the EU and will be applying VAT to any boats in its territory.

The catch is that, for a limited time, it will change just 5% VAT. Which is very reasonable.