Purchase Germany registered boat with VAT paid in Germany and IGIC paid in Canary Islands

[Alex Essouera]

Hi, All!
I am considering purchasing a boat registered in Germany.
The boat was built in 2020 in Slovenia and was purchased from an EU dealer without VAT.
She has had only one owner, a German citizen. A 15% tax was paid in Germany later that same year. That tax has not been recovered,
Since then, the boat has been moved to the Canary Islands, where she has remained for over three years, during which time the local Canary Islands tax (IGIC) has been paid.
As I understand it, while the Canary Islands are politically part of the European Union, they are outside the EU customs territory and VAT area.
I am planning to move her to France and Italy.
Please advise whether the EU VAT-paid status of the boat has been lost?
If it has not been lost, what documents do we need to provide to prove the boat’s VAT-paid status? Are there any exemptions for such case?
Where should the purchase take place?
Warm regards,
Alex

 

[Tranona]

Welcome.

Yes VAT paid status lost nominally after 3 years. However Returned Goods exemption is only available to the person who takes the boat out. So if you buy it in the Canaries it will lose status irrespective of how long the boat is outside the EU.

You will have to import the boat at the point of first entry into the EU. The amount of VAT will be based on the market value at the time of importation. How this value is determined is the responsibility of local state customs so it will be worth establishing that before hand as you have a choice of probably 3 states as first landfall - Portugal, Spain or France and I expect they will all be different. You will need evidence of ownership ideally back to the first transfer from builder to dealer and the CE documents, particularly the Certificate of Conformity.

You can probably avoid all this if the owner is prepared to sail the boat back to the EU, clearing customs under Returned Goods Relief rules and then completing the sale in the EU.

 

[Alex Essouera]

Thanks a lot!
Could you please let me know where can I find the information about Returned Goods Releif rules?

 

[Graham376]

Depends on how honest you are When arriving in say Portugal or Spain, who's to know where you've come from unless you tell them? You could have been cruising Europe and presumably have the documents to prove VAT paid in Germany.

Info on Returned Goods here -

Understanding Returned Goods Relief (RGR) in Europe and Ireland: What It Means for Your Business | Unsworth.

 

[Tranona]

Graham's link gives you the basics. How the process is managed is devolved to individual states. The key things to focus on are that only the person or entity that exported the boat can apply, the 3 year limit, and the evidence of when the boat left the EU. When the UK was in the EU the 3 years was to an extent discretionary reflecting the number of UK owners who took boats on long cruises and returned and cases were dealt with on an individual basis. Since Brexit the 3 year limit has been removed in the UK, but the need for evidence of departure and re-entry is still required. Some other EU states also were similarly relaxed, but others that have more controlled systems and/or have a greater movement of boats in and out of the EU can be more formal in their documentary requirements.

As Graham suggests you could ignore the requirement to formally report re-entry. However this may cause problems down the line when you come to sell the boat as a buyer, knowing the boat has spent considerable time outside the EU and seeing your purchase was made outside the EU question whether it is legal. The responsibility for complying with the legal requirements is with the importer, but the boat can also be seized until any charges are paid.

Hence the advice based on what you have told us is to first clarify whether the owner can apply for RGR and then agree terms that he imports it and you buy it in the EU with clean paperwork, or if this is not possible buy it at a price that allows for delivery to the EU and payment of VAT.

 

[pandos]

I haven't looked this up properly but when I encountered this situation in 2004 I was advised that the rule was 3 years for any person bringing the boat back in but extended to 4 if it was the original exporter who was returning the boat.

That still appears the case on the Irish revenue site in their superficial guidance.

I would definitely speak to a specialist about this as there may be quirks about whether the boat was actually exported from the EU, notwithstanding that it was tax paid into the Canaries.

If it is the case that the boat was in fact deemed exported from the EU, The paperwork for the import to the Canaries undoubtedly fixes the date that was deemed to have occurred.

If that date is inside three years, or even four, I'd get on my bike and get this checked out professionally.

 

[Tranona]

I haven't looked this up properly but when I encountered this situation in 2004 I was advised that the rule was 3 years for any person bringing the boat back in but extended to 4 if it was the original exporter who was returning the boat.

That still appears the case on the Irish revenue site in their superficial guidance.

A good example of the "rules" in local state operation. However to be clear RGR is only available to the person/entity who can show they exported the boat. Strictly speaking a boat potentially loses its VAT paid status once it leaves the EU (or UK) and only regains it on return if it qualifies for one of the reliefs, of which RGR is the most obvious

 

[Metalicmike]

You can reduce liability by splitting the purchase into two parts with two separate payments and receipts. I receipt for the boat and the other for ancillary equipment and keep the two documents 2,000 miles apart.

 

[Tranona]

You can reduce liability by splitting the purchase into two parts with two separate payments and receipts. I receipt for the boat and the other for ancillary equipment and keep the two documents 2,000 miles apart.

That would make absolutely no difference. If he buys the boat where it is now and enters the EU and is an EU resident or wants to keep it in the EU permanently if he is not then VAT is payable on the market value. It is irrelevant what he paid for it and how.

Don't make it more complicated than it is already.

 

[Baggywrinkle]

I haven't looked this up properly but when I encountered this situation in 2004 I was advised that the rule was 3 years for any person bringing the boat back in but extended to 4 if it was the original exporter who was returning the boat.

That still appears the case on the Irish revenue site in their superficial guidance.

I would definitely speak to a specialist about this as there may be quirks about whether the boat was actually exported from the EU, notwithstanding that it was tax paid into the Canaries.

If it is the case that the boat was in fact deemed exported from the EU, The paperwork for the import to the Canaries undoubtedly fixes the date that was deemed to have occurred.

If that date is inside three years, or even four, I'd get on my bike and get this checked out professionally.

This is what I found on the Irish Government site ...

Note

The relief from VAT is only allowed if the person that re-imports the goods is the same person who originally exported them.

Goods re-imported into the European Union (Returned Goods Relief)

To claim RGR you also have to present the paperwork to prove the goods were exported from the EU .... which will have the original owners name on it.

Proof that the goods re-imported were exported from the European Union (EU)

 

[pandos]

This is what I found on the Irish Government site ...



Goods re-imported into the European Union (Returned Goods Relief)

To claim RGR you also have to present the paperwork to prove the goods were exported from the EU .... which will have the original owners name on it.

Proof that the goods re-imported were exported from the European Union (EU)

There you go...I only had a quick look last night, see here. General rules for duty relief on returned goods

No explicit mention of it being the same exporter/importer...

In 2004 I was told about the three versus four year situation.

That was straight from a customs man in connection with a boat I was considering buying...goes to show one can't be too careful with this kind of stuff.

 

[Alex Essouera]

1. EU VAT paid yacht can lose its VAT paid status if:
- The VAT paid is reclaimed (i.e. where the owner was VAT registered and able to reclaim the VAT they paid on vessel purchase); or
- The vessel is sold whilst physically located outside the VAT territory of the EU; or
- The vessel is physically located outside the EU for more than three consecutive years.

2. Canary Islands are Spanish territory; Spain is a part of the European Union. Thus,
Canary Islands are part of the European Union.
Canary Islands are part of the EU Customs.

Territorial status of EU countries and certain territories

IMHO, the boat located more then 3 years in Canaries cannot loose EU VAT-paid status,

 

[Tranona]

1. EU VAT paid yacht can lose its VAT paid status if:
- The VAT paid is reclaimed (i.e. where the owner was VAT registered and able to reclaim the VAT they paid on vessel purchase); or
- The vessel is sold whilst physically located outside the VAT territory of the EU; or
- The vessel is physically located outside the EU for more than three consecutive years.

2. Canary Islands are Spanish territory; Spain is a part of the European Union. Thus,
Canary Islands are part of the European Union.
Canary Islands are part of the EU Customs.

Territorial status of EU countries and certain territories

IMHO, the boat located more then 3 years in Canaries cannot loose EU VAT-paid status,

It is not the customs rules, but the VAT rules that are relevant and the Canary Islands are very clearly outside the EU for VAT purposes. If you buy the boat while it is located outside the EU VAT area it will lose its EU VAT paid status. So I think you are mistaken. The boat can only come back into the EU without paying VAT is if the current owner qualifies for RGR or if you are a non EU resident you can keep it in the EU for up to 18 months at a time under the EU Temporary Admission rules.

 

[Alex Essouera]

Thanks, Tranona!
I think you would be right if this boat was made in the Canary Islands. Since the boat is made in the European Union and the EU VAT is paid, boat has become a European product free to sail within EU (not limited by EU VAT area).
I think it is still necessary to turn to the first source.
Could you please advise which European law describes this situation?

 

[Baggywrinkle]

1. EU VAT paid yacht can lose its VAT paid status if:
- The VAT paid is reclaimed (i.e. where the owner was VAT registered and able to reclaim the VAT they paid on vessel purchase); or
- The vessel is sold whilst physically located outside the VAT territory of the EU; or
- The vessel is physically located outside the EU for more than three consecutive years.

2. Canary Islands are Spanish territory; Spain is a part of the European Union. Thus,
Canary Islands are part of the European Union.
Canary Islands are part of the EU Customs.

Territorial status of EU countries and certain territories

IMHO, the boat located more then 3 years in Canaries cannot loose EU VAT-paid status,

From your link, just to back up what @Tranona posted ....

In the first post, mention was made of IGIC being paid in the Canary Islands ... IGIC ( Impuesto General Indirecto Canario) is a consumption tax, equivalent to VAT in EU countries. They are not part of the EU VAT system, therefore even though VAT was paid in the EU when the boat went to the Canaries, they still had to pay the equivalent of VAT (IGIC) in the canary islands - EU VAT paid was irrelevant, just as IGIC is when returning to the EU. So the EU rule on RGR applies, sold outside the EU VAT region, lose EU goods status.

Taxually | What Is the Canary Islands General Indirect Tax (IGIC)?

IGIC, or Impuesto General Indirecto Canario, is a general indirect tax applied to consumption within the Canary Islands, including its territorial sea and airspace. Established in January 1993, the Canary Islands indirect tax serves as its equivalent to mainland Spain’s VAT, yet it operates under a different set of rules and tax rates.

Unlike VAT, which is harmonized across the European Union, IGIC is a local consumer tax designed to maintain the economic differentiation and competitiveness of the Canary Islands. This means that while VAT applies uniformly across Spain and the Balearic Islands, IGIC is tailored specifically to the unique economic landscape of the Canary Islands, offering lower rates and a broader range of tax types.

 

[Alex Essouera]

Thanks a lot!

 

[Alex Essouera]

The owner of the boat remains the same. Is there a chance for him to re-export the boat by RGR rule? But she is at Canaries almost 4 years!

 

[Graham376]

The owner of the boat remains the same. Is there a chance for him to re-export the boat by RGR rule? But she is at Canaries almost 4 years!

To maintain the VAT status, either the owner or a delivery crew acting on his/her behalf and ownership, must return the boat.

As far as I know, there would be nothing stopping you being engaged to deliver the boat back to mainland EU on the owners behalf and then completing the sale. No doubt, the present owner would require the purchase funds to be deposited in an escrow account beforehand.

P.S. The present owner would claim RGR on the boat's arrival, before the sale completed.

 

[Tranona]

The owner of the boat remains the same. Is there a chance for him to re-export the boat by RGR rule? But she is at Canaries almost 4 years!

The owner will have to clarify with customs at the port of entry. If you read again the link in post#4 you will see that while the period outside the EU is nominally 3 years it can be extended by customs based on the facts of the individual case. As already suggested some states do this - Ireland for example and the UK when it was in the EU.

The only way to find out is for the current owner to present his case to customs before arriving.

 

[dunedin]

The owner of the boat remains the same. Is there a chance for him to re-export the boat by RGR rule? But she is at Canaries almost 4 years!

The owner has lost circa 17% of the boats value (at least to a buyer planning to bring back to the EU) by leaving in the Canaries for 4 years. Hence the price should be that much lower than a similar boat being sold in Spain / France etc.

If the purchase price reflects this then buy and then pay VAT when reimport to the EU. If the purchase price doesn’t reflect this negotiate down or look elsewhere?