Vat on 2 year old French yacht

[cloud7]

The knowledge of the forum is required , has speaking to our neighbors last evening ang they are in process of buying a 2 year old French yacht ( without vat ) apparently it was leased . Found conversation very interesting , has any members advice I could pass on .
Thks

 

[Tranona]

When the lease is finished, either the term is complete or the boat is sold then the leasing company is responsible for accounting for the VAT so the buyer gets a VAT paid boat with documentary proof that there is no outstanding VAT liability. The buyer should ensure that is what he is going to get for the price he is paying and sees the necessary documents before making the final payment.

 

[Dave100456]

I'm no expert and no doubt Tranona will enlighten us but when when the 3yr lease is complete and the finance company account for the vat, what happens if the boat is outside the EU?

I understood that if a boat is vat paid but sold outside EU it looses its VAT paid status.

Also, you need to check the lease agreement; does it require you to keep the boat outside EU for the term of the lease; 3 yrs. If a VAT paid boat is outside EU for 3 years it looses its VAT paid status.

Confused!

 

[Tranona]

I'm no expert and no doubt Tranona will enlighten us but when when the 3yr lease is complete and the finance company account for the vat, what happens if the boat is outside the EU?

I understood that if a boat is vat paid but sold outside EU it looses its VAT paid status.

Also, you need to check the lease agreement; does it require you to keep the boat outside EU for the term of the lease; 3 yrs. If a VAT paid boat is outside EU for 3 years it looses its VAT paid status.

Confused!

No need to feel bad about the confusion - it is confusing!

These lease schemes are not available in the UK as (according to HMRC) they are not legal under EU VAT law. However this does not stop states such as France and Italy from allowing them. The basis for their argument is that Cat A boats spend a proportion of their time outside EU territorial waters - which is sort of easy to justify, particularly in the Med. So VAT is reduced through the lease scheme to account for that time. This, together with currently favourable financial terms for leases make them attractive for many buyers.

You are probably right about the VAT treatment if the boat is outside the EU when it is sold, but I would imagine both the lessor and the lessee would be well aware of this (if it is so) and ensure that any sale takes place in such a way as to avoid any unnecessary taxes. Once a boat is out of the leases then it would be a private boat and all the normal VAT rules apply.

There are also lease schemes that are not set up for VAT reduction purposes on boats used outside the EU which would add another level of complexity in the event of a change in ownership.

So, I guess if you are looking to buy a boat that is currently in a lease scheme you need professional advice to ensure you understand the implications of buying what is on offer.

 

[Sybarite]

I haven’t followed up on this for years but at one time the fisc considered that it was with the final payment that the ownership of the boat passed from the leasing company to the buyer. They treated this last payment as the cost of the boat which gave rise to substantial capital gains when the boat was sold on.

It probably no longer applies but it’s a point worth checking.

 

[wwalsh]

Similar to Greece the vat free status is maintained by certain criteria and can be lost. In Greece there is requirement for number of charter days otherwise fines. In France the yacht needs to exit French waters for 70% of the charter trips per year. Which is a practical impossibility unless the yacht based elsewhere (Greece for instance).

http://yachtownership-solutions.com/en/news/french-vat-rules-for-yachts-for-2016-onwards

I do not know about the specifics for sale of French flag vat free yachts but it is unlikely the french tax authority will permit sale to eligible buyer (non eu buyer or eu vat registered charter company, if it is the same as Greece), without the required documents of eligibility and if the vat is due then to be paid before the sale is permitted (before the yacht is deleted from the registry).

still purchase of yacht from company and especially purchase of vat free yacht and especially purchase of yacht with leasing or mortgage requires a local lawyer especially one very experienced in yacht sales. then after the sale to take the yacht out of their waters after registering with a class A register (eg. british part I) which is a proof of ownership.

vat issue is a good one to stall and delay a sale at the last moment

 

[Tranona]

Similar to Greece the vat free status is maintained by certain criteria and can be lost. In Greece there is requirement for number of charter days otherwise fines. In France the yacht needs to exit French waters for 70% of the charter trips per year. Which is a practical impossibility unless the yacht based elsewhere (Greece for instance).

http://yachtownership-solutions.com/en/news/french-vat-rules-for-yachts-for-2016-onwards

I do not know about the specifics for sale of French flag vat free yachts but it is unlikely the french tax authority will permit sale to eligible buyer (non eu buyer or eu vat registered charter company, if it is the same as Greece), without the required documents of eligibility and if the vat is due then to be paid before the sale is permitted (before the yacht is deleted from the registry).

still purchase of yacht from company and especially purchase of vat free yacht and especially purchase of yacht with leasing or mortgage requires a local lawyer especially one very experienced in yacht sales. then after the sale to take the yacht out of their waters after registering with a class A register (eg. british part I) which is a proof of ownership.

vat issue is a good one to stall and delay a sale at the last moment

You are confusing things. This is not about charter boats, which as you say do not incur VAT while they are still meeting the charter requirements and VAT is paid on the sale value when the boat is sold to a private owner and not chartered.

The question here is about VAT on a boat being bought under a personal lease in France and this is a very different animal from what you described. The purpose of the lease is to reduce VAT payment, not avoid it and the lease company is responsible for paying the VAT.

 

[wwalsh]

interesting scheme. needs the sale contract to specify the steps that will be taken regarding the termination of the lease and the payment of the vat in order for the yacht to be sold clean.

 

[Tranona]

interesting scheme. needs the sale contract to specify the steps that will be taken regarding the termination of the lease and the payment of the vat in order for the yacht to be sold clean.

See posts#2 and 4. There is nothing unusual about the scheme in France and there will be an established procedure to ensure that the transaction is legal and any tax matters dealt with properly.

 

[Pinetops]

If you will allow a slight divergence from the topic - does anyone know whether Holland or Ireland currently allow lease/purchase schemes.
I know they used to before the ECJ ruled that an existing principle of "Abuse of Rights" of Community Law could be applied to the field of VAT. This is what the UK rely upon but it requires them to challenge every separate case, it is not a blanket ruling.