Vat question - JFM are you on line

Elessar

Elessar

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A friend is buying a fairline in croatia. Allegedly EU vat paid.
Questions
How long does the boat have to be out of the EU before Vat is due on entry?
If vat is due and he smuggles it, given historical vat proof, what is the likelihood of it being proven that vat isn't paid?
 
Croatia is more complex than other places, having joined the EU only this year, so your friend needs to be really careful in checking the paperwork. Many boats kept in Croatia were not VAT paid so come July, to stay there VAT would need to be paid, or the boat be of an age (essentially pre 2005 and in Croatia from that date) to be considered VAT paid under the transition rules. Prior to July a discounted VAT scheme was in operation - Deleted User used it for his boat, but after that VAT should have been paid at 25%. If the boat has had VAT paid it will have good paperwork to support it and can freely move throughout the EU. If the boat originally had VAT paid in the EU and then moved to Croatia, it would seem reasonable to think that, now Croatia is in the EU and the transaction is between private individuals, no VAT would be due. However, it would be extra important to ensure there is documentary evidence of original VAT payment.

If you do a search on the subject there was a long running thread earlier this year with lots of information on the ins and outs plus contributions from a Croatian agent who processed a lot of VAT payments, including mike's.
 
Elessar said:
Ok thanks all. I didnt think croatia was in yet, obviously wrong, and the transition is clearly complex. Will get more info.
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Yes Croatia joined the EU on 1st July this year and we were present in the country to witness this misguided event. As tranona says, Croatia had a transition period upto end May during which non VAT paid boats in Croatia could apply to become EU VAT paid at a special discounted rate of 5%. They did this to discourage non VAT paid boats from decamping to countries outside the EU such as Montenegro or opting to pay VAT in another EU country. All very enlightened. In fact the rate of 5% was actually nearer 7% when fees and other costs were included. Late on in the transition period, the Croatian authorities introduced a concession which allowed boats older than 8yrs to apply for VAT paid status at a rate of 0% subject to certain conditions.
The certificates confirming VAT status under the Croatian scheme are exactly the same, the only difference being an entry showing whether VAT was paid at 5% or 0%. In fact, you have to look very carefully to see these numbers. The reason that I point this out is that both 5% and 0% VAT boats could be described as EU VAT paid. IMHO (and this only a personal opinion), 0% boats might be acceptable in Croatia as EU VAT paid but in other countries, the customs may not accept that a boat on which 0% VAT was paid can be considered EU VAT paid. At least a 5% VAT boat has a certificate which shows a figure for the amount of VAT that was paid and IMHO that should be enough to be acceptable to any other EU country customs. I stress again this is all my personal opinion.
So if your friend's Fairline has a 5% certificate, then I would be fairly relaxed but if it has a 0% certificate, I'm not sure I would buy it on the basis that it was EU VAT paid
 
Deleted User said:
So if your friend's Fairline has a 5% certificate, then I would be fairly relaxed but if it has a 0% certificate, I'm not sure I would buy it on the basis that it was EU VAT paid
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Not sure there is anything to worry about. Most other states issued similar certificates at the time of accession. There is nothing remotely illegal about what they are doing in EU terms, nor is it a "concession" - just complying with the accession rules. Indeed HMRC also issued "opinions" in the early days after 1992 under the same rules until they realised that legally they had little meaning as a boat can still become liable to VAT, even if in 1992 it would have been considered VAT paid.

What might create more difficulties is if a boat qualified as "deemed VAT paid" in Croatia, but did not have a certificate. Although that is no different from thousands of pre 1986 British boats, the fact that Croatia does issue certificates would count against a boat from there that does not have one.
 
Tranona said:
Not sure there is anything to worry about. Most other states issued similar certificates at the time of accession. There is nothing remotely illegal about what they are doing in EU terms, nor is it a "concession" - just complying with the accession rules.
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Maybe. My boat qualified for 0% VAT under the 8yr rule but I still chose to pay VAT at 5% and so did other owners in Croatia in a similar position. There was certainly doubt at the time as to whether the 0% 'concession' would identify a boat as EU VAT paid in the rest of the EU rather than just EU VAT paid in Croatia. I and some other owners took the cautious view that paying 5% then was better than taking the risk of paying 25% or whatever later. In any case, the VAT rate was only part of the story as of course, the amount of VAT that owners actually paid depended also on the valuation of the boat. I focussed more on ensuring that the valuation on my boat was as low as possible
 
I'm late here and you got all the info above. Croatia is indeed in the EU now

The premise in your question was mistaken. If Croatia had been outside the eu your friend shouldn't have bought it on the footing it would retain vat paid status. A vat paid boat that changes ownership while outside the Eu loses its vat paid status immediately. Only the person who exported it from eu can reimport it vat free ( within 3 yrs usually). A new owner can't.
 
jfm said:
I'm late here and you got all the info above. Croatia is indeed in the EU now

The premise in your question was mistaken. If Croatia had been outside the eu your friend shouldn't have bought it on the footing it would retain vat paid status. A vat paid boat that changes ownership while outside the Eu loses its vat paid status immediately. Only the person who exported it from eu can reimport it vat free ( within 3 yrs usually). A new owner can't.
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ah that's good additional info re ownership change - thanks - and for all the previous info from others too.

he hasn't bought it yet, but was oblivious to the possibility of a problem.

Will report back.
 
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