VAT Question

[bbg]

My wife has been hounding me to buy a boat since the Paris boat show (When are you going to buy your boat?). /forums/images/graemlins/grin.gif

I am not currently an EU resident, so I was hoping to buy a boat VAT-free, flag it outside the EU and then do whatever I have to do to keep the VAT-free status (moving it out of the EU every year or so, for a few days).

But - another thought occurred to me. What happens if I buy a VAT paid boat? As a non-EU resident (but British subject) would it lose its VAT paid status even if I flagged it in the EU and kept it in the EU?
Would the next purchaser have to pay VAT again just because I am living in sunny Switzerland?

 

[Tranona]

The "flag" is largely irrelevant- if it is in service in the EU then it has to be VAT paid. You can, if you are a qualifying non EU resident apply for temporary importation for a limited period but there are restrictions on usage. You can get the basics of the rules (which are EU wide ) on the RYA website with links to the HMRC sites. You will have to judge for yourself whether you can gain this concession and "work the system".

With your second question, the fact that you are a UK citizen is irrelevant. Changes of ownership and keeping the somewaht slippery concept of "VAT paid status" only holds good if the change in ownership is between two private EU citizens. Therefore if you bought a VAT paid boat it would be deemed exported outside the EU and will be subject to VAT if re-imported. This also applies if an EU resident takes a boat outside the EU and sells it even to another EU citizen as re-importation without paying is only available to the person who took it out.

The upshot of all this is that it is very difficult to avoid paying VAT if you are a private citizen and want to keep a boat in the EU. The liability for tax is defined by "putting on the market" rather than your residency, flag of registration or citizenship, except in the specific case of temporary importation.

 

[bbg]

Sorry, I'm lost.

You said Brisith citizenship is irrelevant and then the VAT paid status only holds if the sale is between two EU citizens. Did you mean two EU residents?

And if that is what you meant - if I as a British citizen / Swiss resident bought a VAT paid boat, are you saying that it is deemed exported therefore loses its VAT paid status? But if I keep it in the same marina in S France (for example) and can't work the "temporary import" exemption I then have to pay VAT again?

That is, a non-EU resident, buying a VAT paid boat in the EU and keeping it in the EU, will have to pay VAT upon purchase, and then the next (EU resident) purchaser will have to do the same as well?

 

[stevebirch2002]

Speak to the VAT people, they are very helpful.

 

[Tranona]

Sorry should have said resident. If you buy a new boat and pay VAT you will have the invoice which is evidence that VAT has been "accounted for", so I woulsd assume that an EU resident could then buy that boat with the evidence and not pay further VAT. However, if you bought a used boat privately there would be no VAT on the transaction and I do not know whether you could use the original VAT invoice (if it existed) to sell it to another EU resident without a further liability for VAT. There is nothing I can see on the HMRC site to cover this situation.

 

[BrianH]

The key is where you intend to keep it. Presumably, your intention would be for the Mediterranean, which limits your choices if you wish to keep out of the EU - Croatia (now in application and likely to be a member in 2011), Albania (limited facilities, unlimited risk) and Turkey. Or the entire north African coast, if you wish to travel that far.

I have my boat in Italy (deemed VAT paid by age), which was very laid back about controlling VAT on boats, despite their bureaucratic ways - until Brussels started to apply some coercion, whereupon the Italian authorities made a lot of noise about checking all boats for VAT-paid status.

Suddenly, a wave of German and Austrian-flagged leisure craft, especially many enormous mobos, flooded out of Italy and over the Adriatic to Slovenia and Croatia.

Then Slovenia joined the EU and immediately announced that they would be controlling for VAT on all leisure craft - another great wave of EU-flagged yachts went south into Croatian marinas until now it is very hard to find a vacant berth there.

It will be interesting to see what will happen in 2011.

 

[PeterGibbs]

My understanding is as follows:

1. Once a boat built after 1985 has paid VAT its liability is cleared, providing of course that it can be demonstrated on challenge that VAT has been paid. Domicile affects the tax status thereafter:

2. If a non-domiciled brings a boat not VAT paid into the EU it is regarded as a non-domiciled personal possession and can be granted temporary VAT exemption, but this must be applied for. If it is then sold within the EU, VAT is chargeable at the then market rate.

3. If an EU domiciled brings a VAT paid boat into the EU and can demonstrate etc, etc, then the status of the vessel is that it is tax paid. Paying tax twice on the same vessel is not demanded under these circumstances, it seems to me.

4. It follows that if a VAT paid boat is taken abroad by an EU domiciled, sold to a non EU domiciled who then brings it into the EU it will be treated as in 2 above ie taxable on disposal. But if the overseas purchser is EU domiciled and can show VAT is already paid, there will be no further liability to VAT on import / disposal.

Hope that narrows the field....

PWG

 

[Tranona]

Peter - right on all except second part of 4. Only the person taking the boat out of EU can bring it back in without paying VAT. If it is sold, even to an EU resident it is liable when it comes back in.

I think the way to avoid this is to make sure the sale between the private EU citizens is seen to take place in the EU.

 

[BrianH]

[ QUOTE ]
If a non-domiciled brings a boat not VAT paid into the EU it is regarded as a non-domiciled personal possession and can be granted temporary VAT exemption, but this must be applied for.

[/ QUOTE ]

This then is the key, which I did not know, and affects the OP - as well as myself, if I did wish to buy a new boat. Except perhaps, that Swiss tax authorities should invoke their own VAT on the personal possession of a domiciled person, if aware of such a purchase, as well as contributing to the Swiss wealth tax annually.

 

[Tranona]

Think you will find that this "concession" is aimed at, for example people from the US doing "le grand tour" and staying temporarily in the EU. There are time and use limitations, for example the boat can only be used by the owner and his immediate family. Would also apply to boats based in Turkey which visit Greece.

I have no experience of how well this is enforced and what it means in practical terms.

 

[Heckler]

I nearly bought one, it had been in Turkey, they apparantly took it from turkey to greece to do the deal so it was sold by a EU national to another EU national in the EEC, if it had been done in turkey it would have forfeited its status.
Stu

 

[bbg]

Thanks everyone for all the stabs at this, but I think it still doesn't answer the situation that I foresee:
- boat is currently VAT paid, situated in S of France, owned by EU domiciled person
- I (currently not EU domiciled / resident) buy that boat in S of France, and keep it there. Boat never physically leaves the EU.
- maybe I re-flag it UK, maybe I keep the flag French (assume I am entitled to do this as a British and French citizen)
- boat never leaves French waters

Would VAT be due by me? By the next (EU domiciled) purchaser? By both?

 

[Tranona]

Flagging is irrelevant. You are probably not strictly entitled to UK registration as right is determined by residence, not normally by citizenship. There are categories of non resident citizens that can register a boat in the UK , but they are usually to do with status such as members of diplomatic corps. Details on the MCA website. The regulations are not watertight and non-residents do maintain registration by registering from a UK address - there seems to be little check, only a personal declaration. Registration on either part of the register is not compulsory in the UK unlike most other countries where registration is compulsory and gives a separate identity to the boat. Be aware also that SSR registration says very little about ownership through title - that comes from your Bill of Sale. Part 1 registration gives a bit more because lenders can register a charge against the boat so in theory the boat cannot change hands without the buyer being aware that a third party has an interest in the boat.

Anyway for VAT purposes it is normally ownership that is relevant and registration may be part of the evidence of where ownership lies.

The bottom line is that you canot keep a boat in the EU as a private individual without paying VAT. As to whether you, as a non-resident can sell a VAT paid boat to an EU resident without further VAT, I do not know.

 

[PeterGibbs]

Yes, but logic applies, as you say. EG - two EU domiciled persons transact a VAT paid boat transfer in, say, Turkey and the boat is brought back into the EU, is the previously paid VAT to be disregarded by the border officer? I think the domicile settles where the transaction took place, not where the boat happened to be at the precise moment of transfer. How these things are presented clearly has a bearing on the outcome.

Folks get concerned if in the above example the boat is registered in a non EU port at the moment of sale: does this change the status of the boat/transaction? I would argue that the boat is deregistered a moment before the transaction took place, wouldn't you?

You can drive yourself mad with these permutations. When I last looked into this it was apparent that the regs are driven by what each official thinks he can gauge out of whoever persents themselves "at the frontier" with a piece of valuable equipment! It seems to me that if the basics are observed, ie VAT is demonstrably paid somewhere along the line, then the obligation is discharged. That should be a good enough defence...!

PS Those thinking of bringing in a non-VAT paid boat right now should choose Blighty - at 15% VAT it's just about the lowest rate in the EU. Hurry, for one year only going cheap...!


PWG

 

[matelot]

[ QUOTE ]
Peter - right on all except second part of 4. Only the person taking the boat out of EU can bring it back in without paying VAT. If it is sold, even to an EU resident it is liable when it comes back in.

I think the way to avoid this is to make sure the sale between the private EU citizens is seen to take place in the EU.

[/ QUOTE ]

This is my understanding of the rules but I've always wondered - where does the transaction take place? Is it where the boat is or where the buyer and seller are. After all the bill of sale doesnt have to say where the boat is located does it? And boats arent registered in and out of the UK. So two people in the UK could buy / sell a boat between them, even if the boat was in (say) Turkey without there being any evidence of it when the boat returns to the UK.

And no - I havent done it or intend to do it. I'm just curious.

 

[PeterGibbs]

Quote: The bottom line is that you canot keep a boat in the EU as a private individual without paying VAT. As to whether you, as a non-resident can sell a VAT paid boat to an EU resident without further VAT, I do not know.
_________________________________
I know what you are inferring but your first statement is not strictly true. A temprary resident can obtain a short term waiver from VAT.

Purchasing a VAT paid asset in the EU as a non-domiciled cannot attract further tax. Where would one go to declare what for taxation purposes? The tax has been paid and bloodsucker has no further interest in the matter. The same applies to an EU domiciled purchasing a VAT paid asset from a non-domiciled. This tax does not fall on the individual in the above instances, but on the asset.

Peter Gibbs

 

[Tranona]

The temporary importation bit was already covered earlier in the thread.

The issue of where the transaction takes place has come up in earlier threads to do with Turkey and its preparation to join the EU. In particular with reference to the RCD which is now required in Turkey, but what happens to boats already in Turkey? Will they need to comply with the RCD if they are imported into the EU? IIRC from a poster (forget his name) who deals with transitional issues in Brussels, there are complicated "rules" about where the transaction takes place and the definition "placed on the market" (the same phrase used in VAT rules) and each case would be treated individually!

I suspect that if a UK resident sold a VAT paid boat to another UK resident even though it were in Turkey at the time, nobody would check when the boat came into the EU because all the paperwork, including the original VAT invoice would suggest that it was a normal EU boat. However, I have no experience or examples to support this!