Warning, think you are VAT paid in the EU? ... Think again - both Slovenien and Croatian port authorities refuse to recognise VAT paid status of boat.

[lustyd]

The boat is flagged in the UK, the VAT was paid (in the UK??)

Neither of these things would change the fact that it's none of HMRC's business since the boat is and has been in the EU. The boat is not deemed UK VAT paid since it wasn't here at new year, so the only interest HMRC would show is if it were imported to the UK, but nobody is even remotely considering that since it would definitely then require VAT payment! As others have said many times, the flag is not relevant to VAT status any more than the yacht's name

 

[Tranona]

I have read the thread in it's entirety and the particular post that I responded to and can only conclude your response is something of a non-sequitur. The boat is flagged in the UK, the VAT was paid (in the UK??), the EU (via it's directives) is involved as is Croatia, in the form of the Croatian Port Authorities (via their interpretation of the directives) so, whilst "everything" may have taken place in Croatia in the most recent events affecting Baggywrinkle, there is clear involvement of the EU, UK and Croatia. Add in the fact that I am responding to a post that suggested that HMRC no longer has anything to do with EU law (despite the fact that whole post is about the interpretation of EU directives as they apply to UK taxes and your response is not exactly logical.

You have clearly not read the thread properly as is now obvious. Cannot conceivably see why you would think that the VAT was paid in UK when everything the OP has written clearly states that it was paid in Croatia.

The post you replied to was absolutely correct - nothing to do with HMRC. The content of your response was irrelevant as this is a purely EU/Croatia issue.

 

[Buck Turgidson]

You have clearly not read the thread properly as is now obvious. Cannot conceivably see why you would think that the VAT was paid in UK when everything the OP has written clearly states that it was paid in Croatia.

The post you replied to was absolutely correct - nothing to do with HMRC. The content of your response was irrelevant as this is a purely EU/Croatia issue.

Just a small correction. It was deemed paid in Croatia on their joining the EU. I'm intrigued to know if VAT was every actually paid anywhere. Not that that has a material bearing on the current sale.

 

[Sandy]

EU regulations and, indirectly, EU directives heavily impact and are very much the business of HMRC, just as UK and any other country's laws are the business of EU and especially of the member states. How on Earth do you think the import and export business works? That's why we have import and export agencies in just about every country as well lawyers that specialise in export and import law and tax experts that specialise in the law relating to the transfer of assets between countries? Good grief, there's an entire industry in every half-decent sized country dedicated to understanding and dealing with the laws of other countries.

Thank you for posting more eloquently the point I was making.

 

[dunedin]

EU regulations and, indirectly, EU directives heavily impact and are very much the business of HMRC, just as UK and any other country's laws are the business of EU and especially of the member states. How on Earth do you think the import and export business works? That's why we have import and export agencies in just about every country as well lawyers that specialise in export and import law and tax experts that specialise in the law relating to the transfer of assets between countries? Good grief, there's an entire industry in every half-decent sized country dedicated to understanding and dealing with the laws of other countries.

Don’t shoot the messenger. On matters of VAT, Tranona doesn’t write the rules - but generally explains them very accurately and precisely.

And this case does appear to be about officials in two EU states not adhering to rules set out by the EU tax directorate. So I agree with Tranona that it is not something HMRC can assist with or opine on (though there are plenty of other closer to home VAT issues that their decisions have impacted).

 

[Baggywrinkle]

Just a small correction. It was deemed paid in Croatia on their joining the EU. I'm intrigued to know if VAT was every actually paid anywhere. Not that that has a material bearing on the current sale.

VAT was not paid ever, but import duty was - it was a few hundred Euros. The downside was I was unable to visit Italy or Greece when it was under TA in Croatia - Italy would have demanded VAT on entry as I was an EU resident.

The boat was over 8 years old when Croatia joined the EU so "deemed VAT paid" .... that is the law for every state joining the EU. It has been in free circulation in the EU for 8 years now and I carry the EU declaration with barcoded MRN number to check its status in my ships papers.

I bought the boat in Croatia a few years before they joined specifically because of this rule so I could buy VAT-free but still get EU goods status for the time when I came to sell the boat.

It all went swimmingly until the Croatians and Slovenians decided to misinterpret the rules. Now I need to re-register in Germany to get the boat sold as EU goods in free circulation. Such is life, and one of the many reasons I took German citizenship.

 

[grumpy_o_g]

Don’t shoot the messenger. On matters of VAT, Tranona doesn’t write the rules - but generally explains them very accurately and precisely.

And this case does appear to be about officials in two EU states not adhering to rules set out by the EU tax directorate. So I agree with Tranona that it is not something HMRC can assist with or opine on (though there are plenty of other closer to home VAT issues that their decisions have impacted).

If that's what Tranona was saying then my humble apologies as I misinterpreted his post and Lustyd's completely.

 

[Three Stars]

I have set out in the attachment the text of a reply received today from the Croatian Ministry of Finance - Customs Administration team.

Hope this helps to clarify the situation. If anyone wants the original for use in negotiations I am happy to provide it.

 

[ean_p]

I have set out in the attachment the text of a reply received today from the Croatian Ministry of Finance - Customs Administration team.

Hope this helps to clarify the situation. If anyone wants the original for use in negotiations I am happy to provide it.

I'll be interested to hear Tranona's take on that email as surely taking the boat out of Croatian waters for a few hours or days or weeks at some time during 2021 doesn't remove the Union goods status does it? Also isn't vat a function of where the deal takes place and not of buyers / sellers residence...?

 

[Tranona]

Complete fabrication. Clearly has a vivid imagination that has Croatia and Slovenia having rules as though they are individual states. Somebody needs to tell them that they are part of the EU and follow EU rules.

EU VAT status allows freedom of movement throughout the EU, is not lost just because a boat leaves EU (not state) territorial waters as Returned goods rules then apply. EU VAT status is a matter of fact and is unaffected by citizenship, residence of the owner and flag of registration. EU VAT status is established by VAT payment or being in the EU on 31/12 2021.

 

[NormanB]

VAT was not paid ever, but import duty was - it was a few hundred Euros. The downside was I was unable to visit Italy or Greece when it was under TA in Croatia - Italy would have demanded VAT on entry as I was an EU resident.

The boat was over 8 years old when Croatia joined the EU so "deemed VAT paid" .... that is the law for every state joining the EU. It has been in free circulation in the EU for 8 years now and I carry the EU declaration with barcoded MRN number to check its status in my ships papers.

I bought the boat in Croatia a few years before they joined specifically because of this rule so I could buy VAT-free but still get EU goods status for the time when I came to sell the boat.

It all went swimmingly until the Croatians and Slovenians decided to misinterpret the rules. Now I need to re-register in Germany to get the boat sold as EU goods in free circulation. Such is life, and one of the many reasons I took German citizenship.

Seems totally contradictory to your original post.

 

[Wing Mark]

Complete fabrication. Clearly has a vivid imagination that has Croatia and Slovenia having rules as though they are individual states. Somebody needs to tell them that they are part of the EU and follow EU rules.

EU VAT status allows freedom of movement throughout the EU, is not lost just because a boat leaves EU (not state) territorial waters as Returned goods rules then apply. EU VAT status is a matter of fact and is unaffected by citizenship, residence of the owner and flag of registration. EU VAT status is established by VAT payment or being in the EU on 31/12 2021.

Some people believe that EU states are sovereign countries able to make their own laws.

It's a bit like it not being a bright idea to register a VAT paid boat in Jersey.

 

[Tranona]

Some people believe that EU states are sovereign countries able to make their own laws.

It's a bit like it not being a bright idea to register a VAT paid boat in Jersey.

The 2 are unconnected. Not sure what point you are trying to make.

The issue here is about an EU state applying EU law correctly. These sorts of issues arose post 1992 when the EU VAT zone was formed and just like now some states ignored the law or interpreted it their own way until the Commission brought them into line. Problems arose again in the early 2000s when the EU was expanded, and again in 2016 when Croatia joined. The later countries joining come from a very different legal and administrative background to more established members and had difficulty adapting to the EU way of doing things. Exactly the same happening now as this example and the Greek issues referenced earlier show but the only effective way of dealing with it is to use the Commission complaints procedure which although tedious works.

There is absolutely no problem having a VAT paid Jersey registered boat either in the EU or the UK. The flag may attract increased attention from some officials in some countries, but legally there are no problems from a VAT perspective.

 

[Baggywrinkle]

Seems totally contradictory to your original post.

The EU VAT was deemed paid (zero rated), which is a special case for boats over 8 years old when the country they are in join the EU. My boat was imported correctly into the EU when Croatia joined, VAT was paid at a zero rate, effectively meaning nothing was paid because no money changed hands, import duty was paid and it became EU goods in free circulation.

It is quite simply that the two states, Croatia and Slovenia, are refusing to recognise the EU goods status of a boat that has been in free circulation in the EU for 8 years .... and they are only doing this because it is UK flagged and Brexit has happened. The problem goes away when I register the boat in Germany.

Unfortunately, not all UK owners of UK flagged boats in Croatia and Slovenia can re-flag to an EU state when it comes time to sell them, and prospective new owners are being told the import paperwork showing EU goods status is invalid due to Brexit and the flag state of the boat being the UK.

There is no contradiction I can see, perhaps confusion between VAT not paid and VAT paid at zero rate? Effectively the same from a cost perspective, but very different from an import perspective.

 

[Wing Mark]

Why did you not register the boat in its home port?
Trying to save money?

The reality is the 'authorities' in some EU countries see things differently and the EU doesn't have a great track record of enforcing its grand principles at ground level in a timely and efficient fashion.
It's quite likely people will be given the run-around for several years and then the issues will be fudged.

 

[Baggywrinkle]

Why did you not register the boat in its home port?
Trying to save money?

The reality is the 'authorities' in some EU countries see things differently and the EU doesn't have a great track record of enforcing its grand principles at ground level in a timely and efficient fashion.
It's quite likely people will be given the run-around for several years and then the issues will be fudged.

My passport was UK, my sailing qualifications were UK, my radio operators licence was UK and therefore the boat was registered in the UK to keep all the paperwork consistent. Insurance was also UK. Seemed sensible at the time as the boat (and Croatia) were originally outside the EU when I bought it. This situation was never changed and never caused a problem until now.

 

[Baggywrinkle]

Why did you not register the boat in its home port?
Trying to save money?

The reality is the 'authorities' in some EU countries see things differently and the EU doesn't have a great track record of enforcing its grand principles at ground level in a timely and efficient fashion.
It's quite likely people will be given the run-around for several years and then the issues will be fudged.

... and the EU has no authority at "ground level" to do anything. It is the responsibility of each state to disseminate the correct interpretation of the rules their country signed up to. That is what membership is, after much wrangling and discussion, get to a point where worthless differences between states are eradicated so that everyone can sign up to new rules that reduce barriers to inter-state trade. Basically ensuring the 4 freedoms of movement - people, goods, capital and services.

Yes, some states still try to extract money from barriers to these freedoms, but they eventually get caught and have to stop. From the post by Three Stars above it seems it is already known by the Croatian authorities, just not properly implemented by the port authority in Pula - or there has been a misunderstanding about the true status of the boat. Who knows? ... I'll get it sorted out and be able to continue sailing in the Adriatic and Med, unhindered and free of VAT and Schengen issues in my next boat.

 

[Metabarca]

At the time the boat was registered, I was living in Germany on a UK passport. I chose to register the boat in the UK so it would match my passport and when checked there would be no discrepancy between my nationality and the flag state of the boat. All perfectly reasonable IMO.

Don't see why that should be an issue: I had until recently only a British passport and my boat is Italian-flagged (now noted your more recent post, but even so, it should not be an issue: my sailing qualification - such as it is - is Croatian). I was going to suggest a possible way forward but will anyway leave the idea here, despite your having found a solution. It's based on recent events in Slovenia, but it depends on the length of your boat. As you may know, Slovenia decided it wasn't going to allow unregistered boats under 10.5 m through its waters (long story), and some locals herein Trieste got around that by registering their boats in Poland, where it was much cheaper than in Italy. Worth pursuing? (I think this would work also if your boat is over 10.5 m, as I suspect it is).

 

[Tranona]

Don't see why that should be an issue: I had until recently only a British passport and my boat is Italian-flagged (now noted your more recent post, but even so, it should not be an issue: my sailing qualification - such as it is - is Croatian). I was going to suggest a possible way forward but will anyway leave the idea here, despite your having found a solution. It's based on recent events in Slovenia, but it depends on the length of your boat. As you may know, Slovenia decided it wasn't going to allow unregistered boats under 10.5 m through its waters (long story), and some locals herein Trieste got around that by registering their boats in Poland, where it was much cheaper than in Italy. Worth pursuing? (I think this would work also if your boat is over 10.5 m, as I suspect it is).

What you describe illustrates the problem perfectly. It is all about "competence" - that is what is within the remit of the EU and what is ln the control of individual states. As far as yachting is concerned the only significant areas for the EU are standards on new boats (RCD), fuel taxation and VAT as private boats are considered means of transport and therefore have freedom of circulation within the EU with rules that are effectively common across the EU. Just about everything else - registration, licencing, safety and equipment standards, control of ports, movements within territorial waters is the responsibility of individual states. Inevitably for individuals and their boats much of these controls are linked to state registration, which also fulfils the international requirement of flag state identification which eases the movement of ships in and out of individual states.

Pre EU, many states had very strict controls over boats, particularly pleasure boats. This is still obvious in states with a political background of dictatorial government and long coastlines where to make these control systems work responsibility is devolved to local officials working to a set of prescriptive rules that are often vague and contradictory leading to widely varying interpretation depending on the location, time and even individual official. Those who sail in Mediterranean states, particularly in the eastern end will recognise all this!. Such "legal systems" have great difficulty adapting to being in the EU and distinguishing between what is EU law and what is local - unlike most northern (original) EU members on whose legal systems EU law is based.

So, in this case when faced with a novel problem the official (and probably his boss) conflates local law (based on registration of boats) and EU law which is nothing to do with registration and believes that boats moving in and out of territorial waters are entering and leaving EU space, which as we know from a VAT point of view is not the case. There have been many similar misunderstandings over the years on similar issues, invariably resolved through the Commission " educating" the local state in how to implement EU directives into local state law. Those with long experience of Greece will know that even when this is done, it takes a long time to percolate to every one of the hundreds of local port officials!

The OP is unfortunate to be caught up near the beginning of this process and wish him well in starting the ball rolling with the Commission as well as resolving his individual problem.

 

[Chris_Robb]

.. I'll get it sorted out and be able to continue sailing in the Adriatic and Med, unhindered and free of VAT and Schengen issues in my next boat.

Not sure how you intend to be Vat free when you are a resident in Germany..... I am really not sure a

What you describe illustrates the problem perfectly. It is all about "competence" - that is what is within the remit of the EU and what is ln the control of individual states. As far as yachting is concerned the only significant areas for the EU are standards on new boats (RCD), fuel taxation and VAT as private boats are considered means of transport and therefore have freedom of circulation within the EU with rules that are effectively common across the EU. Just about everything else - registration, licencing, safety and equipment standards, control of ports, movements within territorial waters is the responsibility of individual states. Inevitably for individuals and their boats much of these controls are linked to state registration, which also fulfils the international requirement of flag state identification which eases the movement of ships in and out of individual states.

Pre EU, many states had very strict controls over boats, particularly pleasure boats. This is still obvious in states with a political background of dictatorial government and long coastlines where to make these control systems work responsibility is devolved to local officials working to a set of prescriptive rules that are often vague and contradictory leading to widely varying interpretation depending on the location, time and even individual official. Those who sail in Mediterranean states, particularly in the eastern end will recognise all this!. Such "legal systems" have great difficulty adapting to being in the EU and distinguishing between what is EU law and what is local - unlike most northern (original) EU members on whose legal systems EU law is based.

So, in this case when faced with a novel problem the official (and probably his boss) conflates local law (based on registration of boats) and EU law which is nothing to do with registration and believes that boats moving in and out of territorial waters are entering and leaving EU space, which as we know from a VAT point of view is not the case. There have been many similar misunderstandings over the years on similar issues, invariably resolved through the Commission " educating" the local state in how to implement EU directives into local state law. Those with long experience of Greece will know that even when this is done, it takes a long time to percolate to every one of the hundreds of local port officials!

The OP is unfortunate to be caught up near the beginning of this process and wish him well in starting the ball rolling with the Commission as well as resolving his individual problem.

Clearly the issue in Greece, especially with the more far flung corners such as Rhodes. But even the centre is confused despite running through the whole issue with the commission - and having France suggest in the discussions that NO UK yacht should retain Vat! The Germans supported our position! It should all come to a head over this winter.......
Re the OP, I dont exactly understand his yachts Vat position. He paid Zero rate of VAT? I believe there was a transition time for Vat when Croatia were overing a bargain discount of 5% rate - to be told off by the EU! But Zero rate - I just dont know the answer as to the transitional arrangements in place in 2016.