VAT, Boats and the E.U.

This is a complex subject and one where expert advice should be sought. The following is no more than a series of pointers, without any authority claimed. In addition, whilst the EU has established a VAT tax scheme that in general provides VAT liability for boats purchased in or formally imported into all EU waters, these are EU guidelines and they are interpreted, administered and enforced by each member country’s taxing authority. Therefore, boat owners may often experience some difficulties and misunderstandings in various EU countries, between the varied tax regimes and according to local conditions and individual circumstances. Bear in mind that Gibraltar is not in the EU, nor is Norway. Cyprus, Madeira and Malta currently have lower rates of VAT than other EU states.

1. VAT for EU registered boats owned by EU citizens

A boat belonging to a EU citizen, or flying the flag of a EU country, must be VAT paid. This means that both in home waters and when sailing between any EU countries, such boats should carry evidence of VAT payment. This could be the original boat builder’s receipt or paid invoice, or some other original document showing clearly that VAT has been paid. A boat owned by EU resident individual or body corporate has the right to free movement throughout the EU, provided VAT has been paid on that vessel in one of the EU countries. A VAT paid yacht should encounter no difficulties in EU waters provided the vessel is not chartered. Pleasure yachts built pre-1985 and in EU waters on 31st December 1992 are treated as VAT paid. Evidence that the yacht was in EU waters on this date may be required.

2. VAT (and some other points) for non-EU boats and non-EU citizens

Temporary importation relief from VAT is available to yachts beneficially owned and used by non EU residents provided such non EU resident does not become ordinarily resident in the EU. Boats owned by non-EU residents and registered outside the EU are entitled to tax free temporary importation into the EU for a total period of eighteen months. The EU Common Customs Tariff provides for relief from VAT liability for up to 18 months (Article 562(e) as referenced above) when the boat is owned by non-EU residents and where the boat will subsequently be removed from EU waters (Article 561). The permitted period, or temporary importation, applies to the entire EU area and therefore at the end of the period the boat must be sailed to a country outside the EU or VAT must be paid. It must be stressed that the above 18-month VAT relief applies only where the boat is owned and sailed by a person not resident in the customs territory of the EU. The relief is invalidated if the boat is hired, sold or put at the disposal of a EU resident.

3. Borders

Non-EU boats and owners are required to contact local immigration authorities whenever crossing a border between EU countries. In the case of EU citizens and EU registered vessels, no formalities are required for departures from a EU port to another EU port, nor arrivals in a EU port directly from another EU port. However, immigration must be contacted if there are non-EU citizens aboard. Customs must be also notified if there is anything to declare, such as firearms (the carrying of which is almost always both unecessary and prejudicial in any EU state and illegal in many). Customs and immigration must be notified when departing for a non-EU port or arriving from one (a yellow Q flag must be flown then). This rule is widely ignored and largely unenforced in the case of Spain and Gibraltar.

4. Documentation

Boats must carry their original registration document, insurance policy and – where appropriate – a ship’s radio licence. In these circumstances one member of the crew must have a radio operator’s certificate of competence. For EU boats, proof of VAT status is also required. It is also very useful to have a typed sheet containing the name of the boat, dimensions and other key data, registration documents, and the crew list. See elsewhere for information regarding certificates of competance and vignette licences. Boats must also clearly display their registration number – for example their SSR (UK Small Ships Register) number. The above is taken in large part from www.myyachtregistration.com– quite a useful resource.