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Old 06-08-2015, 14:46   #1
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VAT in Europe, perpetual traveler

Hi!

SO and I are planning to buy a boat next year in the Mediterranean. So now I am reading up on the whole VAT issue.

One thing that just occurred to me of which I am not sure... Do I always have to pay VAT or, when looking at boats, only for the ones that state that they haven't paid VAT?

Also, how would that come into play for a perpetual traveller? We both have EU passports, are living in Canada right now and when leaving here would have to residency. (Besides the boat, eventually)

It would be great if anyone could shed some light on these 2 issues.

Thanks!
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Old 06-08-2015, 15:49   #2
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Re: VAT in Europe, perpetual traveler

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Originally Posted by MonsterJoe View Post
Hi!

SO and I are planning to buy a boat next year in the Mediterranean. So now I am reading up on the whole VAT issue.

One thing that just occurred to me of which I am not sure... Do I always have to pay VAT or, when looking at boats, only for the ones that state that they haven't paid VAT?

Also, how would that come into play for a perpetual traveller? We both have EU passports, are living in Canada right now and when leaving here would have to residency. (Besides the boat, eventually)

It would be great if anyone could shed some light on these 2 issues.

Thanks!

A) If you buy the boat in Europe and keep it there then you will need to pay VAT unless VAT has been paid on it and a few other conditions apply.

B) If you buy the boat outside Europe and then bring into Europe then you will need to pay VAT upon entry unless you are not "established" in Europe at the time the boat comes in. If you are not "established" in Europe then you can avoid paying VAT by one of these two "reliefs":

- Transfer of Residence relief aka TOR: This applies if you bring the boat as part of "moving" your residence from outside Europe to inside Europe. This relief is permanent. Moreover, after a while you can sell the boat to a local without VAT liability. If you play your cards right you can use this to your advantage in two fronts: bring the boat in without paying VAT and then selling it as if it had paid VAT. See this link for the British version of TOR.

- Temporary Import relief aka TI: This gives you 18 months but then you have to take the boat outside Europe.

C) If you want to buy a boat that is currently in Europe without paying VAT then you may want to have the seller take the boat out of Europe, sell it to you outside Europe and then you bring it back in.

**
All this is a simplification of course. In reality each country in Europe has its own VAT rules that may not be 100% "harmonized."

Where in say "Europe" I mean to say "the customs territory of the Community". I take as given that the boat will only be used for cruising by its owner.
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Old 07-08-2015, 04:12   #3
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Re: VAT in Europe, perpetual traveler

With EU passports and no other residence, you will probably be considered residents. That generally means VAT is due immediately.

There are exceptions for people moving back but that presumes you already own the item and are bringing it back. I'm not sure that would apply if you moved back and then bought the boat in Europe (If you buy in Canada and ship to Europe, you may as well just pay the VAT as shipping will likely be a similar amount).

Once paid, VAT doesn't have to be paid again (keep the documents as the govt doesn't keep copies)
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Old 22-09-2015, 16:10   #4
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Re: VAT in Europe, perpetual traveler

"With EU passports and no other residence, you will probably be considered residents. That generally means VAT is due immediately."
Surely there is no legal basis for "probably be considered"?
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Old 22-09-2015, 16:14   #5
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Re: VAT in Europe, perpetual traveler

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Originally Posted by valhalla360 View Post
Once paid, VAT doesn't have to be paid again (keep the documents as the govt doesn't keep copies)
That is not true if the boat is sold outside the EU, in which case VAT is due again when the boat is brought back into the EU permanently or fo ruse of a resident.
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Old 22-09-2015, 16:25   #6
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Re: VAT in Europe, perpetual traveler

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There are exceptions for people moving back but that presumes you already own the item and are bringing it back.
I am not sure about the "back".

At least when it mattered to me, TOR was available to anyone moving into the UK, even to those who have never lived in the UK before. At least at that time, there was no requirement of having owned the boat for a certain time before moving in. The only requirements were that both boat and owner came into UK form outside EU (loosely speaking). I could have bought the boat in Gibraltar and sailed into the UK with my stuff on the boat, decided to establish residence there and that was it.

When I read the harmonized VAT rules I understood that the same will apply to other EU countries, to the extent their rules follow the harmonized rules.

I do believe that TOR relief from VAT is viable for fulltime liveaboard cruisers that bring a boat and themselves from outside to inside EU (even if recently purchased very close to the EU), but the glitch is that in order to claim TOR relief you have to take steps to establish residence in the EU, and that can carry (at least in theory) consequences in income taxes and certain asset taxes, at least in several Med countries.. In the UK there is no such problem but the summer is too short!
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Old 22-09-2015, 16:26   #7
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Re: VAT in Europe, perpetual traveler

free4all - yes, there is a legal basis for this. Unless you can prove residency outside of europe, you will be considered to be a resident (for VAT). Thus the VAT will be immediately due for the boat. Paid in full upon entry. I'm affected by this at the moment and have gone through various tax agencies to clear up the issue so I do know what I'm talking about regarding this issue... unfortunately...
svlamorocha - I had this case as well with the last boat, the British V.A.T. "Paid" status of the boat was sold outside of the EU and thus it immediately lost that status. In addition, if a boat is removed from the EU (i.e. as would happen during a circumnavigation) for a period of more than a couple of years (the exact period is dependant upon the flag tax authority) then the VAT paid status of the boat is deemed removed and VAT has to be paid again upon re-importation of the boat. Several German circumnavigators have been hit by this clause in past years.
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Old 22-09-2015, 16:52   #8
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Re: VAT in Europe, perpetual traveler

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Originally Posted by Zanshin View Post
free4all - yes, there is a legal basis for this. Unless you can prove residency outside of europe, you will be considered to be a resident (for VAT). Thus the VAT will be immediately due for the boat. Paid in full upon entry. I'm affected by this at the moment and have gone through various tax agencies to clear up the issue so I do know what I'm talking about regarding this issue... unfortunately...
Zanshin

I hope it is not too late for you. The trick in your situation is to make sure that YOU call the shots. You have to have a defensible record that shows that before boat came to EU you lived outside EU (marina receipts, property ownership, whatever) and when boat comes into EU you either:

a) "transfer your residence " into EU and claim TOR relief (if you can bear the impact on income/asset taxes) ; or

b) remain "established " abroad ie keep your residence abroad, which under a common interpretation requires you to have a residence available to you abroad, and apply for TI relief.

If at the time of coming in you do not know if you are doing a) or b) then you will probably lose.

Taking the UK as an example, if b) is what you want to do then you have to fill HMRC form C1331 with your foreign address.

There is no difference between this problem and the problem faced by a corporate expat that moves countries every other year and needs to know where to pay income tax on a certain bit of income, or wants to time a change of residence around a big chunk of income (eg redundancy) to cease to be a tax resident of one country just before receiving the income and then receiving the income before the following country taxes you in full. In those situations you are advised to read the definitions, plan ahead, actually execute the plan (which may require renting a room for a few months from a friend or family member inside or outside EU that you were going to visit anyway) and keep good records (such as the calendar with what you were doing what day in which country, as kept by corporate expats for their tax adviser). Been there, done that.
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Old 22-09-2015, 16:53   #9
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Re: VAT in Europe, perpetual traveler

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Several German circumnavigators have been hit by this clause in past years.
I have not heard of a single case in Germany (and it is often discussed in German forums). Can you give some evidence?

Thanks,

Carsten
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Old 22-09-2015, 17:18   #10
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Re: VAT in Europe, perpetual traveler

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Originally Posted by Zanshin View Post
free4all - yes, there is a legal basis for this. Unless you can prove residency outside of europe, you will be considered to be a resident (for VAT). Thus the VAT will be immediately due for the boat. Paid in full upon entry. I'm affected by this at the moment and have gone through various tax agencies to clear up the issue so I do know what I'm talking about regarding this issue... unfortunately...
.
The answer to your problem will depend on which country the boat is located.

If it is in the UK, then as per ""Notice 308" in order to get TI relief you need to have a "normal residence" outside the EU, which is defined as:
‘Normal residence’ means the place where a person usually lives for at least 185 days in each calendar year because of personal and occupational ties, or, in the case of a person with no occupational ties, because of personal ties which show close links between that person and the place where he is living.
If you are temporarily importing a private motor vehicle and staying in the EU solely for the purpose of pursuing educational studies or fulfilling a temporary work assignment but have a home and personal ties outside the EU, for relief purposes your normal residence will be outside the EU
Therefore if you have "no occupational ties" you get a break from the 185-day rule and your "personal ties" are important if you have not kept a residence outside.
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Old 23-09-2015, 00:38   #11
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Re: VAT in Europe, perpetual traveler

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Originally Posted by svlamorocha View Post
I am not sure about the "back".

At least when it mattered to me, TOR was available to anyone moving into the UK, even to those who have never lived in the UK before. At least at that time, there was no requirement of having owned the boat for a certain time before moving in. The only requirements were that both boat and owner came into UK form outside EU (loosely speaking). I could have bought the boat in Gibraltar and sailed into the UK with my stuff on the boat, decided to establish residence there and that was it.

When I read the harmonized VAT rules I understood that the same will apply to other EU countries, to the extent their rules follow the harmonized rules.

I do believe that TOR relief from VAT is viable for fulltime liveaboard cruisers that bring a boat and themselves from outside to inside EU (even if recently purchased very close to the EU), but the glitch is that in order to claim TOR relief you have to take steps to establish residence in the EU, and that can carry (at least in theory) consequences in income taxes and certain asset taxes, at least in several Med countries.. In the UK there is no such problem but the summer is too short!
The OP has EU passport and is living in Canada. Presumably, "back" is correct.

The OP stated they are buying the boat in the Mediteranean, so that is presumably after they have returned to the EU so TOR probably doesn't apply. It would be the same as any other resident of the EU buying a boat in the EU. VAT is due immediately.

The OP never said they wanted to do a circumnavigation or other boating outside the EU. As long as they stay in the EU, VAT is a one time tax but you do need to keep a copy as the govt doesn't track it and if in 15yrs, they decide you owe, the burden is on you to prove you paid. (unlikely but not hard to keep a piece of paper)
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Old 23-09-2015, 03:12   #12
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Re: VAT in Europe, perpetual traveler

Make your life simple, buy a boat where the VAT has already been paid. What price range are you looking? There's also some kind of VAT lease arrangement Malta offers which spreads the cost over many years.
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Old 23-09-2015, 07:41   #13
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Re: VAT in Europe, perpetual traveler

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The OP has EU passport and is living in Canada. Presumably, "back" is correct.
I do not mean to be pedantic, I just make a living out of structured problem solving. If we get confused with the factors in play then we lose the game. Lots of folks have EU passports without having been born there. Passports or nationalities by themselves have nothing to do with VAT. VAT is about residence. In addition, Most importantly, it does not matter if the person is moving "back" as when someone has lived in EU before. What matters is that the person "moves in".

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Originally Posted by valhalla360 View Post
The OP stated they are buying the boat in the Mediteranean, so that is presumably after they have returned to the EU (snip)
There are plenty of places in the Med that are outside VAT territory. Nothing prevents a determined person who is moving into the EU from buying a boat subject to seller turning it over in in one of those territories and then "move into" the EU with boat and belongings, or make a first trip with TI relief as a tourist (filling the right forms instead of just sneaking in!) and then convert to TOR relief. In the UK there is no problem with that provided that to the pint of TOR application there is a residence outside but not a residence inside.

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Originally Posted by valhalla360 View Post
(snip) so that is presumably after they have returned to the EU so TOR probably doesn't apply. It would be the same as any other resident of the EU buying a boat in the EU. VAT is due immediately.
Tough luck if OP does not make a distinction between a visit to the EU for a "look and see" before moving into the EU and the "definitive move" once there is a plan for everything. It is easy to do these things right if you plan ahead and stick to the plan, but if you want to do it after the fact trouble can happen. Even if just for income taxes it pays to plan ahead on these things.
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