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Old 16-02-2015, 13:57   #1
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EU VAT, one more time...

Hi all, we just got off the phone with a maritime lawyer in Germany who wanted 3000 Euros to answer this little question, so here we are on CF again.

Here's the situation: We are planning to sail to Europe this summer (maybe not now, depending on the answer).

US flagged boat, owned by an LLC, with a US citizen/resident (me) as sole member.

My wife is an EU citizen/resident.

So, here's the question. Can she be on the boat in a marina without me being there without incurring a tax liability? The boat will not ever be underway without me on board, will just be used as a condo for her from time to time.

I know that the rules say that the boat can't be 'used' by an EU resident without losing the exemption, but does spending time aboard while tied to a dock constitute use?

It really makes one wonder why they make it so hard to go over there and spend our dollars.

If anybody has DIRECT experience with this, or can recommend a customs person who can help us navigate through this (for much less than 3000 euros), I would love to hear from you. PM's would be good.

Thanks, TJ and Jenny
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Old 16-02-2015, 14:12   #2
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To my understanding.. which is often different from others..
The boat is good for 18mths.. if worried about the wife being on board make out a letter of authority..
After 18mths sail her out of the EU/VAT area... then back after a few weeks.
I think.. if you put it in your wife's name and have it as her sole residence in the EU.. she would only be liable if/when she sold it in the EU..
At least that's how it works in the UK.. no VAT on a home.
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Old 16-02-2015, 15:25   #3
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Re: EU VAT, one more time...

Quote:
Originally Posted by TJ D View Post
Hi all, we just got off the phone with a maritime lawyer in Germany who wanted 3000 Euros to answer this little question, so here we are on CF again.

Here's the situation: We are planning to sail to Europe this summer (maybe not now, depending on the answer).

US flagged boat, owned by an LLC, with a US citizen/resident (me) as sole member.

My wife is an EU citizen/resident.

So, here's the question. Can she be on the boat in a marina without me being there without incurring a tax liability? The boat will not ever be underway without me on board, will just be used as a condo for her from time to time.
(snip)
If anybody has DIRECT experience with this, or can recommend a customs person who can help us navigate through this (for much less than 3000 euros), I would love to hear from you. PM's would be good.

Thanks, TJ and Jenny
You did not say where the boat will be. That is critical because each country has its own VAT rules and enforcement authority. VAT rules are supposed to be "harmonized" but sometimes the details are not.

You can get free advice about the rules applicable in the UK by contacting Ray Cotton of HMRC´s Yacht Unit of Expertise at pleasurecraft@lcsouth.hmrc.gsi.gov.uk.They are very helpful.

Be prepared to explain them how come you are married but each of you resides in different countries (been in that position many times!).

Most importantly, be aware that if you (owner) move into the UK or some other EU countries then you can get "Transfer of Residence Relief" and import the boat VAT-free into the that country. If you do that in the UK then you will get a C104A that should let you take the boat anywhere in Europe without VAT problems for ever. I cannot speak for other EU countries but they may do the same, at least they were supposed to harmonize that process.

Charlie
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Old 16-02-2015, 15:29   #4
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Re: EU VAT, one more time...

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Originally Posted by boatman61 View Post
I think.. if you put it in your wife's name and have it as her sole residence in the EU.. she would only be liable if/when she sold it in the EU..[/SIZE][/FONT]
At least that's how it works in the UK.. no VAT on a home.[/SIZE][/FONT]
That is not my understanding of UK VAT rules, at least as they applied when I was in a similar position a few years ago. I understand that if a UK resident brings a boat into the UK for personal use then VAT is due immediately upon entry, and if a UK resident buys from a visiting nonresident a boat who is enjoying 18-month relief then VAT becomes due upon purchase.
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Old 16-02-2015, 15:43   #5
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That is not my understanding of UK VAT rules, at least as they applied when I was in a similar position a few years ago. I understand that if a UK resident brings a boat into the UK for personal use then VAT is due immediately upon entry, and if a UK resident buys from a visiting nonresident a boat who is enjoying 18-month relief then VAT becomes due upon purchase.
The boat was my residence.. bought in the US.. registered SSR.. sailed across and as such did not need CE certification or VAT.. unless I chose to sell it.
However a Beneteau 331 bought in the Caribbean while having a UK residence and sailed back was liable for VAT..
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Old 16-02-2015, 16:07   #6
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Re: EU VAT, one more time...

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Originally Posted by boatman61 View Post
The boat was my residence.. bought in the US.. registered SSR.. sailed across and as such did not need CE certification or VAT.. unless I chose to sell it.
However a Beneteau 331 bought in the Caribbean while having a UK residence and sailed back was liable for VAT..
Yep!

I understand what matters is not if you live on the boat, but if you move your residence into the UK at the same time you bring the boat in. So you can do it living on the boat but you can also do it living ashore; just need to synchronize things.

I also I think you could sell the first boat without paying VAT provided you waited a year upon arrival in the UK.

Cheers

C
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Old 16-02-2015, 16:26   #7
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Re: EU VAT, one more time...

Yes she can live on the boat and not be liable for vat as you are the director of llc company and it is registered in your name not hers but you would have to get TIP and then the vessel can only remain in eu 18 months
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Old 17-02-2015, 06:02   #8
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Re: EU VAT, one more time...

Thanks to all for the input. I am the director of the LLC, no problems on documenting solid US ownership of the boat.

To question 1, the boat will spend 1 year or so in the UK (We do understand Shengen rules, no need to discuss), then to Scandinavian countries (with a stint in Norway, which should reset the EU VAT clock), then maybe on to the Med, maybe not.

Also, we just got off the phone with somebody at German customs who seems to know what they're talking about, and the word that we got from them was that an EU resident can be crew, they can also live on board, but they can't under any circumstances move the boat between ports without the American owner on board. Jenny doesn't sail without me, anyway, so we should be in luck.

The customs people also echoed the advice here, that while the VAT rules were supposed to be 'harmonized', they aren't in practice, so it sounds like we'll have to keep our ear to the ground while in Europe and avoid some places just to keep from getting hassled. It is absolutely not worth having to write a check for 20% of our boat's assessed value just for the privilege of cruising Europe for a few seasons, so we'll have to be a little careful, from the sounds of things.

I'm guessing that the Mediterranean countries are taking a more aggressive stance on the VAT issue than northern European ones, but this may not actually be true.

Can anybody think of anything we're missing?

Thanks again,

TJ and Jenny
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Old 17-02-2015, 06:35   #9
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Re: EU VAT, one more time...

A big question is how they consider your marriage in terms of ownership (might vary by country). If they consider that she is a presumptive owner becasue she is married to you, VAT is immediately due.

Assuming she has been living in the EU for a while and you are not becoming a resident, you likely won't qualify for an exemption to bring personal effects in VAT free.

Odds are if she is not on the paperwork, the authorities won't have reason to question but I have heard some stories, paticularly in med countries, where they do come around checking tax paperwork. If she is using the boat without you, you may be in for a tough explaination of why you didn't pay VAT, even if it doesn't leave the dock.

My guess is the lawyer was going to charge you E3,000 because it's not a simple question and he really doesn't want to get drug into a mess later if you point to him a saying it was fine.

Sorry for so much guessing but it looks like you skirt the rules and take your chances or you pay up. It depends on what the penalties are if you are caught cheating.
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Old 17-02-2015, 07:08   #10
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Re: EU VAT, one more time...

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Originally Posted by TJ D View Post

To question 1, the boat will spend 1 year or so in the UK (We do understand Shengen rules, no need to discuss), then to Scandinavian countries (with a stint in Norway, which should reset the EU VAT clock), then maybe on to the Med, maybe not.
If you apply for TOR relief on the basis that you are moving to the UK with the boat and stay there for one year I bet you can use the UK form you will get as "proof of VAT paid status" to show in the other countries later on. Others have done this succesfully going from UK to France and other places. Most importantly, once you have TOR you do not need to worry about the 18 months.

Now there is even more to this!

After one year in the UK the only worry you would have is if other countries will accept the British TOR form. Have in mind that the US flag may attract whatever VAT enforcement effort there is in those countries. You can make things even better by changing the registration into her name at the end of the first year. Being a UK resident by then she can cheaply register the boat in the UK (100% hers in the SSR that is cheapest or aprox 51 hers and 49 yours in the more expensive Part I). Thrn your boat will have a UK flag and form from UK the tax authority saying that VAT is paid. I doubt any other country will harass you on VAT.
By the way, the UK has a very advantageous income tax system for foreigners that can help a lot in protecting Americans who spend extensive time in Europe, worry about being seen as residents of one of those countries and subject to high income and assets taxes that in some cases are not creditable in full against US liability, and have the time to do what it takes to qualify. There are plenty of good advisors on this; look for "resident, not ordinarily resident and non-domiciled". Feel free to PM me.




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Old 17-02-2015, 07:15   #11
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Re: EU VAT, one more time...

Well, with all due respect, it's not about skirting the rules or dodging taxes. It's about understanding the rules and making an informed decision about whether or not we want to subject ourselves to a very expensive bureaucratic nightmare just to briefly visit some place.

We really are not based in Europe, but Jenny can't hold US residency while we are out cruising. The US demands that foreigners spend at least 6 months per year inside the USA as a condition of a green card, and we don't always do that. So, even though she doesn't really live in the EU, one has to be a resident somewhere! Vagabond/homeless unfortunately does not cut it when it comes to these things.

So, we have very few ties to Europe, and we're sure as hell not going to write them a check for 70,000 euros or whatever they decide they want just so we can cruise there for a couple of seasons! We will be sailing back to the Caribbean then to the So. Pacific after Europe, so there's just no reason that I can conceive of that we could be in any way construed to be skirting rules or dodging taxes. We have no problem paying what we owe, but if we would be even potentially liable for VAT, we will not be going. We've been to many countries to date, and have never encountered even a hint of this kind of thing as transient cruisers, so perhaps we need to just strike the entire EU off the list of places to go at this point. That seems to be a bit of a shame, doesn't it?

TJ and Jenny
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Old 17-02-2015, 07:25   #12
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Re: EU VAT, one more time...

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Originally Posted by svlamorocha View Post
If you apply for TOR relief on the basis that you are moving to the UK with the boat and stay there for one year I bet you can use the UK form you will get as "proof of VAT paid status" to show in the other countries later on. Others have done this succesfully going from UK to France and other places. Most importantly, once you have TOR you do not need to worry about the 18 months.

Now there is even more to this!

After one year in the UK the only worry you would have is if other countries will accept the British TOR form. Have in mind that the US flag may attract whatever VAT enforcement effort there is in those countries. You can make things even better by changing the registration into her name at the end of the first year. Being a UK resident by then she can cheaply register the boat in the UK (100% hers in the SSR that is cheapest or aprox 51 hers and 49 yours in the more expensive Part I). Thrn your boat will have a UK flag and form from UK the tax authority saying that VAT is paid. I doubt any other country will harass you on VAT.
By the way, the UK has a very advantageous income tax system for foreigners that can help a lot in protecting Americans who spend extensive time in Europe, worry about being seen as residents of one of those countries and subject to high income and assets taxes that in some cases are not creditable in full against US liability, and have the time to do what it takes to qualify. There are plenty of good advisors on this; look for "resident, not ordinarily resident and non-domiciled". Feel free to PM me.




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Charlie, thank you for the insights here. Very helpful. I don't know if it's really of interest to us to transfer residence. We're really just looking to cruise for 2 or 3 seasons and then sail back to the other side of the pond. Our base is in the USA. The main issue is that I do have to leave for work from time to time, so that's the time that I'm concerned about. I'm sure that when I'm on board, all will be fine, but what if some zealous tax man shows up when I'm not there and finds an EU resident on board?

It would seem that we should be able to do some cruising over there without going through a bunch of hassle, and without a huge tax bill, but we just don't know for sure. It's troubling. It would wreck the cruising kitty to wind up unwittingly on the hook for VAT, so we're looking for something pretty rock solid before sailing across.

Thanks again, TJ and Jenny
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Old 17-02-2015, 08:48   #13
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Re: EU VAT, one more time...

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We really are not based in Europe, but Jenny can't hold US residency while we are out cruising. The US demands that foreigners spend at least 6 months per year inside the USA as a condition of a green card, and we don't always do that. So, even though she doesn't really live in the EU, one has to be a resident somewhere! Vagabond/homeless unfortunately does not cut it when it comes to these things.

So, we have very few ties to Europe, and we're sure as hell not going to write them a check for 70,000 euros or whatever they decide they want just so we can cruise there for a couple of seasons!
Do not get confused about residency. The US has its definitions of US residence for tax or immigration purposes, but that does not imply that those definitions apply when doing the VAT residence test in a certain European country. There comes your expensive German lawyer; which hopefully be a VAT (and not just income tax) lawyer. He may be happy to charge you three grand for telling you that something like if Jenny does not have a fixed "place of abode", "permanent home" or "centre of vital interests" (whatever those things mean for German VAT) then she might be considered to be a resident of her country of citizenship or they might consider the boat to her "centre of vital interests".

Someone I know very well ended up taking a lease on a room for a year just to get certainty of tax residence for that year in which he would get exceptional income. Be prepared to respond if she will keep a place available to her outside Europe an don´t assume that immigration status means she cannot keep property available for her use in the US.

Cheers

Charlie
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Old 17-02-2015, 09:06   #14
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Re: EU VAT, one more time...

That's an excellent idea, Charlie. We'll look into that further. We can probably rent an apartment in Detroit for cheap!


TJ
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Old 17-02-2015, 09:15   #15
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Re: EU VAT, one more time...

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That's an excellent idea, Charlie. We'll look into that further. We can probably rent an apartment in Detroit for cheap!


TJ
Why not buy?If you rent you will need to pay for insurance. A year of insurance may be more expensive than the property itself!
Enjoy Europe!
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