Under What Flag Would You Register ?

[goboatingnow]

Originally Posted by K_V_B

I'm a Belgian living in Switzerland. If I buy a boat I could put a Swiss Flag on it, but then the problem arises that only people with Swiss Sailing Permits can sail it...
But am I correct in assuming that I could hang a Belgian flag on it (or a Flemish flag in a few years :-) and still avoid paying VAT, as I'm not an EU tax resident?

Yes , once you are not a EU tax resident you can avail of a TIR. Of course the rules of any particular register may prevent you using it but that's a different issue altogether.

Dave

[goboatingnow]

The mega yacht stuff is way put of our league here and best ignored, there's a reason most mega yachts have a " charter " angle.

And lets not forget there is another reason for having another flag on the stern: Employment law! If you have 5 -20 souls crew and you operate under a "decent" working law you may face minimal wages, health insurance, pension, paid holidays and in some countries you cannot fire people easily...did you know that you need special working permits to work on weekends and after hours in major EU countries?? That as well a big money saver...

Interesting many many super yachts register in the caymans and other British derived registries, where They fall under MCA manning guidelines. Given the amounts involved, I don't think any super yacht owner registers to access cheap staff, most pay very handsomely to get good quality people. And they quite happily pay whatever legal additions are neccessary. ( I have a good friend who runs a super yacht crew agency )

It's worth pointing outing that most EU countries have quite flexible labour laws anyway, usually more flexible then people imagine. As to weekend working, well the EU working time directive applies ( unless your self employed or a doctor !) again given the nature and costs involved in superyachts I don't beleive any register to get cheap labour. ( commercial ships being the exact opposites)

Dave

[Zonker]

Originally Posted by goboatingnow

How many times do I have to say this

THE FLAG OF THE BOAT IS IRREVERENT IN DETERMINING VAT STATUS. IT'S THE TAX RESIDENCY OF THE OWNER

If you are a EU tax resident, irrespective of flag, when you bring the boat to Europe you pay VAT immediately. If you are not a EU tax resident, again irrespective of flag you are entities to TIR , which gives you 18 months, resettable. ( in effect for ever )

sheesh

Dave

Hm ... I think it's not correct. As far as I understand it's the flag which is relevant because it defines the "ownership/taxation" of the boat.

So if I (EU resident) have my boat registered in one of these "offshore" states and even if it "belongs" to me and if I enter EU, I don't have to pay VAT unless I keep the boat longer then 18 month in EU territories.

If I bring a EU flagged boat (non VAT paid) into EU territories then VAT is due at the first harbor I enter even if the boat doesn't belong to me !

Further if the previous owner paid VAT then the next owner does not have to as long as the ship stays no longer then 3 years outside the EU. That is why it is so important if you buy a 2nd hand boat to check if VAT was paid.

[goboatingnow]

Zonker

No, read the reveleant VAT law around the TIR procedures. The only determining thing is the status of the "beneficial " owner.

The ownership of the boat is demonstrated by whatever proof the owner produces, often its a registration document. All that does is "tie" the boat too you

so

(1)

For example if I charter a US boat (no VAT paid) and enter the EU as a EU resident - why should I be due for VAT ?!

You are not the owner, but in fact the TIR procedures say a EU person can not claim TIR for another countries yacht. Hence yes you could be liable for VAT. There is a whole series of specific "not allowed" rules in the TIR dealing with an EU skipper. You would have to be employed and the yacht in a company to justify not paying VAT. If customs determined you were the beneficial owner, i.e. it was obvious you were usually the yacht for yourself/family, VAT is due immediately. remember in Excise and VAT law you are guilty and must prove yourself innocent.

heres the relevant bit of legislation

"Restricted use – In the normal course, the boat or aircraft may be used only by a person normally resident outside the EU and may not be lent, hired, pledged, transferred or put at the disposal of any person established in the EU. The spouse and immediate relatives of the importer/owner may also use the boat/aircraft provided they are normally resident outside the EU."

Otherwise every EU citizen would construct "charters" abroad to buy yachts and dodge VAT, the place would be full of US sailboats.

SO --- Fail...

(2)

So if I (still EU resident) have my boat registered in one of these "offshore" states and even if it "belongs" to me, I don't have to pay VAT unless I keep the boat longer then 18 month in EU territories.

Nope, the TIR rules explicitly state "beneficial" owner, it matter not the flag state of the yacht, if you are the beneficial owner and a EU resident you pay VAT immediately on arrival in the country of destination in the EU.( often mistakingly the first country)

S0-- Fail...

(3)

Last but not least - if I (EU resident) bring a EU flagged boat into EU territories then VAT is due at the first harbor I enter !

Nope not according to the letter of the VAT acts. VAT is due ( on new means of transport) in the country of destination. For example if you live in the Uk and you will keep the yacht there, you are supposed to pay VAT in the UK, not the azores. The application of VAT is standardized ( single the Single European Act) across the EU, the collection of such taxes is not and is a matter for each country.


SO -- Fail


(4)

Further if the previous owner paid VAT then the next owner does not have to as long as the ship stays no longer then 3 years outside the EU. That is why it is so important if you buy a 2nd hand boat to check if VAT was paid.

Nope, what you are referring to is Returned Goods Relief. As long as you are an EU tax resident , you can apply for RTR, take the boat out for as long as you like ( implementation rules apply differently from country to country the 3 years is the standard UK rule , but is easily extendible, especially using a ATA carnet document)

If the vessel is sold outside the EU , or substantially improved in value outside the EU the RTR is lost and VAT is due on the whole vessel on re-importation into the EU. VAT is a transaction tax not an asset tax, it can legally be pid on the asset several times in its life

The reason a EU resident needs proof of VAT ( whatever that is , as theirs no legal thing as proof of VAT) is to show that they are not sailing a vessel that has not being improperly "placed on the internal market". But VAT issues are always the function of the original country, you cannot be done in france for not paying UK VAT, nor can france legally collect UK VAT. ( there are moves afoot to change this in the next VAT treaty).

SO -- Fail.


This is why I rabbit on about VAT, so much ill-informed information is passed around, anyone who has traded inter-community with a VAT registered business knows how this works ( or their accountants do).

dave

[Zonker]

Dave you are too fast ... had to edit my original post a few times ... nevertheless :

1st : just wanted to make clear that ownership and flag must not relate

2nd : EU resident can "hide" the ownership ... as all these mega-yachts with the "Caribbean" flags show

>> If the vessel is sold outside the EU
3rd : Why should you do that ? Let's keep it simple and keep it all in EU.

4th : VAT, MwST etc is basically sales tax. For ex. if I bought a chocolate in Italy and import it to Germany (for my own use and no matter what residency!) - hell no, you don't have to pay VAT again ! That is why some county (Cyprus) offer very low VAT and make the "import" of yachts cheaper then in other EU countries.

5th
Nope not according to the letter of the VAT acts. VAT is due ( on new means of transport) in the country of destination. For example if you live in the Uk and you will keep the yacht there, you are supposed to pay VAT in the UK, not the azores. The application of VAT is standardized ( single the Single European Act) across the EU, the collection of such taxes is not and is a matter for each country.

Ok - have fun if you ever do that ... :-) ... wonder what the customs there are believing. Why should they believe you that you would pay VAT in UK unless done ahead ?


PS : I am assuming this is about private use - commercial use/import/export is a completely different story !

[swisscraft]

Originally Posted by goboatingnow

The mega yacht stuff is way put of our league here and best ignored, there's a reason most mega yachts have a " charter " angle.



Interesting many many super yachts register in the caymans and other British derived registries, where They fall under MCA manning guidelines. Given the amounts involved, I don't think any super yacht owner registers to access cheap staff, most pay very handsomely to get good quality people. And they quite happily pay whatever legal additions are neccessary. ( I have a good friend who runs a super yacht crew agency )

It's worth pointing outing that most EU countries have quite flexible labour laws anyway, usually more flexible then people imagine. As to weekend working, well the EU working time directive applies ( unless your self employed or a doctor !) again given the nature and costs involved in superyachts I don't beleive any register to get cheap labour. ( commercial ships being the exact opposites)

Dave

Hi Dave,
have a close friend in that biz as well and he may would not agree entirely. True, some EU employment law is quit relaxed, but others like France, Germany and Italy (maybe others) are nightmares (at least from employers view). There are country's where you have to keep a job open for two years after a women gets pregnant, full salary for one year meanwhile. You have to pay a year or more salary if you fire someone without a valid reason. And this list is endless. From personal experience I can ensure you there is a hell of differences between EU countries, and I learned this can be part of a decision as well - particular since several tax heavens provide as well a relaxed employment law.

To quote my friend" Most rich owners are for good reasons not big friends with a socialistic system - why the hell should they implement it on board?"

[goboatingnow]

Originally Posted by swisscraft

Hi Dave,
have a close friend in that biz as well and he may would not agree entirely. True, some EU employment law is quit relaxed, but others like France, Germany and Italy (maybe others) are nightmares (at least from employers view). There are country's where you have to keep a job open for two years after a women gets pregnant, full salary for one year meanwhile. You have to pay a year or more salary if you fire someone without a valid reason. And this list is endless. From personal experience I can ensure you there is a hell of differences between EU countries, and I learned this can be part of a decision as well - particular since several tax heavens provide as well a relaxed employment law.

To quote my friend" Most rich owners are for good reasons not big friends with a socialistic system - why the hell should they implement it on board?"

I dont disagree, but it depends on your political persuasion. What I do know for a fact is that many super yachts are flagged under UK MCA rules and hence apply those quite strict manning rules. If you have squillions, paying the right crew is buttons.

Dave

[goboatingnow]

2nd : EU resident can "hide" the ownership ... as all these mega-yachts with the "Caribbean" flags show

As I said if you have squillions , you can set up a believable commercial company and avoid VAT, the restrictions are as long as your arm.

They simply dontt work and will not be believed for a simple 40 yacht owned by mum and dad,

>> If the vessel is sold outside the EU
3rd : Why should you do that ? Let's keep it simple and keep it all in EU.

WHat I said is the law, boats sold in the EU second hand, in fact do not need proof of VAT, this is somewhat of a red herring as there is no such thing as a proof of VAT document,

4th : VAT, MwST etc is basically sales tax. For ex. if I bought a chocolate in Italy and import it to Germany (for my own use and no matter what residency!) - hell no, you don't have to pay VAT again ! That is why some county (Cyprus) offer very low VAT and make the "import" of yachts cheaper then in other EU countries.

You are factually incorrect, VAT law that applies to food is different then that which applies to "new means of transport" ( boats , planes cars) . Under 7metres you pay VAT in the country of purchase ( or first import), over 7metres you pay VAT in the "country of destination". The " country of destination" is defined at that where the asset is habitually kept.

Cyprus offers VAT reductions via a lease back scheme, ( as does malta ) its very tricky to access for small boats,

The VAT acts for new means of transport are specifically designed to prevent "VAT shopping".

5th
Nope not according to the letter of the VAT acts. VAT is due ( on new means of transport) in the country of destination. For example if you live in the Uk and you will keep the yacht there, you are supposed to pay VAT in the UK, not the azores. The application of VAT is standardized ( single the Single European Act) across the EU, the collection of such taxes is not and is a matter for each country.

Ok - have fun if you ever do that ... :-) ... wonder what the customs there are believing. Why should they believe you that you would pay VAT in UK unless done ahead ?

A perusal of the UK revenue site as its in ENglish will tell you how to do it correctly . The basic approach is to agree in advance with you tax office the route you will take to your destination, they will give you a letter to that effect,

The reason why other customs will accept that , it that you will show that you are a tax resident of that country. VAT is NOT collected cross community, French authorities can not tax or fine a UK individual for a UK Vat offense. ( this may change soon).

SO if I buy a 6,5M RIB in the Uk and take it to france, I pay the Vat to the seller in the UK, If however I buy a 15m yacht I apply to the UK revenue ( under their sail away scheme) I then must remove the yacht within a specified time and pay VAT on arrival in France.

This doesn't apply to secondhand vessels, where VAT simply isn't an issue. ( or more correctly to sales between non-registered individuals).

( If I don't pay the VAT in france, I will be unable to register the boat on the french register as I must legally and the men in blue will eventually cop-on),

[SaucySailoress]

I'm glad this came up... HWMO has been asking me to find out what do long term cruisers do about registering their vessel. Our boat is Kuwait registered, but this has to be renewed annually, in person, along with third party insurance.

He wants to know what the hell do we do about boat registration when we leave Kuwait (on the boat) for good?

Background - I'm British, he's German. Neither of us have lived in Europe for 16 years. We had planned on circumnavigating, but given the current piracy situation, will probably just hang around Asia for a good while... meaning we won't even be sailing through Europe any time soon.

[goboatingnow]

4th : VAT, MwST etc is basically sales tax. For ex. if I bought a chocolate in Italy and import it to Germany (for my own use and no matter what residency!) - hell no, you don't have to pay VAT again !

As a separate aside, let me demonstrate how VAT works and how VAT can be paid multiple times on an asset.

Vat is a transaction tax, it must be accounted for on every purchase, every sale, every import and every export in the customs union of the EU.

Lets not take a food item, since most are zero rated for VAT. Lets take a TV.

The importer buys the TV from china, He pays VAT immediately on import ( unless he has a bond process, now rare). Lets say the importer sells that TV to a local TV shop

The Shop and importer is VAT registered.

The TV is sold by the importer, plus VAT to the local shop , who pay the Vat ( again). , Now both the importer and the shop fill in regular VAT returns, They offset the sales VAT and the Purchase VAT and they receive a net credit or debit on the VAT amounts, eventually the VAT cash balance is returned to the various entities.

Now you go in an buy the TV, since you are not a VAT registered entity, you Pay the Vat in full , and you have no recourse to claiming it back.

Bear in mind now that in effect three groups have paid VAT over at this stage and net VAT has been paid on the profit gain each group makes as it passes through the distribution chain,

Now lets say you take you TV to america and there you sell it to your friend, as he's coming back to europe next year. On his return he has to pay VAT on the TV again , when he imports it ( assuming outside TOR).

Now lets say the friend is fed up of the TV, and sells it to 2nd hand shop. he gets €100 for it. The shop is VAT registered, The shop then sells that TV to another person, that person also now pays the VAT on the new sale price.

By now about 5 VATs have been paid on the item!!.

Now you can see why (a) the whole EU is funded by VAT , the commission takes 5% of all Vat collected in Europe, its what provide the squillions for them to squander, and that 15% is the lowest VAT rate allowed by the commission in the EU.

VAT is a huge huge revenue collector.

Dave

[Zonker]

>> proof of VAT document,
That is the funny percentage number on each bill you get in the EU.

>> You are factually incorrect, VAT law that applies to food
I am talking of the general "VATness" required ... if you "buy" it you pay VAT for it.

>> Under 7metres you pay VAT in the country of purchase ( or first import), over 7metres you pay VAT in the "country of destination".
Please don't mix up things. The RIB purchase can also be handled by "import" and you pay tax where it has been imported/bought.

>> Cyprus offers VAT reductions via a lease back scheme, ( as does malta ) its very tricky to access for small boats,
It's all about money - to register my dinghy is possible. From an economically point of view - it just doesn't make sense,

>> By now about 5 VATs have been paid on the item!!.
Depending how the chain is, could be that the reseller might be left with some of the VAT. But it's the end consumer in the chain which pays majority of it. That is why even in EU ppl own boats via a company - to be in the chain and NOT at the end. For a yacht of several 100k it makes fully sense to pay company "running" costs.

Btw David ... I live in Europe and my company owns a Mwst account ... :-) ... so quite familiar w the stuff.

[goboatingnow]

>> Under 7metres you pay VAT in the country of purchase ( or first import), over 7metres you pay VAT in the "country of destination".
Please don't mix up things. The RIB purchase can also be handled by "import" and you pay tax where it has been imported/bought.

Zonker , this is my last attempt, please don't listen to me , read the VAT law as regards new means of transport,

A ordinary non Vat registered person buying a means of transport is NOT allowed to VAT shop. for boats under 7M you pay Vat in the country of purchase. THATS IT, you cannot "import" it yourself from another EU country ( no one can legally give you back the sale VAT)

Over 7M you are supposed to pay VAT in the country of "destination". This VAT law. Its often overlooked , but rarely so on new boats. I have bought new boats in france and I never paid the VAT there. ( Its usually a pay and reclaim, so you often have to fund 2xVAT cash-flow which is a pain in france, in the UK its easier)

>> Under 7metres you pay VAT in the country of purchase ( or first import), over 7metres you pay VAT in the "country of destination".
Please don't mix up things. The RIB purchase can also be handled by "import" and you pay tax where it has been imported/bought.

No , unless you are Vat registered, other wise No and no EU seller will refund the VAT to you as to do so would be braking the law and they would be responsible,


VAT is a "value added tax" net VAT is paid every time the value is increased. The consumer pays ( in general the most), but not necessarily so ( for examples items sold at a loss). At hence sale stage, Net VAT is paid to the exchequer.

That is why even in EU ppl own boats via a company - to be in the chain and NOT at the end. For a yacht of several 100k it makes fully sense to pay company "running" costs.

This claim is made, yet I have never seen it actually happen. You would be evading VAT.

You cannot in europe wrap a hobby into a company. Firslty the company must trade commercially, secondly you must deal with benefit in kind and other rules for directors using assets for their own use.

Then finally the Vat law is full of the term " beneficial owner", it doesn't matter if you wrap it up in a company you still are the beneficial owner.

look up the term "self supply" in the VAT laws ( that the english term) and you'll see what i mean.

My experience is short of megayachts it cannot be done legally but of course all over europe people are dodging VAT illegally , its called tax evasion

[Zonker]

Bottom line :

If you have a larger boat then a dinghy - then own the boat via a company. I think Ireland, Cyprus have very low tax rates - ok, only if you think EU will not crack down ... :-)

[David_Old_Jersey]

Originally Posted by goboatingnow

Your right DOJ. Im on the floor laughing.

I can see the French ( no more likely a Portuguese official) understand how you have a jersey flagged no Vat uk address no resident set of papers. , talk about a stick to beat yourself with. LOL

Dave

Am not entirely sure if that is (all?) aimed at me - but fair play if it is . I can see with the above that a UK address would be the fly in the ointment (AKA a VAT Bill arriving) - I wasn't intending to suggest otherwise (albeit I may have ).


Scenario 1

French (or Portuguese) official encounters boat:-

1) Jersey Flagged
2) UK (or other EU) Passport (instead of or in addition to a passport for "home" country - say Australia or USA)
3) No VAT paid
4) Owner Non-EU Resident (and can evidence that - whether that be Australia, or Timbuktoo)

My understanding with all that is no VAT bill.

For VAT Purposes (i.e. for getting stuck with a bill!):-

1) Not relevant (Could be registered in Germany or on Mars) - but somewhere "offshore" (or elsewhere not your home country) could act as a flag (lol!) to have further questions asked.
2) Not relevant - but could act as a flag to have further questions asked.
3) Relevant insofar as begs the question "why not?".
4) Relevant - the more evidence the better to show that you actually live elsewhere. How that is done will likely be cumulative effect of various documents and having a rational reason for you and the boat being where they are (and likely more important if the boat is not Flagged in your home country and / or you don't have a passport for your home Country (especially if only have an EU one).


Scenario 2:-

Easiest (Ideal?) scenario?:-

1) Australian Flagged (not conclusive proof of VAT not due, but helps the contention)
2) Australian Passport (not conclusive proof of VAT not due, but helps the contention)
3) No VAT paid
4) Owner Non-EU Resident in Australia and can evidence that (to support the contention that you have not immigrated to the EU and therefore you / the boat will be returning "Home").
5) a rational story for being in the EU (when you arrived and when you / the boat will be leaving - not a biggie if you do actually intend for you / the boat to leave within the 18 month timescale).

My understanding with all that is no VAT bill. (appreciate item 5 may be arguable, but I have always valued a good story being to hand in advance of an encounter with officialdom. all the better if true .....but just because something is true doesn't mean does not also have to be evidenced - some people do lie!, especially when money is involved - go figure ).

FWIW, I have used the word "evidenced" as on many things there is no 100% conclusive "proof" - especially on intentions for the future (mostly because they have not yet happened ).


With hindsight I should have simply said in this post: "GBN knows of what he talks"


Of course if the Owner / Boat is American then the easy answer is to start shootin' Just sayin'

[goboatingnow]

Originally Posted by Zonker

Bottom line :

If you have a larger boat then a dinghy - then own the boat via a company. I think Ireland, Cyprus have very low tax rates - ok, only if you think EU will not crack down ... :-)

No its impossible to pass corporate law and VAT law wrapping a private pleasure boat up in a company, You may think you right, but all you are doing is engaging in fraud. If anyone investigates you will not survive.

The only reason it goes on is that VAT inspections of private craft are actually rare.

But thats not the point. fundamentally you will be breaking laws all over the place.