Another VAT question (please bear with me)

[Geko21]

Hi,

I searched, and read.. a lot. I still need clarification, hope someone will help.

I am an EU "citizen", I am buying a boat from France, which is VAT paid. So far, so good. However I want to change the registration to Cook Islands instead, and keep sailing in Europe, then maybe go to the Carribean, then return, etc.

I remain an EU citizen, the boat is still mine, there will be the previous VAT paid document with the boat... will someone make any problems from then on in the EU because of the foreign flag?

If someone knows the answer, please give accurate (and possibly verified) information.

Thanks

[goboatingnow]

The VAT status has nothing to do with the flag. So the answer is no., vat is not changed. But in practice a EU citizen sailing a foreign registered vessel tends to generate scrutiny. So ensure you have the required proof that vat was paid. So the answer is no its doesn't cause any technical vat issues, but yes it will cause some extra hassle.

Dave

[Geko21]

Originally Posted by goboatingnow

The VAT status has nothing to do with the flag. So the answer is no., vat is not changed. But in practice a EU citizen sailing a foreign registered vessel tends to generate scrutiny. So ensure you have the required proof that vat was paid. So the answer is no its doesn't cause any technical vat issues, but yes it will cause some extra hassle.

Dave

Dave, thanks a lot!

The informerion I am getting is very diverse, it seems that very few people know what the situation is. The problem is wether the changing of the flag will be seen as an "export" of the vessel. I really hope you are right, since we will probably change the flag.

[goboatingnow]

changing the flag has nothing to do with exporting the boat. To export the boat it must be physically removed from the EU customs territory.

what cam happen with a foreign flagged boat , is that over zealous officials can claim that since you sailed it out of the Union ( say on a journey) you have exported it.

BUT in this case you are entitled to claim Returned Goods Relief( RGR) RGR allows a EU owner to temporarily export VAT paid items and reimport them without repaying VAT. As long as the item doesn't change hands aboard.

No you are quite safe in what you are doing , just keep the paperwork trail. The chances anyway of any official actually giving a damm are miniscule.

Dave

[David_Old_Jersey]

Just to clarify - I see you state you are an EU "Citizen" (your quotes) does that mean you are only a passport holder or also live in the EU? .....just being nosey as to why you want the Cook Islands registration rather than that of your own EU country.

[Geko21]

Originally Posted by David_Old_Jersey

Just to clarify - I see you state you are an EU "Citizen" (your quotes) does that mean you are only a passport holder or also live in the EU? .....just being nosey as to why you want the Cook Islands registration rather than that of your own EU country.

I do live in the EU, but I plan to live on the boat from now on. Cook Islands is just simpler with bureaucracy than the french registration and I plan to sail to the Pacific anyway. And I like the flag better


Dave, thanks for the explanation. That's really good news!!

[David_Old_Jersey]

Fair enuf, as I said - was just being nosey!

[dominiccc]

Originally Posted by goboatingnow

BUT in this case you are entitled to claim Returned Goods Relief( RGR) RGR allows a EU owner to temporarily export VAT paid items and reimport them without repaying VAT. As long as the item doesn't change hands aboard.


Dave

Interesting - I was just having a similar conversation with a broker in BVI. He was very helpful, here's what he said about Lagoons for sale in certain parts of the Carribbean:

"To answer your question, the majority of boats in this area are not VAT paid, if they are they usually state it and tend to be in the French Islands where VAT is payable, if you wish to keep a boat there, unlike the rest of the world outside Europe.
>
> However be careful with boats that have sold outside of the EU since they first paid VAT or have been out of the EU for 3 years ( I believe is the time period) as British customs we understand may wish to charge you VAT again when you re-enter the EU, even though it has already been paid once! You have got to love the mentality of the tax collectors in the first world, "unfair" I feel would be an understatement when it comes to charging VAT for a second time."

I'm wondering if this comes down to defintion of the term "temporary" - perhaps 3+ years' cruising worldwide with the intention of eventually returning to the EU is no longer "temporary"......?

Anyone understand this?!

[David_Old_Jersey]

Originally Posted by dominiccc

Anyone understand this?!

Short answer = no

My reading of the VAT thing is that it's a bit like Colregs , a little knowledge can be a dangerous thing - especially if you pick the bit of knowledge that works well for you, and ignore the rest .

My understanding (which means I don't really know) is that if a VAT paid boat is bought and sold outside the EU it immediately loses the VAT paid status and if the new buyer returns with it to the EU (except as a genuine non EU resident visitor) then VAT is due again, as if none had ever been paid. That applies whether 1 day or 100 years between the original VAT being paid and the boat being sold. and could, in theory, apply 1000 times (or more!).

My guess is that the 3 year thing is simply an interpretation of the rules that already apply - if something is exported from the EU then it is no longer an EU item so when it appears in the EU it is an import (no matter where originally made - which is why new stuff can be exported VAT Free).

To my mind it is quite fair to say that at some point an item (boat or whatever) that has left the EU has been exported (and hence if it reappears in the EU becomes an Import - with the tax consequences involved).....the only argument being how long that is - seems the UK customs have decided for boats that is 3 years, I am sure that is arguable in court (although probably cheaper to pay the VAT!). (I am leaving aside all the stuff about genuine non EU resident visitors arriving with boats etc not paying VAT from day 1).

[dominiccc]

Ah! That does make sense, is so much as tax ever makes sense.

[goboatingnow]

Returned Goods Relief, is what we are talking about here. The 3 years is a UK interpretation ( as is much of local implementation ). However if you intend that a VAT paid assets is to remain outside the EU for a long time , but not change hands , then you can export in under a Carnet and the RGR timeframes can be extended by agreement almost indefinitely.

Of cource if the item changes hands while outside the EU , RGR is not applicable.

On a broader scale. Despite much confusion VAT is not a asset tax,, its a "transaction" tax, hence it can in theory be paid multiple times.

( an example would be repeatedly selling the same boat back to a Vat registered seller. each time that boat was resold by that seller, Vat would have to be charged).

VAT accounting is due on , (a) all sales transactions (b) all purchase transaction (c) all exports and (d) all imports.

To allow a working system the following "overrides" apply. Where both parties are not registered for VAT, no accounting applies. ( i.e. private 2nd hand sales) where goods are exported and reimported by the same person , RGR applies. All else i.e. sales between Vat registered entities or between a private and a Vat registered entity, require VAT accounting.

A business does not pay Vat on a specific item by item basis. Rather only the difference between purchase VAT and sales VAT is paid on a typically 2 months basis.

Assets do not gain or loose "VAT status", this is a layman's term. Its merely that Vat must be paid at the appropriate transaction point (s) during a history of transactions.

As to this piece of advice

However be careful with boats that have sold outside of the EU since they first paid VAT or have been out of the EU for 3 years ( I believe is the time period) as British customs we understand may wish to charge you VAT again when you re-enter the EU, even though it has already been paid once!

The broker is wrong. A boat sold outside the EU is in all cases Vat able on reentry to the EU, irrespective of whether VAT was paid on its initial purchase transaction. RGR relief does not apply in this case

Dave

[dominiccc]

Originally Posted by goboatingnow

Returned Goods Relief, is what we are talking about here. The 3 years is a UK interpretation ( as is much of local implementation ). However if you intend that a VAT paid assets is to remain outside the EU for a long time , but not change hands , then you can export in under a Carnet and the RGR timeframes can be extended by agreement almost indefinitely.

This is immensly helpful, thank you Dave. So, to be clear, these are the three choices I (as a UK/EU citizen) am contemplating:

1. Buy a boat within the EU which is VAT paid.

2. Buy a boat within the EU which was VAT exempt but, upon my 'private' purchase, VAT becomes immediately payable (presumably charged at the UK rate if I'm registering the vessel in the UK) .

3. Buy a boat outside the EU (in reality the US, or the Caribbean but possibly Croatia) which almost certainly will not be VAT paid but register it in the UK.

In the case of 1) where I buy a boat from a private seller, (but, likely as not, via a broker) I could sail in the Med and then export under a Carnet and extend the RGR timeframes as necessary. No VAT would be due if I then returned to EU waters and sold the boat privately.

In the case of 2) I would have to pay VAT immediately but could then, again, export under a Carnet and extend the RGR timeframes as necessary.

In the case of 3), no VAT would be payable (the broker said they do not collect VAT) UNTIL I returned to EU waters (possibly some years later)whereupon it would become immediately due.

Have I got the right end of the stick? I understand that I must seek the advice of HMRC, but would it be helpful to have some understanding of my potential liability before doing so.

Thanks

[plato-gb]

salut - came across this and want to mention something I believe hasn't been covered. Whatever your 'citizenship' your residence is what counts as far as what you can and can't do.
If you are an EU resident, you can't sail a boat in the EU unless it is vat paid or deemed vat paid.
If you are a non-EU resident and own a non-EU registered boat you are entitled to something called Temporary Import/Temporary Admission,

For up to 18 months in any one period, you can sail your boat in the EU (as long as you are the registered owner) without being liable for VAT.

After 18 months the boat has to leave the EU to start the clock ticking again. Last time I looked, there was no minimum time the vessel had to stay outside of the EU before coming back in and starting the 18 months clock again.

If you were going to do this, be sure to get an inward stamp from customs at the EU port of entry (as well as the one for your outward journey). This way you can prove how long you have been in or out of the EU with your vessel.
Hope this helps.

and by the way, a very important thing to remember if you have a non-VAT paid boat in the EU under Temporary Import. The system is only valid if the vessel is owned and sailed by a non-EU resident. If you sell the vessel (or rent it) to an EU resident while the boat is in the EU that is what's known as a chargeable event and the VAT immediately become due.