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Old 19-10-2021, 05:41   #1
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Where to flag without having to pay VAT/tax?

Hi folks,


I've read through a lot of threads here but couldn't find a definitive answer for the questions below, so I thought it'd be worth starting a new one...


I'm about to purchase a sailboat registered in Canada and located outside of the EU (so no tax paid within EU). I don't intend to use it to sail within the EU. I'm an Italian/Brazilian citizen and tax resident in Portugal.



I thought I'd be able to register in Poland without paying VAT as the boat wouldn't be brought into the EU, but apparently VAT must be paid for a vessel to be registered in any EU country. Is that correct?


If that's case, is there anywhere I'd be able to flag it without having to pay VAT/tax?


Best regards,
Guilherme
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Old 19-10-2021, 06:23   #2
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Re: Where to flag without having to pay VAT/tax?

Taxes shouldn't be your only consideration when choosing a flag [registration].
However:
Vessels registered in the Cayman Islands benefit from all the privileges of the British flag, while simultaneously having the tax-free,and confidentiality perks,of the Cayman Islands.
Cayman Islands Shipping Registry ➥ https://www.cishipping.com/
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Old 19-10-2021, 08:21   #3
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Re: Where to flag without having to pay VAT/tax?

The VAT isn't due when you purchase a vessel flagged in the EU, but will be due when that vessel enters EU waters. I don't know if the Polish have special rules, but those countries I know (UK when it was still part of the EU, Germany, France) don't care what the VAT status is when you register the boat.

The question for you with regards to taxes is different, it is dependent upon where the boat will be physically located after you buy it. Usually you either have to pay taxes there, or you have only limited period of time that you can stay before you either have to leave or get your boat taxed.

Where will the boat be kept?
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Old 19-10-2021, 13:49   #4
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Re: Where to flag without having to pay VAT/tax?

Also will be in slightly similar situation very soon. so following this post

Ill throw in my 2cents but only take it with a pinch of salt.

If you are part of the EU (ie you hold an EU passport) then VAT must be paid in the EU, there are cheaper country's than others.
https://nomadcapitalist.com/finance/...living-europe/

5. GIBRALTAR
Gibraltar has long been a popular tax residence for British citizens, but Gibraltar’s benefits as a low-tax residence are available to anyone. Nestled at the southern tip of Spain, Gibraltar is a British Overseas Territory and not a sovereign country, but is able to set its own tax policies.

There are two ways to become resident in Gibraltar: start a company or demonstrate a high net worth. As is usually the case wih these programs, it is easier for entrepreneurs to qualify by forming a company.
VAT starts at 10%

6. Malta is one of only four countries on this list that are part of the Schengen Area, and one of only three that are also part of the European Union. Malta has developed some of the EU’s most tax-friendly programs for both individual residents and corporations, with corporate tax rates as low as 5% possible for non-resident companies.

This is also subject to something called Fiscal Residency https://www.internations.org/guide/g...esidency-16198

Basically if you can find a way to make your main tax country say Cayman Islands register a company there and make that company own your boat. then you might be able to bypass the EU VAT.

Flag and VAT not related at all, so polish flag is cheapest and best so I understand.

I thought I'd be able to register in Poland without paying VAT as the boat wouldn't be brought into the EU, but apparently VAT must be paid for a vessel to be registered in any EU country. Is that correct? No I understand Polish Registration is open to anyone, each country to port into might and probably will ask for your boats papers, checking its vat status someone, but really if you take boat into USA for example, they see vat issue nothing to do with them.


this guy might have some advice.


If you find anymore information keep this updated, or if anything ive been reading is wrong lol
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Old 19-10-2021, 17:24   #5
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Re: Where to flag without having to pay VAT/tax?

Quote:
Originally Posted by Zanshin View Post

The question for you with regards to taxes is different, it is dependent upon where the boat will be physically located after you buy it. Usually you either have to pay taxes there, or you have only limited period of time that you can stay before you either have to leave or get your boat taxed.

Where will the boat be kept?

I'm not going to keep the boat in the same country for extended periods of time
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Old 19-10-2021, 17:29   #6
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Re: Where to flag without having to pay VAT/tax?

If none of those countries are in the EU then your tax-paid status and country of registry (as long as it isn't any of those countries) makes no difference. Each country makes its own rules about how long foreign-flagged vessels may stay and that vessel's tax status is of no interest to them.
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Old 19-10-2021, 17:32   #7
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Re: Where to flag without having to pay VAT/tax?

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Originally Posted by gsalgado View Post
I'm not going to keep the boat in the same country for extended periods of time
As i understand it, vat free rule for upto 18 months, leave EU zone for at least a week and then stamp passport back in for another 18 months and repeat. My goal will be to travel world eventually. Aka no home country really. Digital nomad.

Broker told me this:
You have to pay taxes where you are tax resident. VAT tax is obligatory for fiscal residents of EU. If your boat is VAT non-paid and you sail in EU waters (without being fiscal resident in EU) then you can sail 18 months in EU. After that you will have to leave EU waters or pay VAT. You can leave EU waters for 1 week and come back to EU again. If the boat is VAT paid then you can sail in EU as long as you wish. Thank you

Only 90/180 rule will also need to be managed in my case.
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Old 19-10-2021, 17:39   #8
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Re: Where to flag without having to pay VAT/tax?

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Originally Posted by Zanshin View Post
If none of those countries are in the EU then your tax-paid status and country of registry (as long as it isn't any of those countries) makes no difference. Each country makes its own rules about how long foreign-flagged vessels may stay and that vessel's tax status is of no interest to them.

That was my understanding, but people from https://www.bandeirapolaca.pt/ said they'd only be able to register my boat in Poland after paying VAT. on the other hand, https://www.polishyachtflag.com/ says they would be able to register without me having paid VAT
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Old 20-10-2021, 01:55   #9
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Re: Where to flag without having to pay VAT/tax?

Quote:
Originally Posted by Zanshin View Post
The VAT isn't due when you purchase a vessel flagged in the EU, but will be due when that vessel enters EU waters. I don't know if the Polish have special rules, but those countries I know (UK when it was still part of the EU, Germany, France) don't care what the VAT status is when you register the boat.

The question for you with regards to taxes is different, it is dependent upon where the boat will be physically located after you buy it. Usually you either have to pay taxes there, or you have only limited period of time that you can stay before you either have to leave or get your boat taxed.

Where will the boat be kept?
I can second that. This is the same information what I got from the German registry.
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Old 20-10-2021, 02:15   #10
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Where to flag without having to pay VAT/tax?

Quote:
Originally Posted by Zanshin View Post
If none of those countries are in the EU then your tax-paid status and country of registry (as long as it isn't any of those countries) makes no difference. Each country makes its own rules about how long foreign-flagged vessels may stay and that vessel's tax status is of no interest to them.


In the EU the length of time for non eu pleasure boats is harmonised under the temporary admissions procedure

In the EU the tax status of vessels is most definitely of interest to the authorities.
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Old 20-10-2021, 02:23   #11
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Where to flag without having to pay VAT/tax?

Quote:
Originally Posted by gsalgado View Post
Hi folks,


I've read through a lot of threads here but couldn't find a definitive answer for the questions below, so I thought it'd be worth starting a new one...


I'm about to purchase a sailboat registered in Canada and located outside of the EU (so no tax paid within EU). I don't intend to use it to sail within the EU. I'm an Italian/Brazilian citizen and tax resident in Portugal.



I thought I'd be able to register in Poland without paying VAT as the boat wouldn't be brought into the EU, but apparently VAT must be paid for a vessel to be registered in any EU country. Is that correct?


If that's case, is there anywhere I'd be able to flag it without having to pay VAT/tax?


Best regards,
Guilherme


(a) the situation you outline means you do NOT pay vat as long as the vessel never enters EU waters.

(B) when registering a boat most eu registries will accept non vat boats as long as the registrant CAN PROVE VAT need not be paid on the boat. This is important especially when you are a EU tax resident.

This is the key point. You will have to show as a EU tax resident sufficient proof to convince the registrar

For example if you are a EU resident the polish registration will expect to see a VAT paid document for your boat. You will need to talk to the registration agent to see what you need to satisfy the polish registrar . Polish registration via an agent is about €400-600

Some EU registrations require considerable proof , long term marina contracts , evidence of term term cruising costs outside the EU and so forth.
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Old 20-10-2021, 02:24   #12
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Re: Where to flag without having to pay VAT/tax?

As an EU citizen and owner of the boat you can't enter any EU port without paying the VAT. You need have a company owning the boat outside EU to avoid it..
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Old 20-10-2021, 02:26   #13
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Re: Where to flag without having to pay VAT/tax?

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As an EU citizen and owner of the boat you can't enter any EU port without paying the VAT. You need have a company owning the boat outside EU to avoid it..


Company doesn’t protect you. The term “ beneficial owner “ is used in the directive.
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Old 20-10-2021, 02:46   #14
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Re: Where to flag without having to pay VAT/tax?

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Originally Posted by goboatingnow View Post
Company doesn’t protect you. The term “ beneficial owner “ is used in the directive.

Would you have a link to the directive text? As a dual EU (Irish) and non-EU (British) citizen, who is not resident in the EU, I'm interested in the exact details of the directive - in particular whether the requirement applies to EU *citizens* or to EU *residents*.


I'm also interested in whether customs officials in EU countries understand the distinction, but that's a different kettle of fish.
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Old 20-10-2021, 03:15   #15
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Where to flag without having to pay VAT/tax?

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Would you have a link to the directive text? As a dual EU (Irish) and non-EU (British) citizen, who is not resident in the EU, I'm interested in the exact details of the directive - in particular whether the requirement applies to EU *citizens* or to EU *residents*.


I'm also interested in whether customs officials in EU countries understand the distinction, but that's a different kettle of fish.

I can’t remember where it is exactly but the rules reflect the famous 2006 European Court of
Justice (ECJ) ‘Halifax Case’

It became legendary in tax circles. It was the law that reinforced the concept of abusive practices in the context of VAT. It means that no person has the right to avoid VAT by setting up a commercial structure where the essential aim is to obtain a tax advantage, contrary to the intention of the law. The ECJ declared that:
...In that case, where an abusive practice has been found to exist, the transactions involved must be redefined so as to re- establish the situation that would have prevailed in the absence of the transactions constituting that abusive practice.


In essence , if the authorities believe the company structure was setup to avoid vat they can void that structure

Hence sailing around the med with all your kids , wife etc and claiming it’s company boat won’t wash ( not to mention the self supply vat issue and or benefit in kind)

EU tax law applies to EU residents irrespective of nationality or passports. If you do not reside in the EU your boat may avail of the temporary admissions procedures as regards EU VAT ( it would also allow you to buy a EU boat VAT free and keep it in the EU subject to the TPA process.

you may bizarrely avail of the EU freedom of movement which applies to EU citizenship not residency.

Just be careful to hand the U.K. passport to the tax people and the Irish one to the immigration !!
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