Buying an EU boat - registration/tax/other issues

[Mariefred]

As I say, once the tax people have their VAT, you don't need to charge VAT. If you're a VAT registered company, you'll have got the VAT back from the tax people on anything you buy, so you need to charge VAT so they get their VAT.

If that company sells that thing to someone who's not VAT registered, so they can't get the VAT back from the tax people, that person can sell it on for whatever they want with no VAT - they might get hit with capital gains tax on the profit if they sell it for more than they paid for it, but no VAT because the tax man still has his VAT.

[BigDogAtSea]

Originally Posted by Dogscout

I am a US citizen and I live aboard my US flagged boat in the Med for most of the year. I have done a full year but chose to come back on occasion to put more gold in the box.
I bought a Malta flagged VAT paid boat in Malta. You can register your boat in the EU but you will likely have to have an EU tax number. I believe that this can be done by setting up a corporation. I chose to Document my boat with the USCG so I had to have the Maltese registration canceled then have the boat US documented. All done very easily. I have not registered my boat in any US state. I dont have a US residence.
Do not worry about the Schengen game, go to Albania or Tunisia or Croatia or Montenegro, or Cyprus, or Turkey. You will see many many boats all over the Med with US flags and home port of Delaware. This is a BS tax dodge but hey its funny to watch. You will also see many US flagged boats in the Med with US citizens and lots of different home ports. Be careful of Greece with the Tepai they want to know where your boat is at all times. I had to argue and show proof that my boat was VAT paid in the EU and they still wanted to charge me Greek VAT.

Insurance maybe you biggest hassle. American companies do not want to insure in the EU and EU companies that will insure an American can be hard to find.

Sorry I dont have an answer on arriving in the Caribbean or a US port. I have not done that yet. I expect that at some point if I ever return to the US, then I will have to import the boat and pay 5% duty.

Interesting, lots of good info. I am in a similar situation. US passport, looking to buy in Panama, EU boat VAT paid. Considering US flag remote registration. Question about 'home port of Delaware' comment. Registering a boat in US with USCG home port has US state tax ramifications ??

[Anders]

Originally Posted by BigDogAtSea

Interesting, lots of good info. I am in a similar situation. US passport, looking to buy in Panama, EU boat VAT paid. Considering US flag remote registration. Question about 'home port of Delaware' comment. Registering a boat in US with USCG home port has US state tax ramifications ??

It will not be EU VAT paid after it changes owner outside the EU.

[goboatingnow]

Originally Posted by Mariefred

"Vat is a transaction tax. It must be accounted for every time goods are purchased , sold , imported or exported and can be paid multiple times on the same item."


That's not correct. There's no more VAT on a good once the tax people have the VAT and keep it. It may be a one time transaction tax, but it's not charged every time something changes hands.

Basically, if they don't have the cash in their account for something sold in their jurisdiction, they'll want it (so imported goods, stuff where the VAT's not been paid, or the seller has claimed the VAT back). If they have the cash, you can sell it without charging VAT.

Sorry this is rubbish. Vat can and is charged several times on assets depending what has happened.

For example a vat paid boat sold abroad and reimported much pay the vat again.

[goboatingnow]

Originally Posted by Mariefred

As I say, once the tax people have their VAT, you don't need to charge VAT. If you're a VAT registered company, you'll have got the VAT back from the tax people on anything you buy, so you need to charge VAT so they get their VAT.

If that company sells that thing to someone who's not VAT registered, so they can't get the VAT back from the tax people, that person can sell it on for whatever they want with no VAT - they might get hit with capital gains tax on the profit if they sell it for more than they paid for it, but no VAT because the tax man still has his VAT.

Clearly you have never been in business and dealt with vat. Vat is not paid or tracked on an item by item basis by vat authorities. Vat authorities cannot determine vat status other then by you producing a sales invoice.

You also need to understand the specific rules for “ new means of transport. “

[goboatingnow]

Originally Posted by Endless time

Hi DS. Thanks.

I am strictly learning here so I may be wrong on many items.

However I have read that the yacht import duty to the US is not 5% but rather 1.5%. Here is a link to that:

https://cbpcomplaints.cbp.gov/s/arti...rm%203520%2D21.

Re: entering the US temporarily. I have read that a foreign registered yacht is issued a US cruising permit that is good for 1 year. I cannot find any info that this is affected by the citizenship of the owner. This is my question for my scenario.

Regarding the need for a EU tax number to register a boat in the EU I just came across the below link regarding a Polish registration which states that they will register and flag a boat for a non-EU passport holder directly in the owners name (for 575 euros). It does not mention the need for a tax number.

https://yachtregistration.navy/?gcli...YaAi1iEALw_wcB

Comments, corrections, omissions, misunderstandings?

If you are entitled to have a vat free boat , ie non resident and the 18 month rule “ some “ registries especially Poland will happily register the boat. Some will not. ( France for example )

Merely having a EU flagged boat is no indication of vat status.

You do not need any sort of tax number.

Wrapping up the boat in a company needs very carefull advice. If you use in personally you could expose yourself to benefit in taxes ,and or vat “Self supply “ issues. Eu vat law has the term “ beneficial owner “

[Diogo Cyrineu]

Originally Posted by Montanan

VAT when buying a used boat

If the buyer is not resident in an EU country, they can temporarily import the vessel without paying VAT, for instance to cruise in the EU, for a period of usually up to 18 months. In this instance, the VAT that would be due is deferred pending the discharge of the temporary importation / admission by being exported within the 18 month VAT collection waiver period.

So, Im a Brazilian looking to buy an EU boat that has no VAT paid (dont know why).
In this case, that "temporarily import the vessel without paying VAT" means that I have 18 months to leave EU to Brazil (or any other country) without having to pay VAT?

In the 18 months period the boat will have the EU flag?

[Montanan]

Originally Posted by Diogo Cyrineu

So, Im a Brazilian looking to buy an EU boat that has no VAT paid (dont know why).
In this case, that "temporarily import the vessel without paying VAT" means that I have 18 months to leave EU to Brazil (or any other country) without having to pay VAT?

In the 18 months period the boat will have the EU flag?

Note that the EU does not flag a vessel, rather individual countries within the EU register vessels and thus provide it their nationality.

What flag does the vessel wear that you are interested in purchasing?

One has to review the laws of specific countries as to what is required to have them issue nationality to the vessel.

You state that you are Brazilian and thus not a citizen of the EU which makes challenges for pursuing flagging your vessel with an EU nation.

An flagged vessel of an EU country only needs to have VAT paid status if it enters the EU. If the vessel is located outside the EU, e.g., located in Brazil then it does not need to have EU VAT paid status.

Can an EU VAT paid yacht lose its VAT paid status?
Yes - an EU VAT paid yacht can lose its VAT paid status. Examples of how a yacht might lose its VAT paid status include:

- The VAT paid is reclaimed (i.e. where the owner was VAT registered and able to reclaim the VAT they paid on vessel purchase); or

- The vessel is sold whilst physically located outside the VAT territory of the EU; or

- The vessel is physically located outside the EU for more than three consecutive years.

In addition, if a vessel is substantially improved or modified without EU VAT having been paid on the improvements or modifications it may no longer be considered as fully VAT paid

[Diogo Cyrineu]

Originally Posted by Montanan

Note that the EU does not flag a vessel, rather individual countries within the EU register vessels and thus provide it their nationality.

What flag does the vessel wear that you are interested in purchasing?

One has to review the laws of specific countries as to what is required to have them issue nationality to the vessel.

You state that you are Brazilian and thus not a citizen of the EU which makes challenges for pursuing flagging your vessel with an EU nation.

An flagged vessel of an EU country only needs to have VAT paid status if it enters the EU. If the vessel is located outside the EU, e.g., located in Brazil then it does not need to have EU VAT paid status.

Can an EU VAT paid yacht lose its VAT paid status?
Yes - an EU VAT paid yacht can lose its VAT paid status. Examples of how a yacht might lose its VAT paid status include:

- The VAT paid is reclaimed (i.e. where the owner was VAT registered and able to reclaim the VAT they paid on vessel purchase); or

- The vessel is sold whilst physically located outside the VAT territory of the EU; or

- The vessel is physically located outside the EU for more than three consecutive years.

In addition, if a vessel is substantially improved or modified without EU VAT having been paid on the improvements or modifications it may no longer be considered as fully VAT paid

The flag of the boat is Croatia. The boat is in Croatia. I want to bring it to Brazil.
Do I have to pay VAT? Can I stay a few months there before coming to Brazil without paying VAT?

[Montanan]

Originally Posted by Diogo Cyrineu

The flag of the boat is Croatia. The boat is in Croatia. I want to bring it to Brazil.
Do I have to pay VAT? Can I stay a few months there before coming to Brazil without paying VAT?

Croatia became the 28th EU member country on 1 July 2013.

Yachts can qualify for relief from VAT under a temporary importation regime (generally 18 months), after which the yacht needs to prove she’s left the EU and then returned.

There are 4 main conditions you must be aware of, for your yacht to qualify to unnecessary VAT payment in the EU:

The Owner must be a non-EU resident
The End-User [master skipper / crew] must also be a non-EU resident
The boat needs to be delivered outside of the EU Customs Territories The Sale transaction occurs outside of the EU Customs Territories and the boat thence returns to the EU Customs Territories under temporary admission status for up to 18 months. EU VAT is a transaction privilege tax, thus the transaction must occur outside the EU.
In case of ownership through a corporation, the corporation must be established outside the EU



Will you pursue flagging of the vessel with Brazil or an open registry country?

[Montanan]

Brazil import duties and the numerous social taxes are onerous. All in it could cost you upwards of 50% of the value of the vessel upon entry to Brazil.



Reference: https://thebrazilbusiness.com/article/importing-vessels-to-brazil

[Montanan]

Useful reference: https://oceanskies.com/yachts/guides/eu-vat-yachts-frequently-asked-questions/

Temporary Admission (often referred to as Temporary Importation) can very simply be described as a mechanism that enables non European Union (EU) resident yacht owners to bring their yachts into Europe for a limited time, such as a holiday, and under certain conditions without having to pay VAT on the value of their yachts.

It is important that such a mechanism exists otherwise many non EU resident yacht owners would simply avoid visiting European waters as the costs of paying VAT on arrival would be prohibitive.

Temporary Admission – Criteria
The fundamental criteria for a yacht to qualify for Temporary Admission is that the yacht must be owned by a natural person (i.e. an individual) or a legal person (i.e. a company) who is established (i.e. resident) outside the VAT territory of the EU.

Temporary Admission – Time Allowed
The yacht can only be used within the EU for a maximum of eighteen months after its first arrival. Under certain conditions this time frame can be extended to a maximum of 24 months if vessel is laid up and usually bonded with the prior agreement of the authorities.

Temporary Admission – Restrictions
In practice it is not simply enough for a yacht to be owned by a natural or legal person established outside of the EU. The authorities will always look through the non-EU ownership of a particular vessel showing on its registration and look closely at how a particular vessel is being used.

This means that they would expect the principal user of the vessel, i.e. the individual or individuals who are the main users of the yacht, to themselves be established outside the VAT territory of the EU.

Principal users of yachts sailing within the EU under Temporary Admission should therefore be prepared to provide evidence to the authorities that they are genuinely not established in, or a resident in, the EU.

Temporary Admission – Arrival in the EU
The official EU guide to Temporary Admission states the following:

“Just crossing the frontier of the customs territory of the Community is in general sufficient. But, you may be required to use a route specified by customs and they may require you to make an oral or written customs declaration. It is possible they may require the provision of some kind of security or guarantee to cover the payment of the customs duties and VAT that become due if the boat does not leave the EU.”

The key point of this message is that procedures vary from country to country and it is therefore important that a yacht owner wishing to enter the EU under Temporary Admission carefully selects their EU entry point and understands in advance what formalities are required upon arrival.

Temporary Admission – Leaving the EU
Care should be taken when terminating Temporary Admission upon departure from the EU to a non-EU port. It is important that the yacht owner understands the relevant formalities required by the authorities of the state of departure and they should also check back in case the authorities of the EU country of arrival or any countries visited in between require any proof of departure from the EU.

The official EU guide to Temporary Admission states that the following with regard to the time that a yacht has to remain outside the EU before it can return:

“Yes, you are not limited to a single period of temporary import. You can sail the yacht out of the EU to a foreign place or port and when you came back again for another holiday a new period of temporary importation can begin. The customs rules do not provide for a ‘minimum period’ during which the goods must remain outside of the customs territory of the EU.”

Be sure to obtain written documentation of the vessel arriving in a foreign place or port outside of the EU so as to provide proof of discharging of the temporary importation by having exported the vessel outside of the EU Customs Territories.

[Montanan]

Originally Posted by Diogo Cyrineu

The flag of the boat is Croatia. The boat is in Croatia. I want to bring it to Brazil.
Do I have to pay VAT? Can I stay a few months there before coming to Brazil without paying VAT?

The Brazilian indirect taxes system is complex and has been subject to multiple changes during the past years. The text below contains general information applicable to each of the taxes herein mentioned. It is important to note that the respective legislation includes various exceptions to the general stated rules. In the case of the state VAT (ICMS), although a federal law should be followed, each state issues its own legislation, which brings certain differences when compared to the federal law.

The Brazilian indirect tax system comprises three key indirect taxes:

VAT on Sales and certain Services (ICMS)
Excise Tax (IPI), and
Service Tax (ISS),
which are state, federal, and municipal taxes, respectively.

VAT on Sales and Services (ICMS)

ICMS is due on a monthly basis, however, on imports, ICMS is due on customs clearance.

The internal ICMS rates varies according to each State of Brazil, ranging, as a rule, from 17% to 20%. In the state of São Paulo, for example, ICMS is collected at a 18% rate. Certain products can attract higher internal rates (such as 25%) or a lower internal rate (such as 12%). Different states may apply different rates according to the type of good well as the nature of the operation.


Excise Tax (IPI)
This Federal excise tax is paid by manufacturers on behalf of their customers at the time of sale, either to another manufacturer who will continue the manufacturing process or to the retailer who sells to the end user.

The tax paid is stated separately on the sales invoice, as is the nature of the goods involved. Certain exemptions are given to goods considered to be of basic necessity to the country's economy. The rates are defined by the product’s tariff code (normally around 5% to 30%, but in certain cases ranging to over 300%) and are in accordance with the essentiality of each product, which generally means that essential products will attract lower tax rates.

As mentioned above, when manufactured products are sold between producers, the IPI is imposed. However, the subsequent manufacturer is allowed a credit against its IPI liability, on the amount of IPI paid to its suppliers (non-cumulative tax, similar to what happens with ICMS). Furthermore, to retailers, IPI is not recoverable and is considered as a cost of the operation.

Imports of goods are also subject to IPI taxation, while exports are not.

IPI is due on a monthly basis, however, on imports, IPI is due on customs clearance.


Import tax

The import duty (II) is a federal tax levied on permanent import of goods into Brazil and is also referred to as import tax or customs duty. The rates vary according to the product’s tariff code based on Mercosur Harmonised System (NCM/SH), usually ranging from 10% to 20% (there are some exceptions, but the maximum consolidated rate is 35%). As a general rule, the taxable basis consists of the cost, insurance, and freight (CIF) value of the product (i.e. cost, international insurance, and international freight), calculated pursuant to the World Trade Organization’s (WTO’s) Customs Valuation Agreement.

Import duty is not recoverable by the importer (i.e. it is considered a cost).

[Diogo Cyrineu]

Originally Posted by Montanan

Brazil import duties and the numerous social taxes are onerous. All in it could cost you upwards of 50% of the value of the vessel upon entry to Brazil.



Reference: https://thebrazilbusiness.com/article/importing-vessels-to-brazil

Im well aware! Its 38% to be more exact, at least in my state.
Still cheaper to buy abroad.

There's a small fleet here and the boats are priced as the import tax beeing paid.

So if I dont want to pay the VAT in this boat, that happens only if the currently owner moves the boat outside EU and sell me out of EU and THEN I take the boat to EU, right?

I as a foreign cant buy it in Croatia and put a Brazilian flag? Or any other country? To avoid paying european AND brazilian taxes.

[Montanan]

Originally Posted by Diogo Cyrineu

Im well aware! Its 38% to be more exact, at least in my state.
Still cheaper to buy abroad.

There's a small fleet here and the boats are priced as the import tax beeing paid.

So if I dont want to pay the VAT in this boat, that happens only if the currently owner moves the boat outside EU and sell me out of EU and THEN I take the boat to EU, right?

I as a foreign cant buy it in Croatia and put a Brazilian flag? Or any other country? To avoid paying european AND brazilian taxes.

If purchased in the EU then EU VAT is typically due upon sale but can be reclaimed upon prompt exportation. One will need to assess the procedure to file and obtain refund of paid VAT upon exportation from the EU.

Albeit, Non-EU residents are permitted to use privately owned yachts in the Mediterranean under “Temporary Admission” for up to 18 months without being liable to pay VAT. So I would check with an expert in maritime sales transactions in Croatia to determine if you as a non-EU resident may be able to purchase in country but have the transaction be deemed a temporary importation status and thus have the otherwise due VAT be deferred for up to 18 months. They may require that you place a security deposit in lieu of VAT which deposit can be recouped upon discharge by exportation of the good.


If sold in a non-EU country then that country's taxation would apply. Check with the country you may be contemplating to provide for the transaction to be realized and which law's will govern the transaction / contract.


Flagging is generally distinct from taxation.

I suspect that Brazilian taxes would only become due upon importation to Brazil.

Since you are Brazilian presumably you can have your vessel flagged with your country. Some countries require that their citizens must flag their vessels only with the country of their citizenship, meaning that open registry countries are not permitted. I don't know if Brazil requires that Brazilians only register / flag their vessel with Brazil.