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VAT Regulations in the European Union
APRIL, 2018

The EU has established a VAT tax scheme that provides VAT liability for boats purchased in or formally imported into EU waters. These EU guidelines, are interpreted, administered and enforced by each member country’s tax authority. Boat owners may often experience some difficulties and misunderstandings in various EU countries.

The place the yacht is purchased and the owner’s place of residence will determine what tax and duties may be due upon purchase. These are usually VAT and transfer tax or import duties. In general terms, any EU resident who buys a new build or secondhand yacht that is not VAT-paid will be required to pay VAT at the VAT rate applicable at the country of delivery, unless the yacht is acquired for commercial purposes or through a leasing scheme.

The rules are different for non-EU residents, who are permitted to use private yachts in the Mediterranean under Temporary Admission for up to 18 months without being liable to pay VAT on the hull. Alternatively, a commercial yacht that is registered offshore and owned is exempted from VAT, providing the vessel has been imported in accordance with the applicable regulations.

Two normal methods by which VAT is administered and enforced by customs officials are a) via following clearance procedures when cruising boats enter an EU country, and b) routine inspections of cruising boats upon their entrance in EU waters.

Photo by Chris Karidis on Unsplash
A boat owned by EU resident individual or body corporate has the right to free movement throughout the EU, provided VAT has been paid on that vessel in one of the EU countries.

The rules are very clear and a boat belonging to a EU citizen, or flying the flag of a EU country, must be VAT paid. This means that both in home waters and when sailing between any EU countries, such boats should carry evidence of VAT payment. This could be the original boat builder’s receipt or paid invoice, or some other original document showing clearly that VAT has been paid. Those who are exempt from this rule must have on board a document issued by customs or the relevant authority stating the reasons for such exemption.

A VAT paid yacht will encounter no difficulties in EU waters provided the vessel is not chartered. Pleasure yachts built pre-1985 and in EU waters on 31st December 1992 are treated as VAT paid. Evidence that the yacht was in EU waters on this date may be required.

In Greece a DEKPA needs to be issued for all private boats travelling in Greek waters.

“The place the yacht is purchased and the owner’s place of residence will determine what tax and duties may be due upon purchase. These are usually VAT and transfer tax or import duties.”
Temporary importation relief from VAT is available to yachts beneficially owned and used by non EU residents provided such non EU resident does not become ordinarily resident in the EU.

Boats owned by non-EU residents and registered outside the EU are entitled to tax free temporary importation into the EU for a total period of eighteen months. The EU Common Customs Tariff provides for relief from VAT liability for up to 18 months (Article 562(e) as referenced above) when the boat is owned by non-EU residents and where the boat will subsequently be removed from EU waters (Article 561). The permitted period, or temporary importation, applies to the entire EU area and therefore at the end of the period the boat must be sailed to a country outside the EU or VAT must be paid. The temporary importation period may be extended, at the discretion of local customs, if force majeure reasons arise, such as if the boat is left unattended and unused, if the owner leaves the EU, or if the boat is left in the care of a boatyard for repair.

Those who wish to remain longer in any one EU country must deposit the ship’s papers with the local customs office, who will put the vessel under bond. The 18 month temporary import period will then be stopped until the owner returns on board. During the period the vessel is in bond, the boat must not move from its berth, and the owner or crew are not allowed to sleep on board.

Non-EU boats remaining inside the EU for over the permitted period must be imported and VAT paid on the value of the boat. Anyone intending to do this would be well advised to import the boat into one of the EU countries with a lower VAT rate.

It must be stressed that the above 18-month VAT relief applies only where the boat is owned and sailed by a person not resident in the customs territory of the EU. The relief is invalidated if the boat is hired, sold or put at the disposal of a EU resident.

When a non VAT paid boat is travelling in Italy and Greece a Transport Log needs to be issued by the local customs authority, this log is validated at each port of call, upon exit from these countries the Transport Log needs to be cancelled.

The legal provisions on temporary importation are found in: Articles 137 to 144 of the Customs Code (Council Regulation (EEC) N° 2913/92 of 12 October 1992 establishing the Community Customs) and in particular Articles 553 to 562 of the implementing provisions of the Customs Code (Commission Regulation (EEC) No 2454/93 of 2 July 1993).

Departure from a EU port to another EU port: no formalities required. Arrival in a EU port directly from another EU port: no formalities for EU vessels and EU citizens. Immigration must be contacted if there are non-EU citizens aboard. Customs must be notified if there is anything to declare, such as firearms.

Departure from a EU port to a non-EU port: customs and immigration must be notified. Arrival in a EU port from a non-EU port: Q flag must be flown when entering 12-mile limit. Customs and immigration must be contacted on arrival.

Yachts must carry their original registration document, insurance policy and ship’s radio license. One member of the crew must have a radio operator’s certificate of competence. For EU boats, proof of VAT status is also required. You will also find useful to have a typed sheet containing the name of the boat, port of registry, and the crew list.