Which VAT scheme for pleasure yachts?
The taxation of yachts sailing in the Mediterranean varies according to different criteria: country of navigation, import or intra-community acquisition, private or commercial use. VAT exemptions schemes can apply under certain conditions.
In this guide for brokers and yacht managers, we’ll identify 2 main cases, depending on whether the client pays VAT on his yacht, or wishes to benefit from the 18-month temporary admission scheme for private use or from specific customs schemes for commercial use.
VAT PAID pleasure yachts that remain outside EU waters for more than three years are obliged to pay VAT again when they return to EU waters – unless they set up a specific customs scheme called the “returned-goods relief”.
These vessels must have an export document and remain outside Community waters for a maximum period of three years before being reimported.
What documents need to be presented in the event of an inspection?
What are the different steps required?
Scenario n°1: your client has paid or wishes to pay VAT on his pleasure yacht
Usually, the owner of a pleasure yacht has to pay VAT on his yacht. The payment of this VAT in Europe allows the yacht to sail freely in EU waters.
If investigated, the owner must prove that VAT has been paid on the price of the vessel in one of the Member States of the European Union, except for vessels considered as “VAT PAID” because they were built before 1985 and stationed in the European Union on 31/12/1992.
The vessel was acquired and VAT was paid on it in one of the European Union Member States
Your client purchased a vessel in the Member State where they reside, and the delivery was made in that same state. The owner must keep the following on board:
- the purchase invoice VAT inlcuded;
- proof of payment with a purchase invoice and/or any other document clearly showing that VAT has been paid;
- the builder’s certificate.
The yacht has been acquired within the EU and is subject to VAT
The vessel was purchased in Member State 1 (e.g. Germany). It is intended to be delivered, used and moored in Member State 2 (e.g. France).
In this case, the owner of the vessel must pay VAT in Member State 2 (France) and establish a tax certificate of acquisition with the relevant authorities. This document, called the “VAT paid certificate”, usually goes hand in hand with the registration of the vessel, while obtaining the flag of the same Member State.
All these documents must be kept on board of the yacht.
If the owner of the vessel is a taxable person, they should:
- obtain a VAT number in the Member State concerned;
- pay VAT by filing a return in that same Member State.
However, this payment may be eligible for VAT deduction if the rules of the Member State allow.
The yacht has been imported (import)
The vessel was purchased or manufactured in a non EU country and it is intended to be delivered in a Member State of the European Union: in this case, the common law procedure – common to all Member States – consists in importing the vessel by establishing a customs import document. Depending on the Member State, the VAT should be paid to the Customs or Tax Authorities.
In most countries, this is done via a customs broker or freight forwarder. A customs import document (Single Administrative Document or SAD) will then be prepared. It serves as justification of the VAT payment and more generally the VAT status of the vessel.
Depending on the import Member State, other VAT schemes may be in place. These imports can be carried out, depending on the case, under the reverse charge mecanism. In practice: if the owner of the vessel is a taxable person, they will have to register for VAT in the Member State concerned. They will also be able to benefit from a VAT deduction if the rules of the Member State allow it. In any case, and whatever the VAT scheme applied, all compulsory documents must be kept on board, in case of an audit.
“VAT paid” vessels may have their VAT status changed. The result? In some cases, the owners will be forced to pay VAT a second time! It does happen.
Example n°1: a VAT paid pleasure yacht is transported to be used by its owner in a country outside the EU. If the owner does not re-import the vessel into the European Union within three years and under a special customs scheme (the “returned-goods relief”), they will have to pay VAT on the vessel’s total value. A value called “market value” based on insurance certificates and an estimate by a maritime expert or the customs authorities.
Example n°2: a VAT paid pleasure yacht is transformed into a commercial yacht by its owner. The owner benefits from a VAT exemption for one or more years. However, VAT will have to be paid on the vessel’s “market value” as soon as it becomes pleasure again.
How it works: you’ll have a dedicated employee to personally assist you with your regulatory procedures. We will take care of your customers, regardless of the Member State concerned.
EASYTAX INTERNATIONAL offers complete support, we will:
- let you know which documents are required and collect them;
- contact customs authorities to request import;
- help with selecting the right VAT scheme (reverse charge VAT on import etc.);
- choose the customs office for import;
- coordinate with customs and the captain to choose the import place and date;
- send the validated declaration to the vessel.
Case n°2: your client wishes to benefit from the 18-month temporary admission scheme and not pay VAT on their yacht
In Europe, a pleasure yacht can, in certain cases, sail in EU waters without paying VAT. However, in the event of an inspection by the authorities, this vessel will have to prove its right to sail in the European Union without having to pay VAT.
A pleasure yacht can stay in EU waters for 18 months without paying VAT, in two types of contexts.
The pleasure yacht is used privately within the framework of the 18-month Temporary Admission.
A pleasure yacht can be used privately in EU waters for a maximum period of 18 months without having to pay VAT. The condition? It has to be owned by a non EU resident (taxable or non-taxable) and flying a non EU flag.
If controled by the relevant authorities, the owner will have to pay VAT on the value of the vessel, unless they can prove that the vessel arrived in EU waters less than 18 months ago. Any proof can be useful (logbook, navigation instruments, invoice receipts from a non EU port…or a customs form in certain Member States)!
To secure this private use scheme, the yacht owner can fill in a specific document offered by the European Commission (compulsory in some Member States).
How it works? Have it validated by the relevant customs authorities in the first European port the vessel stops at. Be warned, the pleasure yacht can only be used privately during those 18 months!
We help you to secure your arrival in the European Union waters.
The pleasure yacht is used on a commercial basis
In some Member States, pleasure boats benefiting from the 18-month Temporary Admission scheme are not allowed to be marketed, unless they are placed under a specific customs procedure. These customs procedures are set up with the agreement of the relevant customs authorities. In principle, a customs broker takes care of the formalities:
- A request for authorization is sent to the customs authorities;
- The vessel is temporarily imported for the time it takes to carry out its commercial activity (boat show, rental…);
- The vessel is re-exported and returns to the 18-month Temporary Admission scheme. The duration of the temporary import is not included in the 18-months.
What are the obligations for yachts offered for sale or charter in the European Union?
- For sale: a broker established in the European Union must take care of marketing the vessel. The latter must be moored in a place known to the customs administration. As far as customs procedures are concerned, the yacht must be placed under the “Temporary Admission for Sale” or “Temporary Admission for Demonstration” procedure if it is participating in a boat show.
- For rental: some flags allow a pleasure yacht to be rented. For example, the Marshall Islands, Bermuda and the Cayman Islands have implemented the “YET – Yacht Engaged in Trade” status. Depending on the member state, a customs procedure called “Temporary Admission for Hire” may be required.
Renting pleasure yachts under temporary admission: the YET scheme
The regulations related to certain flags allow a pleasure yacht to be rented. The Marshall Islands, Cayman Islands and Bermuda, for example, have implemented the “YET” or “Yacht Engaged in Trade” status, under the customs regime called “Temporary Admission for Charter”.
The YET initiative puts an end to Mediterranean yacht owners’ biggest dilemma: they can either use their yacht purely privately or charter their yacht to third parties and only pay VAT on their own charters.
For a yacht to have “YET” status, it must:
- be in possession of a value added tax (VAT) payment certificate or other document proving that the yacht has a VAT paid status,
- or operate in EU waters under the temporary admission (TA) scheme in accordance with EU regulations which allows the yacht to enter and stay in EU waters for up to 18 months without paying VAT on the hull.
As YET yachts are considered as private yachts from a tax point of view, no VAT/duties exemption will apply on fuel, supplies and services, except for works (inward processing). VAT must be paid on third party charters as for purely commercial yachts.