Taxation: the main VAT exemption rules for selling a boat.
The VAT rules and VAT exemption for selling a yacht depend on different criteria: the Member State, the type of vessel (new or used, pleasure or commercial), the type of sale (BtoB or BtoC), etc. There are also many documents that need to be provided to get the exemption.
This guide is intended for yachting professionals in charge of ship management who are likely to assist a client selling a yacht. .
Some vessel sales are simple since they are subject to VAT. But other types of sales concerning pleasure or commercial yachts are more complex since they are subject to a VAT exemption.
Choosing the VAT scheme, flag and place of delivery, drafting sales contracts and more. To ensure that sales subject to or exempt from VAT comply with the regulations in force, it is often much better to call on a specialist!
EASYTAX INTERNATIONAL cannot act as consultant for your yacht sales as this role is reserved for the regulated profession of lawyers.
However, our expertise allows us to offer you below an overview of the VAT rules applicable to certain situations.
Scenario n°1: your client wishes to sell a commercial yacht
If the vessel is commercially registered by the new owner, then the sale should be exempt from VAT, according to the rules defined in our “Commercial vessels” guide. The seller will have to prove the application of these rules, but also have several documents available – such as the provisional and final Certificate of Registry..
Scenario n°2: your client wishes to sell a new pleasure boat
The regulations for sale vary depending on whether a pleasure craft is new or used. To help you get a clearer overview, EASYTAX INTERNATIONAL has drawn up a list of some standard scenarios specific to the sale of a new pleasure boat and a second-hand boat, as well as the regulatory points which refer to them.
Intra-Community deliveries of new ships
Intra-Community deliveries of new ships can be carried out without VAT.
There are two types of sale: “B to B” sales and “B to C” sales.
Beware of sales made on “departure conditions” – where the seller does not take care of the transportation of the yacht to the destination Member State. Since 2020, these sales follow specific rules.
See “chain transactions” below.
Sales of new ships to professionals – “B To B”
Selling a yacht to a taxable person, that’s then transported from the seller’s Member State to the buyer’s Member State, can be exempt from VAT provided the following conditions are met:
- The seller must obtain and validate the buyer’s intra-community VAT number.
Obtaining a valid VAT number at the date of delivery of the goods is a basic condition for benefitting from a VAT exemption on the sale of a yacht.Good to know
The VIES database on the European Commission’s website can be used to verify the validity of this intra-Community VAT number.
- The seller must report the sale in their state.
Member States shall keep a summary of their intra-Community sales. Since 2020, this intra-Community sales list or “EC sales list” has become a basic condition to benefit from VAT exemption on intra-Community deliveries.
- The seller has to prove that the yacht has left the shipping Member State.
Since 2020, two options are foreseen by the European Directive on VAT:
If the seller arranges the transport – carried out by themself or a third party – they must present two pieces of evidence which must not be contradictory. These two pieces of evidence will also have to be delivered by two different parties – independently of each other, the seller and the buyer. This evidence can take the form of:
- A primary transportation document (a signed CMR document, airway bill or bill of lading, or delivery note).
- A corresponding transportation invoice.
Alternatively, the yacht seller may present one piece of evidence from the list above, accompanied by a second piece of evidence from the list below:
- An insurance policy for the shipping or transportation of the goods.
- Bank documents proving payment for the shipping or transportation of the goods (letter of credit).
- Official documents issued by a public authority, such as a notary, confirming the arrival of the goods in the destination Member State.
- A receipt issued by a warehousekeeper in the destination Member State attesting to the storage of the goods in that same Member State.
If the buyer arranges the transport – by themself or a third party, they will then have to present three pieces of evidence: two, identical to the those presented in option n°1, as well as a written declaration from the purchaser, attesting that the goods were shipped or transported either by the purchaser, or by a third party on their behalf. The buyer will also have to specify the destination Member State as well as other information:
- DATE OF ISSUE;
- name and address of the purchaser;
- quantity and nature of goods;
- date and place of arrival of the goods;
- identification of the person accepting the goods on behalf of the purchaser.
In the event that the seller does not succeed in obtaining this evidence, they must establish a body of evidences and the authorities will decide whether they accept it at their on discretion in the event of an inspection. Evidence that may contribute to this body:
- proof of arrival of the yacht in and EU Member State port;
- vessel registration certificate, if the flag nationality is the same as the yachts destinaton Member State;
- proof of payment of VAT to the tax authorities in the arrival Member State;
- declaration from a recognized local authority;
- contract concluded with the purchaser;
- business correspondence;
- order form written by the purchaser indicating that the goods are to be shipped or transported to another Member State;
- delivery or collection note – preferably signed by the carrier;
- written confirmation by the purchaser of receipt of the goods in another Member State;
- a copy of the seller’s invoice with the buyer’s stamp;
- notice of settlement from a foreign bank;
- copy of the buyer’s identity card, etc.
Yacht sales to private individuals – “B To C”
The sale of a new vessel used as a means of transport to a non-taxable person, transported from the seller’s Member State to the purchaser’s Member State, may be exempt from VAT.
The purchaser must pay the VAT to the tax authorities of the arrival Member State. The seller, on his side, will have to gather and present evidence (some of which are identical to those presented in the previous section ” B To B Sales “) that will allow him to prove the VAT exemption.
Successive deliveries of vessels
What is meant by ” delivery ” ?
It is the handover of power to use property as an owner.
Please note: the place of delivery is the place of taxation.
How is a successive delivery defined ?
A = initial vendor
B = intermediary (buyer – reseller)
C = end customer
Departure or arrival conditions?
The sale of a boat ” at the conditions of departure ” puts at the expense of the customer the transport / convoying of the boat. The sale of a boat ” under the conditions of arrival ” puts the transport / convoying of the boat at the expense of the seller. This has consequences for VAT.
In practice, what are the points of attention ?
The problematic transactions are those that involve two deliveries (i.e., two handovers of power to dispose use the goods as an owner) in the departure Member State. This situation is very common in yacht sales.
Let’s take a concrete example:
- A German shipyard builder (A) sells a new vessel to a Spanish distributor (B). This shipyard sells this vessel ” at the conditions of departure “, so it does not take care of the transport/conveyance of the vessel to another Member State.
- The Spanish distributor resells this vessel to an end customer in Portugal (C).
This distributor resells the vessel at the same ” conditions from “, so he does not take care of the transport/conveyance of the vessel to another Member State.
- The end customer in Portugal (C) picks up the vessel from the German shipyard (A) and transports/delivers it to Portugal.
In this situation, there are two ” changes of ownership ” in Germany, thus two successive deliveries :
- the first one between the shipyard (A) and the distributor (B)
- the second between the distributor (B) and the end customer (C).
The VAT implications here are very important, both for the builder and the distributor. The diagram above highlights the two possible situations for complying with the European QUICK FIXES regulations, which came into force in 2020:
1st option: the Spanish distributor registers for VAT in Portugal.
- The 1st delivery constitutes an intra-Community acquisition to be reported in Portugal.
- The 2nd delivery is a domestic sale subject to VAT in Portugal.
2nd option: the Spanish distributor registers for VAT in Germany.
- The 1st delivery is a domestic purchase subject to VAT in Germany
- The second delivery is an intra-community delivery to Portugal, exempt from VAT in Germany .
It’s a risky process with high stakes if the necessary provisions corresponding to one of these two options are not put in place.
- German shipyard (A): Incorrect invoicing without VAT means a risk of taxation on the sales price.
- Spanish distributor (B): risk of taxation on the purchase price without the right to deduct.
How it works: our team helps to ensure your clients are registered for VAT in all EU member states. You will have a dedicated person to assist you. 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;
- liaise with the tax authorities;
- take care of registering for VAT;
- ensure contract compliance;
- liaise with the shipyard builders and their distributors to safeguard this type of successive sale.
Exporting new yachts
Exporting new ships – defined as deliveries of a yacht from a Member State to a third country (non-EU country) – can be carried out without paying VAT.
In practice, the seller must justify that the export and therefore the sale is exempt from VAT by filling out a customs export document or SAD (Single Administrative Document). To be valid, this document must be marked “ECS Exit”. The latter confirms the effective exit of the yacht from the European Union.
For vessels leaving the European Union by their own means (own propulsion), the “ECS exit” status will be confirmed by the yacht’s proof of arrival in a third country. This can be, for example:
- proof of the vessel’s arrival in an EU Member port;
- acknowledgment from a known local authority;
- a copy of the logbook etc.
The customs representative in charge of the export formalities, will be able to assess this evidence and confirm the exit of the vessel from the European Union.
Some vessels are exported from a Member State and benefit, upon their return to the European Union, from the Temporary Admission of Means of Transport for Private Use scheme. In this specific situation, the practical arrangements for export vary from one Member State to another.
See our ” Customs” solutions.
Exporting equipment for pleasure boats
The VAT exemption for exporting equipment for pleasure boats is granted under the same conditions as exporting a new yacht (see previous section), if, and only if, the seller is in charge of the transport of the equipment to a third country (non-EU country).
If the buyer transports the equipment it’s a whole other scenario: it cannot be sold without paying VAT!
Scenario n°3: your client wishes to sell a used pleasure boat
The VAT scheme for second hand yachts depends firstly on where the vessel is being delivered.
- When a used ship is sold in the European Union, it can be sold under the VAT margin scheme.
- When exported outside the European Union, it can be sold VAT-free.
What is the VAT margin scheme?
The VAT margin scheme is reserved for “taxable resellers”: taxable persons who buy second hand yachts in order to resell them as second-hand vessels. A distributor of new ships who takes back second-hand yachts is considered a taxable dealer.
The “taxable dealers” are distinguished from ” taxable users ” who, on the other hand, sell goods that they have recorded as fixed assets.
The VAT margin scheme was set up by the European Commission in 1996 to prevent the same goods from being taxed twice in their life cycle.
- Example: a buyer-reseller takes over a second-hand boat from one of their private customers – a non-taxable person – for €1,000. This private individual, at the time of the purchasing the ship, paid VAT without being able to recover it. The buyer-reseller resells the vessel in the European Union for the sum of €1,500. This VAT margin scheme will allow you to pay VAT on the difference, i.e. €500. The buyer-reseller cannot deduct VAT on the purchase from a private individual. The buyer-reseller will therefore issue a sales invoice for an amount of €1,500 including VAT without showing any VAT. They will pay VAT in the Member State where the yacht is shipped.
|Purchase from a private individual:||€1000 inc. VAT|
|Selling price:||€1,500 inc. VAT|
|Tax Base:||€500 inc. VAT x 0.83 = €416 inc. VAT|
|VAT Due:||416.50 x 20% = €83.33|
However, bear in mind that the conditions for setting up such a scheme and the method of accounting may vary from one Member State to another.
The VAT margin scheme is applicable to vessels purchased from:
- a person not subject to VAT (individual or legal entity not subject to VAT);
- a taxable person who benefits from the basic exemption;
- another taxable dealer, if the supply by the latter has been subject to the special margin scheme as of right or by option;
- from another taxable person established in France or in another Member State, if the supply by this taxable person was exempt. This includes ship transfers that were not eligible for deduction.
In all of these situations, the goods have not given rise to a right of deduction for the taxable dealer. This taxable dealer will of course have to obtain all the necessary evidence to justify that the supplier has indeed purchased the yacht without deducting VAT.
The VAT margin scheme is not applicable if the goods sold have given rise to a right of deduction at the time of their acquisition by the taxable reseller. This is the case for vessels that:
- have been imported;
- were purchased from a taxable person who charged tax on the supply;
- have been the subject of a taxable intra-Community acquisition.
Are you a yachting professional, or a consultant with yachting professionals as clients, who wants to increase your skills on tax issues?
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