To pay or not to pay? VAT for boat owners.
There are stories about boats being confiscated because of VAT not been paid. There are another long stories about ways of "escaping" from VAT. But what exactly is VAT? Why is it charged on yachts and boats? Who should be concerned or not?
We will attempt to answer at least some of your questions, so you can sleep well.
The tax on goods and services (VAT) is widely know tax invention. It is imposed on consumption and applied in practically every country. On goods, on services. It is general rule in European Union to use VAT - although the tax rates for the same products or services may vary.
As a consequence, VAT is also levied on yachts imported into the EU, produced in EU and on yachts purchased and owned by EU residents who use their yachts inside EU.
What is quite important, VAT applies regardless of jurisdiction of the ultimate beneficial owner and the yacht's flag. It is bound and dependent on the final destination of yacht - in other words where the yacht will be physically located and, in the case of a "commercial" yacht, where it will be chartered.
VAT settlement. Who should discharge, when and at which rate - sellers or buyers?
The general concept is quite. For example, Polish party imports goods from another EU country, i.e. imports them to Poland, then Polish company is obliged to pay VAT at the rate applicable in Poland. In simple words - VAT goes with goods/services. The importing party settles accounts in his country in accordance with the applicable rate for these specific goods.
Transactions between parties in European Union member states are called Intra-Community Acquisition of Goods/Services and they should be identified as such.
VAT regulations on yachts - new vehicles of transport
Following the legal texts, pursuant to art. 2 clause 1 lit. b) point (ii) of Directive 2006/112 / EC OF THE COUNCIL of 28 November 2006 on the common system of value added tax (hereinafter referred to as the "Directive"), VAT applies to transactions for pecuniary interest in the intra-Community acquisition of goods within the territory of a Member State in the case of new vehicles of transport, by a taxable person or a non-taxable legal person, where other acquisitions are not subject to VAT in accordance with art. 3 sec. 1, or by any other non-taxable person.
For the purposes of art. 2 clause 1 lit. b) (ii) of the Directive "vehicle of transport" means of the transport of persons or goods, including vessels with a length of more than 7.5 meters, with the exception of vessels intended for navigation on the high seas and carrying passengers or for payments, vessels intended for commercial, industrial or fishing purposes, and for rescue and assistance at sea, as well as vessels intended for coastal fishing. These means of transport are considered “new” if delivery is made within 3 months of their first putting into service or if the vessel has not been completed for more than 100 hours.
Pursuant to art. 14 sec. 1 of the Directive, "delivery of goods" means the transfer of the right to dispose of the property as owner.
Pursuant to Art. 20, first paragraph of the Directive, intra-Community acquisition of goods means the acquisition of the right to dispose as owner of movable tangible property sent or transported to the buyer by the seller, by the buyer or on their behalf, to a destination in a Member State other than the Member State of departure or transport of the goods.
Article 68 of the Directive states that the chargeable event takes place at the time of the intra-Community acquisition of goods. Intra-Community acquisitions of goods are deemed to have been made when the supply of similar goods is considered to have been made on the territory of the Member State concerned.
This is what law says. But what it means for us?
In short, if you buy or import new boat which is intended to be used on EU waters, better check if VAT has been paid. If you are even smarter, ask for advise before you pay the invoice for your new vessel. By choosing specific jurisdictions, flags and boat ownership types you can save on VAT- reach out to us for professional VAT advise for boats and yachts in EU
BalticBoat24 team with Maja Czarzasty-Zybert, PhD