VAT tax and yachts in the European Union:
Value Added Tax (VAT) is an EU tax levied on consumption by the government of each member state. Yachts imported into the EU and yachts purchased by EU owners who use their yachts in the EU are obligated to pay VAT.
Any yacht owned by any nationality that spends more than 6 months in any calendar year in EU waters is subject to VAT. EU residents can only use a yacht in the EU if it has paid VAT.
Each member state interprets, implements, administrates and enforces EU VAT rules according to their own discretion. VAT rates differ according to individual member state rules. Normally, the local customs authority enforces the relevant VAT rules.
A yacht owned in the EU has the right to move freely throughout the EU, provided VAT has been paid on that yacht in any EU country.
If the yacht spends more than 6 months in some EU countries, it may be subject to local laws.
What VAT documentation is required?
Each yacht needs some proof of VAT payment onboard the yacht; such as a paid invoice or VAT certificate, when sailing in EU waters. If the yacht is exempt from paying VAT, documents stating the reason for the exemption issued by customs or other appropriate authority need to be onboard.
Any yachts built or brought into the EU on or after January 1, 1985 must be able to prove its VAT status.
Yachts built or brought in the EU before January 1, 1985 are considered to have paid VAT status if privately owned and operated in EU territorial waters until December 31, 1992. Proof of this status may be required by local customs officials. Documentation such as logbooks, receipts or invoices from European marinas may be used. If it is not possible to provide documents confirming the yacht's location on December 31, 1992, all relevant documents should be presented and local customs authorities will make a determination.
When a European buyer purchases a yacht, an appropriate document from the seller or his broker should be requested confirming its VAT status. Yachts built after January 1, 1985, VAT should be paid by the original buyer or importer. The proof may be an original invoice or a VAT certificate. Certified copies can be used in lieu of originals.
If a company sells the yacht, and they recover the VAT, the new buyer will pay for the yacht with VAT added. There will be a sales contract that proves that VAT was paid.
If the original buyer is an individual (not a company) and paid VAT, they should transfer this VAT paid status to the new buyer and will not recover any VAT. The yacht will keep its VAT paid status after it changes owners.
Can the yacht lose its VAT paid status?
If a yacht with VAT paid status was exported from (or sails out of) the EU, it will normally qualify for a VAT exemption if it is brought back into the EU within 3 years of exportation. This only applies if it is brought back by the same person who left with it. This means no change of ownership can occur outside the EU. Customs duties may apply.
When is the VAT due to be paid?
VAT is payable in the event of a chargeable event. A chargeable event occurs when a yacht is imported into the EU or sold by a company in the course of an operating activity.
If you are buying a yacht from a company that does not collect VAT on sales or from an EU private individual and the seller reports that the VAT has been paid before, you should get evidence from the seller or broker that this has happened.
Yachts imported from outside the EU, must pay VAT at the place and time of importation. VAT is assessed on the value at the time of yacht's importation. Customs may require additional pricing from brokers if they believe the real value is less than claimed.
What to do if VAT cannot be proved and there is no chargeable event?
You must keep any available invoices or logs from the yacht. Some customs authorities may want to see the available documentation and may issue a letter of guarantee that the yacht is paid for VAT. Such a letter does not prove that VAT is considered to be paid. For yachts built before January 1, 1985 and in EU territorial waters on December 31, 1992, such documentation and requests for a letter of recommendation must be submitted to the customs authority of the country where the yacht was on December 31, 1992.