Window to pay VAT on Yachts in Croatia at 5%

Croatia is set to become the 28th member state of the European Union on 1st July 2013.

Ahead of the country's accession, intelligence is reaching us that the Croatian government has approved the introduction of a reduced rate of local VAT of 5% on the importation of foreign flagged vessels for a limited time.

The reduced rate was due to have commenced on the 1st January, 2013 and remain in force until the 31st May, 2013.

After this date it is likely that the payment of VAT on yachts in Croatia will only be possible at the standard VAT rate of 25%

This window presents a unique opportunity to pay 5% VAT on yachts in Croatia which in turn will allow the vessels to be considered to be in ‘free circulation’ within the EU after the accession of Croatia to the EU (i.e. effectively considered as EU VAT paid at a rate of 5%).

This system is very similar in nature to that adopted by Malta prior to their EU accession in 2004.

In addition to reducing the VAT rate on yachts we understand that the Croatian government has also reduced applicable import duty as follows:

• Yachts up to 12m in length - 1.7%
• Yachts over 12m in length - 0%

We understand that the various rules and conditions will apply to the application of the regime including;

• Yachts must hold a non Croatian flag and be already berthed in Croatia
• The yacht must be moored in Croatia
• VAT cannot have already been paid in another EU country

We are presently in contact with the Croatian authorities to request sight of the official rules and regulations underlying these proposals and to then, if deemed workable, implement a straight forward and robust importation system to offer our clientele.

We shall prepare further blogs on the subject as more information becomes known.

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