EU VAT & Yachts Frequently Asked Questions

Introduction

EU VAT is an important issue for owners sailing within the EU which can sometimes impact on the choice of yacht registration. We have put together this Frequently Asked Questions guide to answer some of the more common questions owners have about EU VAT and yachts:

1. What is the general rule about EU VAT and yachts?

All yachts sailing wihtin EU waters should be EU VAT paid unless the owner is able to qualify for a customs relief such as Temporary Admission or able to qualify for a VAT exemption such as the operation of the vessel for genuine commercial purposes. If in doubt - pay VAT.

2. I am an EU resident using my yacht for private pleasure use in the EU – does my yacht need to be EU VAT paid?

Yes – the EU authorities will expect your vessel to be VAT paid.

3. I am an EU resident using my yacht for private pleasure use in the EU – can I legally avoid the payment of VAT by owning and/or registering my vessel in a non-EU jurisdiction?

No – the EU authorities ‘look through’ any non EU ownership and/or registration that a yacht may have and determine the liability to pay VAT on a yacht on the residence of the principal users of the vessel – in simple terms this is the person(s) who are enjoying the yacht.

4. Can I avoid paying VAT on my yacht by running it as a yacht charter business?

Yachts that are run as bona fide commercial businesses can in certain limited circumstances qualify for VAT exemption. We have produced a guide to some of the fiscal and legal considerations of yacht charter in the EU that includes a section concerning VAT exemption that can be found here on our website at the following link:

The Charter of Yachts in the EU – A Guide

5. I am a non-EU resident using my yacht for private pleasure use in the EU – does my yacht need to be EU VAT paid?

Potentially you can keep the vessel within the EU without paying if you can comply with the EU rules for Temporary Admission. See our online guide here for further information:

Temporary Admission – A Guide

6. Where do I pay VAT on my yacht?

For a new vessel purchased by a private person from an EU VAT registered supplier the basic rule is that VAT should be paid in the EU member state where it will be consumed (i.e. primarily used/kept). This treatment is defined by EU VAT rules relating to New Means of Transport that are designed to prevent private owners purchasing a yacht in an EU member state with a low VAT rate and then consuming the yacht in an EU member state with a higher rate of VAT. Under the New Means of Transport rules a new vessel is defined as any yacht that is over 7.5 metres in length overall and where less than 3 months has elapsed since its first entry into service or where it has travelled under its own power for less than 100 hours. For a vessel purchased by a private person that is not a New Means of Transport the basic rule is that VAT is paid in the EU member state of importation or in the EU member state where the vessel is located at the time of purchase.

7. Is it possible to defer and/or reduce the EU VAT that I pay on a private yacht through a leasing or rental scheme?

If the yacht leasing and/or rental scheme being contemplated is a mechanism that is motivated primarily to defer and/or reduce the amount of VAT payable on the EU purchase or EU importation of private yacht we suggest tread with caution. Although such schemes differ considerably in methodology, the underlying commonality is the creation of an artificial structure to manipulate the use of an EU VAT registration in order to create a fiscal advantage that would not otherwise be available for a private yacht. Such schemes are not without risk and probably best avoided in the light of ever evolving EU caselaw and ongoing investigations by the EU Tax Commision.

8. Can a yacht be considered VAT paid because of its age?

Under EU Single Market transitional arrangements certain yachts that were in use as private pleasure craft at the time of the creation of the EU single market are ‘deemed’ VAT paid under the Age Related Relief Scheme. For a yacht to benefit from this scheme it must be evidenced that the yacht was in use as a pleasure craft on 1st January 1985 AND moored in the EU on the 31st December 1992. As Austria, Finland and Sweden joined the Single Market two years later, the relevant dates are ‘ in use before 1st January 1987 AND moored in the EU on 31st December 1994. The position for countries subsequently acceding to the EU appears less clear in that there appears to have been no formal transitional arrangements put in place for yachts to become 'deemed' VAT paid. In general this is an area where we strongly recommend that owners should contact the relevant EU member state for detailed guidance before assuming that their vessel can be considered 'deemed' VAT paid.

9. Can an EU VAT paid yacht lose its VAT paid status?

Yes - an EU VAT paid yacht can lose its VAT paid status. Examples of how a yacht might lose its VAT paid status include:

- The VAT paid is reclaimed (i.e. where the owner was VAT registered and able to reclaim the VAT they paid on vessel purchase); or

- The vessel is sold whilst physically located outside the VAT territory of the EU; or

- The vessel is physically located outside the EU for more than three consecutive years.

In addition, if a vessel is substantially improved or modified without EU VAT having been paid on the improvements or modifications it may no longer be considered as fully VAT paid.

Caveat

As a caveat we would stress that we are a yacht registration and documentation agency and not legal and/or tax advisers so none of the foregoing information should be treated as any kind of formal legal or tax advice. Readers are therefore advised to take advice directly from EU customs authorities and/or take appropriate professional advice specific to their individual circumstances before taking any action based on the contents of this or any other page of this website or any correspondence with ourselves.

EU VAT & Yachts Frequently Asked Questions

Introduction

1. What is the general rule about EU VAT and yachts?

2. I am an EU resident using my yacht for private pleasure use in the EU – does my yacht need to be EU VAT paid?

3. I am an EU resident using my yacht for private pleasure use in the EU – can I legally avoid the payment of VAT by owning and/or registering my vessel in a non-EU jurisdiction?

4. Can I avoid paying VAT on my yacht by running it as a yacht charter business?

5. I am a non-EU resident using my yacht for private pleasure use in the EU – does my yacht need to be EU VAT paid?

6. Where do I pay VAT on my yacht?

7. Is it possible to defer and/or reduce the EU VAT that I pay on a private yacht through a leasing or rental scheme?

8. Can a yacht be considered VAT paid because of its age?

9. Can an EU VAT paid yacht lose its VAT paid status?

Caveat

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