As general idea the introduction in EU territory of a pleasure craft is subject to Import VAT dispatch unless she is in one of these two situations:
- Temporary Import VAT relief
- Returned goods VAT relief
In this article we will focus on the last one.
You might have your VAT paid vessel sailing out EU waters – for example to the UK waters after Brexit – and you are concerned about the Customs asking you paying Import VAT when returning. In principle there is no VAT obligation as long as the vessel is no more than three years among other requirements.
The VAT exemption for the reimportation of returned goods is a ‘technical’ exemption aimed at avoiding double taxation. Therefore, the exemption is limited to temporary exports in respect of goods for which VAT has been paid in the territory of application. It would not make sense for VAT to be charged again on re-importation if all that has happened is that the goods have left and re-entered the country, the holder being the same person, without having undergone any modifications and without an excessive period of time having elapsed since they left the country.
However following requirements must be fulfilled:
The export must not have been the result of a supply or sale in the territory where the tax applies. That means that the exportation of the vessel was not covered by this exemption. There are only two exceptions to this requirement relating to goods returned as defective or recovered by the exporter for non-payment.
The goods must have previously been exported on a temporary basis to third countries or territories. And that is because when a vessel with EU status is reintroduced into the EU common Custom territory she will be considered declared for reintroduction for release for free circulation with exemption for returned goods, by the mere fact of crossing the EU border. This scheme of the customs regulations carries with it the presumption, for VAT purposes, that the exit was temporary and, therefore, compliance with this requirement.
That the goods have not been the subject of a supply or sale outside of the Community.
That the re-importation of the goods is carried out by the same person to whom the Administration authorised the departure. This requirement, together with the previous one, implies that the owner of the vessel must be the same at both the time of departure and re-introduction into the territory of application and that this ownership must have been maintained while the vessel was outside EU territory.
That the goods are re-imported in the same state in which they left without having suffered any deterioration other than that produced by the use authorised by the Administration, including the case of carrying out lucrative work outside the territory of the EU. However, some normal refit work or repairs may be carried out outside the EU.
Finally, the deadline is three years. That means that in order that returned goods to be exempt from import VAT and custom duties they must be reintroduced into the EU territory within a period of three years.
Sometimes these requirements are interpretated very strongly at Customs and Excise office therefore we suggest before leaving EU territory to check exactly the tax situation of the vessel in order to avoid bad surprises when returning.
Carlos Espinosa
Solicitor & Tax Adviser
+34 627 41 32 01
carlos.espinosa@iurisnautic.com
