How To Avoid Paying Vat On A Yacht?

Yacht owners in the EU are often asked about VAT taxes due to confusion surrounding the subject. In the EU, boats older than 15 years are often exempt from VAT, meaning they won’t have to pay VAT if bought outside the US. However, when the yacht enters European or British territorial waters, both the EU and the UK require VAT. This article provides a comprehensive guide on legal ways to minimize or avoid VAT on boats.

To avoid VAT, yacht owners can keep their vessel in the EU indefinitely as long as their VAT is paid, no matter their citizenship. VAT rules only apply to the vessel, not the person behind it. Non-EU residents using their yacht for private pleasure use in the EU may need to be EU VAT paid. There are several exceptions to avoid paying boat VAT again, such as exporting the boat from the UK or EU for more than 3 years, not paying VAT, or having no proof of the boat’s VAT status.

The easiest option is for new owners to buy the yacht directly from a shipyard or company registered in the UK. The supplier can provide proof of VAT payment and the conditions for exemptions. All yachts sailing within EU waters should be EU VAT paid unless the owner is able to qualify for a customs relief such as Temporary Admission or if the owner or user is not a EU resident.

In summary, yacht owners in the EU should be aware of the various strategies and exemptions available to minimize or avoid VAT on their vessels.

What is the import tax on yachts in the UK?

The EU has lifted the 25% customs tariff on the import of US-origin yachts and boats into the EU with effect from 1 January 2022. Unfortunately, at the moment the UK continues to impose the 25% customs tariff on the import of US-origin yachts and boats into the UK.

A deal was agreed between the US Government and the EU Commission last Autumn to remove steel and aluminium tariffs. This opened the way for in the full removal of the 25% retaliatory tariffs imposed by the EU on American-made boats and engines entering the EU. It has been estimated that the tariffs resulted in a 50% reduction in US exports of yachts to the EU with the loss of hundreds of millions of dollars in revenue.

These tariffs were introduced by the EU in the summer of 2018 in retaliation for the tariffs introduced by the US on the import of EU steel and aluminium products. They applied to the import into the EU of US-origin new and second-hand yachts and boats, and a wide range of other marine products.

Do you pay VAT on second-hand?

Buying second-hand goods If you buy second-hand goods from a private individual you will not be charged VAT, for the obvious reason that they are not VAT registered.

If a business buys and sells second-hand goods, they can use one of the second-hand margin schemes so that VAT is only due on the profit margin, not the full selling price.

When using a second-hand scheme there are a number of points that you should remember.

If you buy second-hand goods from a private individual you will not be charged VAT, for the obvious reason that they are not VAT registered.

How much of VAT can you claim back?

Let’s say, for instance, that half your mobile phone calls are personal and half are for business use. You can reclaim 50% of the VAT on the purchase price and the service plan. Similarly, if your office occupies 10% of the floor space in your home, you can reclaim 10% of the VAT on your utility bills.

It’s important that you keep records to support your claim and show how you calculated the business proportion. You’ll also need valid VAT invoices.

Claiming back VAT on travel and food. You can reclaim VAT on employee travel expenses for business trips, for example if they were visiting a client. Travel expenses include transport, hot food and accommodation that you pay for. Just be aware that most public transport is zero rated for VAT, so there will be no VAT to reclaim.

Claiming VAT back on vehicles. You might be able to reclaim all the VAT on a new car or commercial vehicle so long as you only use it for business. You’ll need to be able to prove that it’s not used for personal reasons, for example if it’s specified in your employee’s contract. Note that personal use includes travelling between your place of work and your home.

How do I become exempt from VAT?

Examples of VAT exempt goods and servicesinsurance, finance and credit services.education and training services.charitable fundraising events.subscriptions to membership organisations.selling, leasing and letting of commercial property, however this exemption can be waived.

This blog will explain everything you need to know about this key issue.

In the UK, goods and services can be either exempt from VAT (Value Added Tax) or taxable, which could be standard-rated, reduced-rated, or zero-rated. As no VAT is charged on supplies which are exempt and no VAT is charged on zero-rated supplies, it is easy to think they are interchangeable, but a very important distinction is essential to understand.

Why does it matter whether you are exempt from VAT or zero-rated?. As a buyer, it makes very little difference whether a product or service is exempt or zero-rated – no VAT is payable either way.

How do I get out of paying VAT?

You can cancel your VAT registration online if:you’ve stopped trading and you’re not part of a VAT group.your taxable turnover is below £88,000.you’ve stopped making VAT taxable goods or services.you’re applying for an exemption if most or all of what you sell is VAT zero-rated.

You must cancel your registration if you’re no longer eligible to be VAT registered. For example:

• You stop trading or making VAT taxable supplies
• you join a VAT group

You must cancel within 30 days if you stop being eligible or you might be charged a penalty.

What does VAT mean on a boat?

Value Added Tax Value Added Tax (VAT) is a tax scheme established by the EU. It is a tax on what is referred to as consumption and is levied by the government of each member state. VAT is chargeable on boats imported into the EU and on boats purchased and owned by residents of the EU who are using their boat within the EU.

Can you claim VAT back on a boat?

Any EU/UK VAT paid will not normally be reclaimable by a private purchaser but where the boat is used in whole/part for a ‘VATable’ commercial purpose, such as third party leasing or providing other leisure services, then the VAT paid may be recoverable via a local VAT registration.

There are a number of business structures in this area which may be suitable in some circumstances to render the VAT paid reclaimable, but specific advice will need to be taken in the relevant country. These structures are only likely to be suitable for larger vessels as there will be additional costs attached.

Customs Duty. UK/EU Customs Duty will not be payable directly by the purchaser, unless the boat is ‘imported’ into another country.

Do you pay VAT on second hand boats in the UK?

What is VAT on Boats in the UK?. Boats are considered the same as any other goods and are therefore taxed at 20% VAT in the UK. Boats are taxed when they’re bought as new vessels and will carry a VAT-paid status for the duration that they remain in the country (or in the case of the EU, in the region) that they were purchased in. So if you buy a used boat then it will likely have its VAT paid status and you aren’t liable to paying it again.

The difficulty lies when it comes time to take your boat from one country to another. Taking a boat out of the UK and moving it permanently to the EU, US, or any other country will likely require you paying taxes again. Traveling on your boat and spending a temporary amount of time as a visitor is permitted, so long as you keep within the time frame allowed. For the EU this is 18 months.

What is Temporary Importation (TI) and How Long Does It Last?. For British boat owners, this is one of the main benefits of Brexit. It means they can now keep a private boat in EU waters without paying the import VAT of 20% by using the Temporary Admission or Importation scheme. It allows them to keep their boat in the EU for up to 18 months without paying VAT on their vessel. Once the 18 months are up, a boat only needs to be taken out of EU waters for 24 hours before the VAT clock starts again for a further 18 months. A transit log and evidence of time spent outside of EU waters will need to be kept.

Are yachts VAT exempt?

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.

Which countries are exempt from VAT?

VAT exempt areas within EU countriesSpain: Canary Islands. Ceuta. Melilla.Germany: Büsingen am Hochrhein. Heligoland.Greece: Mount Athos.Italy: Campione d’Italia and the adjacent Italian waters of Lake Lugano. Livigno.

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The Easy Digital Downloads EU VAT plugin automatically sets the correct tax rate for each European country. However, some areas within European countries are exempt from EU VAT because they are not part of the EU customs territory. For example, the Canary Islands (including Tenerife, La Palma, etc.) are part of Spain but is a VAT exempt area.

You can read a full list of VAT exempt areas here. Most of these are already in EDD as separate countries so that the plugin can automatically ensure that no VAT is charged. However, the following areas are not treated as countries in Easy Digital Downloads and unfortunately it is not possible to prevent them from being charged VAT without affecting the entire country:

What makes you exempt from VAT?

What does VAT exemption mean?. Certain goods and services are exempt from VAT. This means that they are not subject to VAT and therefore, do not incur the standard 20% VAT charge.

Exempt goods and services include insurance, education, and health services. However, any VAT incurred on the provider’s costs in connection with these supplies cannot be reclaimed from HMRC.

Please note that specific conditions or restrictions may apply to certain exemptions, so it’s advisable to consult with a VAT expert for further guidance.

• Examples of VAT exempt goods and services. insurance, finance and credit services
• education and training services
• charitable fundraising events
• subscriptions to membership organisations
• selling, leasing and letting of commercial property, however this exemption can be waived