EU YACHTING VAT CHANGES - IMPACT ASSESSMENT Ayuk Ntuiabane VAT Director, Equiom Yachting MM Superyacht Finance Forum, Monaco Tuesday 22 September 2015 2015 Equiom Group
Introduction A. Overview of the EU indirect tax framework as it affects yachts B. Structuring yacht ownership for operation within v. outside EU VAT system C. Impact of recent rule changes in key Member States and how to cope. D. Some practical issues and frequently asked questions (FAQs).
Trinity of Indirect Taxes on Yachts VAT, Customs Duty, Excise Duty Harmonised Indirect Taxes Value Added Tax [The VAT Directive] Customs Duty [The Customs Code] Excise Duty [The Excise Directive]
Yacht Ownership Structuring - inside v outside EU VAT System 1. COMMERCIAL OPERATION EU Company VAT number UBO* 2. PRIVATE OPERATION Non-EU Company Yacht EU or Non-EU Flagged Commercial Status Yacht Non-EU Flagged Pleasure Supply, Acquisition or Import VAT Free Circulation Temporary Admission (Conditional Use) Inward Processing Relief (For Works) *Tax Relief under 2 for non-eu residents only
Impact of recent rule changes - France 1. Amended qualifying conditions mean French Commercial Exemption (FCE) still exists, but in a different incarnation 2. To a yacht being commercially registered, having a permanent crew and being put to a commercial activity have been added: Yacht must be at least 15m in length; and Yacht must sail on the high seas so determined if at least 70% of the voyages are carried out outside French territorial waters (preceding year) 3. But the benefits of the FCE are now defined to cover just the vessel itself its supply, modification, repair and maintenance. Exemption on charter activity is no longer allowed; Fuelling and provisioning are negotiable, but may be phased out 4. Going forward, new calculations to be made as to the ratio of charter voyages inside v outside French territorial waters 5. Flipping between commercial and private use status is particularly risky
Impact of recent rule changes - Italy 1. Now settled that VAT must be charged, collected and paid for charters commencing from an Italian port; charged at standard rate on full charter fee, if charter is wholly within Italian or EU waters; and Charged at standard rate but on 30% of the charter fee if the charter partly takes place outside the EU 2. Exemption on any grounds for the yacht itself (supply, modification repair, maintenance) or on goods for its fuelling and provisioning still questionable 3. So for operation in Italy make sure the yacht is: Commercially registered Imported and VAT accounted Owning company is VAT registered before commencing charters Chartered to third parties VAT is properly accounted, including on APA expenditure
Impact of recent rule changes - Spain 1. VAT must be charged, collected and paid for charters commencing from a Spanish port; charged at standard rate of 21% on full charter fee no reduced tax base In principle (use and enjoyment rule), charge at standard rate on proportion of use in Spain for charters entering Spain from outside 2. Yacht entering Spain first having previously left the EU without formal export can suffer import VAT on its value at standard rate of 21% 3. Exemption on yacht and its fuelling and provisioning not allowed 4. Exemption from matriculation tax now available for yacht 15+ metres 5. Withholding tax on income (a direct tax)? 6. Therefore for operation in Spain ensure the yacht is: Commercially registered, VAT accounted, chartered to third parties Owning company is VAT registered before commencing charters
Impact of recent rule changes Temporary Admission (TA) and Inward Processing (IP) 1. TA is for yacht use; IP is for works these provide conditional relief 2. Breaching the rules triggers fines, VAT on whole value or confiscation 3. Three qualifying conditions; Yacht owned/used by non-eu person and, for TA, used privately Registered outside the EU Brought into the EU temporarily only with a view to re-export 4. Updated rules (2011) mean just checking non-eu passport may not be enough officers can also check where relief beneficiary actually pays tax 5. EU resident employee claiming TA relief must show employment contract 6. New Union Customs Code (coming into force 1 May 2016) suggests TA and IP will have stricter formalities e.g. customs authorisation required 7. Some good news? No customs debt shall be notified to the debtor after the expiry of a period of three years from the date on which the customs debt was incurred. [Art 103 (1), UCC]
Frequently Asked Questions 1. To import or not to import yacht and account for VAT on value? 2. To undertake export/exit formalities if yacht is exiting EU for a certain length of time? 3. EU purchases and use of reverse charge mechanism? 4. Taxing charters on reduced base dash into international waters? 5. How to treat VAT on Advanced Provisioning Allowance? 6. VAT on ship/maintenance yard supplies and Buyer s Supplies? 7. VAT liability on sale of yachts? 8. VAT on commissions? 9. Impact on TA/IP if UBO takes up EU residence whilst yacht is under these procedures? 10.Encounters with Customs & Investigators disclosure of UBO?
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