If you're planning to sail the Mediterranean Sea or waters of European Union countries it's likely you'll have come across mentions of paying VAT tax on your yacht and things you import. As a foreigner especially this can be a little tricky to understand.
To help out I'm going to go through some of the key things to know about EU VAT and yachts, such as what qualifies a yacht to be exempt from VAT and how yacht goods can be imported VAT free. Wherever possible I've linked official EU documentation so you can refer to it yourself.
Before I begin just a little caveat that this information is general in nature meant to act as a helpful guide for cruisers. If you want specific advice for your situation it's best to consult a lawyer or tax specialist.
What is EU VAT?
VAT, or Value Added Tax, is a broad consumer tax applied by countries in the European Union. By law the standard VAT rate must be at least 15%, but it does vary country to country. Here's a few examples to give you an idea of VAT rates.
Malta - 18%
France - 20%
Italy - 22%
Spain - 23%
Greece -24%
Croatia - 25%
EU VAT paid status
Yachts that sail in European Unions waters are considered VAT Paid or VAT Unpaid.
If a boat is VAT Paid it generally means that VAT was paid to a country in the European Union and that payment is still considered valid. There are a couple exceptions, for example some older boats that met the conditions to be considered VAT Paid when the VAT system was first introduced.
VAT Unpaid means that VAT has not been paid within the European Union or that the original EU VAT Paid status is no longer valid. Unfortunately there are certain circumstances where a boat can lose EU VAT Paid status and if you're planning to take your VAT Paid yacht out of EU waters for an extended period of time it's something you should look into.
EU VAT for yachts of European Union residents
People considered European Union residents who sail or buy their boats in EU waters are required to have VAT Paid status. It's a good idea to keep proof of this aboard to help prevent any issues with customs.
EU VAT for yachts of foreign residents
If you aren't a resident of the EU you can sail a VAT Paid or VAT Unpaid yacht within EU waters. To be able to sail a VAT Unpaid yacht you do need to meet the conditions for temporary importation relief, often referred to by cruisers as the 18 month tax exemption.
Having a yacht in the EU tax free
When you bring a yacht into the European Union as a non-EU resident it's possible to get an 18 month tax exemption. The conditions for this temporary importation relief are outlined in these two documents.
Article 250-253 of the Union Custom Code
Article 207-217 of the Customs Delegated Regulation 2015/2445
One of the key sections to read is Article 217(e) of the Customs Delegated Regulation which refers to the 18 month period allowed for private yachts to remain within the EU:
Article 217: Time-limits for discharge of the temporary admission procedure in the case of means of transport and containers
The discharge of the temporary admission procedure in the case of means of transport and containers shall take place within the following time; (e) for privately used means of sea and inland waterway transport: 18 months;
To reset this time period you need proof that the yacht has exited the European Union during the 18 month limit. Many people do this by taking the yacht to a non-EU country and getting marina and customs paperwork that proves the yacht was outside the EU. There's no minimum period of time you need to be outside EU waters.
Another key section is Article 212 of the Customs Delegated Regulation:
Article 212: Conditions for granting total relief from import duty for means of transport
3. Total relief from import duty shall be granted for means of road, rail, air, sea and inland waterway transport where they fulfil the following conditions: (a) they are registered outside the customs territory of the Union in the name of a person established outside that territory or ,where the means of transport are not registered, they are owned by a person established outside the customs territory of the Union; (b) they are used by a person established outside the customs territory of the Union, without prejudice to Articles 214, 215 and 216.
This section establishes two of the key eligibility criteria for temporary importation.
The person is established outside the Union
The vessel is registered outside the EU
The feedback we've received on Point 1 is it's usually interpreted as the person being a non-EU resident. As you can see it does not mention citizenship.
Point 2 is a VERY important section to know about if you are considering registering your boat to Poland. Poland is an EU country therefore having a Polish registration could, based on this legal document, make your boat liable for VAT even if the owner is a non-EU resident.
How to get the VAT exemption
In our experience there's nothing specific you need to do to start the exemption, it just starts when your yacht clears customs in the EU and it's up to you to retain records.
When we were in Italy it was commonplace for the financial police to come to the marina and check how long foreign yachts had been there. Due to some confusion regarding timing and a change of owners, one unfortunate couple discovered they only had days to relaunch their yacht or face a VAT tax bill from the Italian government. This shows how seriously the rules can be taken.
Note for EU citizens
If you're a citizen of an EU country but you reside elsewhere you may be able to claim the 18 month temporary importation. This is because the wording of the legislation refers specifically to residents, not citizens. Our suggestion is to make sure you have clear evidence of your status as a person established outside the Union in case Customs come asking questions.
Importing yacht in transit goods into the EU VAT free
Within the European Union it's generally possible for foreign yachts to import marine goods VAT free, but the process is country specific and can be very complicated.
Some countries also require you to use an agent. Croatia is one example so we used a yacht services company to bring a sea container of goods in VAT exempt, but for smaller items the tax was cheaper.
If you are trying to import goods tax free make sure your parcel is addressed to the yacht and labelled as "Marine Yacht Spares in Transit". For country specific information you could speak to the local Customs office or a customs broker in the area.
VAT refunds
In the EU there is a process through which you can get a VAT refund on certain goods on departure. We did this in Croatia and while it involved a bit of paperwork, the refund was absolutely worth it.
There are a few general criteria for the purchase and export.
The purchaser needs to be considered a visitor to the EU
VAT must have been paid at the time of purchase
The goods must leave the EU within 3 months of purchase
All goods must be accompanied by the purchaser when they leave the EU
There is no standard form across EU countries so you will need to search online, check the national tax office website, speak to Customs or liaise with the seller to find out what the process is in the country you're departing from.
Official sources
Here are some useful sources to refer to for EU VAT matters.
European Union - VAT Rules and Rates
European Commission - Frequently Asked Questions on: Rules for private boats
European Commission - Guide to VAT refund for visitors to the EU
