VAT rules on importation of yachts
In accordance with Council Directive 2006/112/EC on the common system of value added tax (VAT), the importation of goods, including yachts, refers to the entry into the EU of a yacht which has not been previously placed into free circulation within the EU.
This means that yachts deriving from a third country, i.e. a country which is outside the EU, shall be considered to be in free circulation in a Member State of the EU only if the import formalities have been complied with on arrival within a particular EU country.
Therefore, any yacht that finds itself within the EU VAT zone waters is liable to pay VAT, irrespective of the nationality of the owner.
However, third-country nationals, who intend to use the vessel within the EU only temporarily, may, fortunately, free themselves from this predicament through Malta by placing the yacht under temporary importation arrangements.
A yacht that is imported into EU waters through Malta customs with the intention of re-exportation within the allotted timeframe may find themselves exempt from paying VAT and customs duties, in addition to numerous benefits ensuring an uninterrupted voyage through EU waters, so long as the vessel is only used for private purposes.
When a yacht is placed under temporary importation, the chargeable event shall occur and VAT shall become due only when the yacht shall cease to be covered by those arrangements. This means that as long as a yacht follows the time frames and established periods for entry or otherwise in the EU, no VAT shall become due at any point in time of the yacht’s cycle inside and outside of EU waters.
Temporary Importation – facts and figures
Even though the current regulations of Temporary Admission have been in place since 2006, a question on the requirements to apply for temporary admission and how long a yacht can remain in the European Union while operating under Temporary Admission remain the most frequently asked questions.
In accordance with EU law, a non-EU flagged private yacht, owned by a non-EU resident which is imported to EU waters with the intention of re-exportation, may be exempt from paying VAT and customs duties as long as the yacht is used only for private purposes for a total duration of 18 months.
Temporary admission begins upon the crossing of EU customs territory and ends on the re-exportation, or exit of the vessel from EU customs territory into Non-EU customs territory.
Therefore, once the 18-month period is over, the vessel must leave the EU, thus discharging the temporary admittance period. If the vessel does not leave on the expiry of the 18 months, customs duty and VAT become payable.
It is important to note, that temporary importation can be renewed, provided that the vessel has been sailed out of the EU and cleared in and out of a non-EU port. In this case, upon returning to the EU waters, a new period of temporary admission will begin.
Conveniently, there is no minimum period in which the vessel must remain outside of EU customs to be eligible for the renewal of its temporary admittance.
Furthermore, temporary admission into the EU means that during this 18-month period the yacht owner would benefit from:
The freedom to move from one Member state to another with no further customs formalities.
The possibility to employ EU residents to work on the vessel provided that a formal contract of employment exits between the owner and the seafarer.
It is important to remember, that the owner of the vessel must comply with the established requirements and restrictions throughout the whole period of the temporary importation:
It is the responsibility of the beneficial owner/Captain of the vessel to keep evidence of the vessel’s movements.
Temporary admittance is not available to beneficial owners who have an EU residence.
The 18-month allowance period is only applicable to the vessel, and the beneficial owner must comply with the fiscal residential legislation of each individual member state, as well as applicable immigration laws.
The vessel may not be used commercially during the temporary importation period. In some member states, this includes advertising the vessel for sale.
Voluntary Customs Bonding and its synergy with Yacht admission
When the vessel is not in use and has been laid up (anchored) in port, it is possible to apply for voluntary customs bonding.
The vessel may be in bond for a maximum period of 24 months, differing between member states. Furthermore:
- Crew members may remain on board the vessel during the bonding process, provided that they have a formal contract of employment.
- During the period of customs bonding, the 18 month admission period is suspended whilst the vessel is not in use.
- When the beneficial owner requests for the vessel to be unbonded, the temporary importation period resumes from where it had left off when the vessel was bonded.
Upon expiry of both, the 24 month bonding period and the 18 month admission period, the vessel will be required to leave EU customs territory, failing to do so will make the beneficiary liable for VAT and customs duty.
Temporary Yacht Importation into EU via Malta
To begin the temporary admission of the vessel into EU via Malta, Malta shall be the first port of call on the vessel’s arrival into EU customs territory.
Once the yacht is in Malta, one has to make arrangements with Customs in order to pay a visit to the yacht. Before this Customs officer will usually require the submission of supporting documents. If all documents are at hand the procedure is relatively easy and straightforward.
After Customs has ensured all corresponding documentation is in place, importation exemption will be issued, allowing the vessel and its beneficiary to take full advantage of their new found freedom from VAT, customs duties and travel restrictions between EU member states.
This page is intended to serve as a general guide on the subject matter. For further information and guidance on the subject we recommend seeking professional assistance.
At SMM we can assist with the importation of the vessel into EU to obtain temporary admission status through dealing with Customs on your behalf. We aim to resolve the matter in the shortest time possible to make the process stress-free and smooth for you.
Contact SMM Yachting team for personalized guidance and free consultation. We are always available for both face-to-face or online consultations, get in touch with our team and speak with one of our experts today.