On paper, the VAT is supposed to be straightforward, especially when you’re used to the overall complexity of the French tax system. You pay a 20% on new manufactured products, end of story. In other words, used boats should be completely out-of-scope.
Of course, this would be too simple. Actually, in France, you can halve the VAT on new boats using a leasing scheme, and even completely zero it if you’re sailing outside of the EU territory.
Leasing aside, the rule seems to be that you need to pay the VAT of your flag country unless you never plan on going there. For other countries, you can’t stay more than a few consecutive months without paying. The trick is to interrupt your stay by sailing to the closest third-party country, taking a couple of pictures for evidence if needed, before getting back. Easy peasy. There’s just a small problem : you usually can’t work if you haven’t cleared the VAT. In theory, Sarah would be pissed, but since she doesn’t have the proper diploma to work outside of the EU anyway, we probably don’t care that much…
Turns out there seem to be as many exceptions than there is countries, and even the concept of country isn’t as clear-cut as you would have thought …
For example, Gibraltar is part of the UK, but Spain claims it as well. Which means that Gibraltar isn’t in the Schengen area (but belongs to the EU anyway). Unless of course you’re talking to the Spanish customs. French Antilles aren’t considered to be in France, but you will only be asked for the VAT differential with continental France if you go there. And you’ll probably end up paying the octroi de mer if you stay there (or in another so called French “DOM“) too long. None of that in French Polynesia (which is a French “TOM“), but an import tax that you need to settle after 3 uninterrupted years.
If -like me – you never really understood the difference between England, Great-Britain and the United Kingdom, you’re in for a nasty headache.
To make things more challenging, we are considering buying a boat for which the French VAT has already been settled in the past – we even have an official customs letter to support this. Trouble is, she’s been sailing a Swiss flag for four years. We gave the customs a quick call to make sure we were all set. Since there are so many legal texts around this, of course the officials didn’t have a clue.
At La Rochelle, a nice custom agent told us that since we had this official VAT-payed stamp, he was one-hundred percent sure we would be OK but he was not confident enough to write this on a nice French-customs letterhead. At Lorient custom office, we were told that since the ship had sailed a Swiss flag for more than three years, she had been de facto exported, and thus would need to be imported back. And of course, importation equals VAT. Our guy didn’t care that she staid in Portugal most of the time, nor that in essence, paying a VAT on the same goods multiple times didn’t make much sense. Back at La Rochelle, another guys told us that even though it was stupid and didn’t make any sense, we would need to pay nevertheless. I didn’t dare asking him to write these exact words on a piece of paper …
Deep on web forums, we found out we were not alone in that situation. In our case, the saving grace seems to be that the ship staid in the EU most of the time, making its non-EU flag irrelevant.
Bottom line, if your ship has left both the EU territory and the EU flag for more than three years, you might have a VAT situation even if someone else already paid it in the EU for your very ship in the past!