Tax – VAT & GST

Ahhh tax, the thing we all love to hate. Seeing as I work for the Government, I guess I shouldn’t be so cynical as it pays my salary, however while everyone has to pay – the question is how to be smart and avoid paying more than you should!

I have done quite a bit of research on this, and it kind of goes hand in hand with the yacht registration post – although both are quite separate issues.

If we purchase a yacht in the EU with the intention of removing it from the EU then we can purchase it excluding VAT. (VAT in Europe can be anything from 15-25% depending on which country you are in) You have to leave the EU after a certain period of time. So we could purchase the yacht in France, then sail to a non-EU country within 18 months to avoid paying VAT on the purchase price.

Once you leave, you can go back in and the 18 month clock starts ticking again.

You can also claim back VAT on any other items – so it could be worth purchasing other boat ‘stuff’ over in Europe. As opposed to purchasing them here and then shipping them over. Here are the details:

Visitors from outside the EU are entitled to get a refund of VAT paid on goods they have purchased during their stay in the EU provided that the goods are produced to Customs on departure from the EU together with the VAT refund documents. These documents are normally prepared by the merchant from whom the goods have been purchased, and the refund is made directly by the merchant, rather than the customs service.

In many countries, commercial firms act as agents for the merchants. Generally, merchants or the commercial companies charge for this service by making a deduction from the refund. As the refund scheme is voluntary, travellers should check that the merchant participates in the scheme before the goods are purchased.

If you are a non-EU resident, then you can apply to temporarily import the vessel back in to the EU for periods of up to 18 months. After that you either need to leave the EU and return in again to get another 18 months, or pay VAT.

Apparently the place of registration of the vessel is irrelevant to this, but I would think that having a NZ registration would be a bit more authentic. I think that we would raise a flag being NZ residents, having a yacht registered in the UK and still be sailing around the Med with tax free status might make things a bit complicated and look suspicious. While we have options on which country our boat will be registered in, we have decided that we will register it in New Zealand.

To qualify for Temporary Admission in to the EU the yacht must be owned by someone who is established outside the VAT territory of the EU. (Another good reason for us to be traveling on our New Zealand passports with our New Zealand registered boat).

The yacht can only be used within the EU for a maximum of 18 months after its first arrival. Under certain conditions this time frame can be extended to a maximum of 24 months. This involves you leaving the EU and depositing your documents with the local authorities.

There is also a system called TOR – or Transfer of Residence Relief. So if we decided to permanently reside in the EU then we might qualify for this. Check this sheet out for more information Info en GB-2

Once we get back to New Zealand you are liable to pay 5% duty and GST of 15% on the value of the vessel if you want to permanently bring the yacht in. There is the option of temporarily importing a boat in to NZ for up to two years without having to pay tax.

The value of the vessel is determined by the purchase price less 10% depreciation per year – up to a maximum of 80% – so this is going to have to be a major consideration for us. If we purchase a new yacht for $200,000 and came straight back to NZ, then the duty and GST will total $40,000! If we took three years to get back to NZ, then the depreciated value of the yacht would be $145,800 and the duty and GST would be $29,160. A big difference.

I guess you have to pay tax somewhere along the line, however it would be really nice not to have to pay it twice and to try and minimize the amount. This will have to be factored in to our budget.

The other thing we will need to consider is our tax residency status. Looking at the Inland Revenue website it looks like we will still be classed as tax residents of NZ as we will still have an ‘enduring relationship’ with New Zealand – i.e our bank accounts and property etc will remain in New Zealand. So we therefore will still be paying tax in NZ – all our investments and income will be here anyway so that makes sense I guess. By continuing to pay tax on our investments in NZ while we are away it means that we will still qualify for other things when we come back. Superannuation, health care and those sorts of things.

So in summary, the tax benefits of purchasing a brand new boat in the EU mean that we avoid having to pay VAT in Europe, we delay and depreciate the value of the boat the whole time we are overseas, and then pay a lesser amount of GST when it gets here. All in all, another great reason to purchase the boat in Europe – plus it saves us having to sail all the way over there in the first place!

Do you have any good tax tips when it comes to boat purchases?

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8 thoughts on “Tax – VAT & GST

    • We are still a few years away. The other bonus is that we will only have to sail it back to NZ one way – as opposed to sailing there and back. (Very keen to do the Med, French Canals, Baltic, Caribbean etc!)
      In the mean time we have still got Wildwood here to play on too.
      🙂

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  1. In NZ is the valuation done on the vessel no matter how long you’ve had her? In Australia if you’ve had the vessel longer than two years, then the amount you purchased the boat for is not used and a valuation is done. There are ‘special’ surveyors who do a ‘special’ valuation on boats being imported.
    Also, for boats over a certain age (twenty years?) is there tax to be paid in the Eu? It maybe more than twenty years, but I’ve heard that boats of a certain age are exempt…. that might not help at all, just some thoughts to mull – and it’s another thing to add to your search criteria, some boats have tax paid already…. all so exciting!
    PS hurry up and come see us in the canals! LOL!

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    • Ohhh thanks Jackie, I will check that out!
      Yay can’t wait to come and see you in the canals! I have got visions of us riding back to the boat on our folding bikes, with a basket containing a nice bottle of red wine, a baguette and a gooey brie… mmmm
      Off to New Caledonia tomorrow to sail and practice our French!

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  2. excellent research, Viki.
    So, the longer you keep on sailing before returning to NZ, the less tax you need to pay because of the yachts value? This could help you staying “out there” even longer.
    Re the 18 months, I initially thought it was only 3 but might have mixed that up with another residency regulation. I’d rather trust your research here… 😉

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    • Thanks Hubert!
      Yes apparently so, but Jackie has just alluded to another point, so I had better check that out. I am pretty sure too about the 18 months. Should give us a decent amount of time to explore and come raft up in your part of the world!

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  3. Excellent article, Quite a few yachts are registered in Delaware from Europe and the US to avoid VAT etc too, a friend of mine did this and was very proud of this tax haven and had the port or origin as Delaware written on the back of his 1/4 mil yacht, he was very smug until we pointed out that he spelt (spelled) Delaware incorrectly!!

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  4. Pingback: Country Entry & Exit Requirements & Schengen | Astrolabe Sailing

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