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Moore Stephens Isle of ManYachting
PREC ISE . PROVEN. PERFORMANCE .
Yachting VAT NoteMay 2012
Mention yacht importation amidst the flurry of solicitations to
appoint Tax Representatives in Italy, and faces instantly dim. It
had not crossed the mind, because nobody had mentioned it.
They had supposed, as indeed most of the pamphleteering has
declared, that all they needed to do in order to charter their
yachts in Italy was appoint a Tax Representative there to register
them for VAT and assume responsibility for the correct
management and settlement of VAT on their behalf in
accordance with the local regulations. They would hence be
able to bring their yachts into Italy and conduct charters,
charging VAT at the fantastic rate of 6.3% of the charter fee.
Well, not quite so simple. Yachts are after all goods that are
owned (‘movable property’ in the VAT legalese), and as such
they must first be imported and VAT accounted under EU VAT
rules before they can be used as ‘EU goods’ in the operation of
charters or other services. Now, you tell a yacht owner that they
would have to put up front VAT, even at the touted rate of
6.3% of the value of their yacht on importation, or alternatively,
that they must post a bond in favour of the Tax Representative,
and they are bound to perk up to consider the seriousness of
the offer and fire back a few more need-to-knows.
A not so prosaic VAT scene
VAT representation is hardly uncharted waters. It is a trite area
of VAT law laid down by the dated Article 21 of what used to
be the Sixth Directive. It was particularly relevant in situations
involving non-EU companies trading in the EU. Its significance
need not be exaggerated or glamorized, nor should it be
doom-mongered.
Reflecting the provisions of that wider EU legislation, the tax
code of literally all EU countries requires the Tax Representative
to ensure that the foreign trader is properly registered with the
local tax administration. ‘Foreign traders’ (inelegantly referred to
as ‘non-established taxable persons’ in the lingo) are ones not
already registered for VAT in any EU country.
The Tax Representative must additionally ensure that the foreign
trader is fully compliant with the general VAT operational rules
such as invoicing, VAT treatment, exchange rates and the like.
He must ensure the trader’s accounting records are maintained
to local standards and are readily available for inspection by the
tax authorities. All the trader’s VAT and associated filings should
be correctly prepared and submitted, and enquiries and tax
inspections from the VAT office should be dutifully fielded and
handled. These are exacting requirements which, in effect, make
the Tax Representative the local exponent of the foreign trader.
This is why the tax authorities hold the Tax Representative jointly
and severally liable for the taxes of the trader; and why most Tax
Representatives would require a full bank guarantee from their
principal to protect them from losses.
However the context here is the EU, whose whole basis is that
of a borderless “Single Market” in which people, goods, services
and capital move internally among the Member States as freely
as within one country. Yes, the system does not quite work as
fully as the founding ideologues conceived it. The EU has turned
out to be a complex marketplace currently comprising of 27
countries, each with its own customs and tax authority,
speaking 23 official languages. Without the right expertise it
can be difficult for the uninformed to navigate successfully. Such
practical difficulties may dictate a need for a professional agent
or consultant in some situations. But the appointment of a
formal Tax Representative is not a mandatory requirement in all
cases involving EU trade in goods and services, and it would be
disingenuous to pretend otherwise.
Businesses already registered for VAT in one EU member state
have in fact ceased to be required to appoint a VAT
representative since 2000, thanks to EU Directive 2000/65/EC.
This Directive simplified the rules substantially, and withdrew the
option of Member States to require the appointment of a Tax
Representative. EU businesses thus continue to have the wide
choice and scope to organise their trade to avoid the liability to
register for VAT in Italy or elsewhere, and obviate the
appointment of any kind of tax agent.
It’s goods, silly
Moore Stephens Isle of ManYachting
PREC ISE . PROVEN. PERFORMANCE .
This bulletin is prepared by Moore Stephens Consulting Limited. Moore Stephens Consulting Limited is a company incorporated in the Isle of Man No. 071416C. Yachting VAT Note is designed to keep readers abreast of current developments and trends. It is a general guide only and is not intended to be comprehensive. No liability is accepted for the opinions it contains, or for any errors or omissions. In all cases you should seek professional advice specific to your circumstances. Printed and published by © Moore Stephens Isle of Man, an independent member firm of Moore Stephens International Limited. Moore Stephens International Limited is regarded as one of the world’s leading accounting and consulting networks with 636 member and correspondent offices in some 100 countries. May2012FA304
Ayuk Ntuiabane - Director
S ayuk.ntuiabane.msiom
Grant Atchison - VAT Manager
S grant.atchison.msiom
Clive Dixon - Director
S clive.dixon.msiom
Moore Stephens Consulting Limited
PO Box 25, 26-28 Athol Street
Douglas, Isle of Man, IM99 1BD British Isles
T +44 (0)1624 662020
www.moorestephensyachts.com
The Tax Representative is now only an option for foreign traders,
particularly those carrying out transactions in the EU with
private customers who cannot tax that operation by self-
invoicing. That is why the Tax Representative provisions have
since been largely removed from the VAT Directive itself - and
recast in terms of the Thirteenth Directive covering
arrangements for the refund of VAT to taxable persons not
established in the EU territory. And even then it is within the
rights of such foreign companies to request to directly register
with the relevant tax authorities, rather than appoint a Tax
Representative.
Ode to joy
Another trite but critical point about the EU is that it is a
customs union. It has a fiscal ‘fence’ around it, with a common
customs duty tariff and VAT against goods from outside the
fence. This is to protect EU traders against foreign competition
as well as being a producer of tax revenue. There is no customs
duty on superyacht imports, but there is certainly VAT. The VAT
liability is triggered on importation of yachts from outside the
EU and the person liable for payment of the tax on such
importation is the owner. Holding out as their Tax Representative
makes the latter jointly and severally liable with the owner.
Like other Member States, Italy makes that clear in its law
establishing and regulating VAT (the infamous Article 17)
whereby ‘Persons supplying taxable goods or providing taxable
services shall be liable to VAT; those persons shall pay the tax …
to the tax authorities …The rights and obligations … with
regard to transactions carried out in Italy by or on behalf of
persons not established in Italy and not having a fixed
establishment there may be exercised or fulfilled in accordance
with the usual conditions by a representative established in Italy
…, who shall be jointly and severally liable with the person
represented for the performance of the obligations arising …’
That in essence reiterates the provisions of the wider EU law
which allow Member States to impose directly on foreign
persons the same obligations as those which apply to
established taxable persons in their territories.
Not for the last time Italy wins first prize for grabbing the
headlines at the onset of the yachting season. But hold your
breath and wait for the truly sensational two pieces of good
news to come - if they do indeed come. Firstly, that Italy will
waive its import VAT accounting requirement for foreign traders
who appoint an Italian Tax Representative. Secondly, that the
profit and capital gain from the yachting trade, as might be
earned post registration through their Italian Tax Representative,
will be ignored for Italian direct taxation purposes.
As we wait in joyful hope reality is raining on this heady parade.
Italy requires VAT to be levied on importations, regardless of
who effects them. Italy has a live history of arresting yachts for
not accounting for VAT on the hull value. Italy requires yachting
businesses already established there to import the yachts they
operate and account for VAT on their value. Italy charges its
taxpayers a yacht ownership tax on top of VAT.
