Can you get a VAT exemption on boat repairs, maintenance or refits?
In some cases, yacht repairs and maintenance can be done without paying VAT (VAT exemption). This tax exemption depends primarily on the vessel’s status and its owner, but also on the rules set by the EU Member State where the renovation, maintenance or refit services will be performed.
In practice, three types of yachts are eligible for VAT-free repairs:
- commercial vessels;
- pleasure yachts under the 18-month Temporary Admission scheme;
- pleasure yachts owned by a taxable company not established in the same Member State as the shipyard.
Your client wants to repair a commercial vessel in the Mediterranean
Repairing a yacht in France or in Monaco: the conditions for VAT exemption
Commercial vessels that comply with the conditions set out in our “Commercial vessels” guide can benefit from a VAT exemption on their repair in both France and Monaco. In practice, this exemption is valid for:
- repairs;
- maintenance;
- refit operations;
- equipments.
The conditions to benefit from these exemptions are as follows
A mandatory certificate to be paid by the yacht operator
For a ship operator’s client to benefit from a VAT exemption on repair works, they must provide their supplier(s) a certificate they have drawn up. The latter must certify that the boat meets the conditions for tax exemption. In addition, the vessel operator must state on the document that they will pay the VAT in the event that the conditions for exemption are not met when work is complete.
What is a “vessel operator”?
Anyone employed or commissioned – by the shipowner, their representative or an authorized company – to deal permanently with the safety and maintenance of a yacht is considered a ship operator.
5 conditions for VAT exemption to be included on the ship operator’s certificate
- The vessel is registered on a commercial register;
- The ship is permanently crewed;
- The vessel is engaged in commercial activity;
- The ship is at least 15 m long;
- At least 70% of the trips made by the yacht during the year take place outside French territorial waters.
What you need to know for a VAT exemption from the first year
As explained in our “Commercial vessels” guide, a new commercial vessel can benefit from a VAT exemption from its first calendar year of operation, when it is put into service, when there is a change in ownership or if the vessel has never been operated in France before. However, if at the end of this first year, the vessel has not met one of the conditions for exemption, it will not be eligible for an exemption on operations carried out the following year. In addition, the vessel operator will have to pay the VAT that they were exempt from. In other words, they will have to pay back the VAT on the total cost of repairs that were wrongly charged without VAT.
Ship repairs in Italy: VAT exemption for commercial vessels
- repairs;
- maintenance;
- refit operations;
- equipments.
To remain compliant in Italy
Unlike in France, it is still mandatory to issue a customs document for the supply of equipments for a commercial vessel.
Companies owning yachts, if they want to make their purchases in exemption, must first register their supplier on an online platform managed by “Agenzia delle Entrate”.
Ship repairs in Spain or Croatia: no VAT exemption, subject to exeptions.
In Spain as well as in Croatia, there is no scheme that allows a commercial vessel to benefit from a VAT exemption. However, a yacht registered in a non EU country and whose owner is established in a non EU will be able to benefit from VAT-free repairs with using the Inward Processing Relief scheme.
EASYTAX INTERNATIONAL, INFORMS YOU ABOUT ALL THE RULES OF VAT EXEMPTION THANKS TO ITS ONE-STOP SHOP:
- Information on the exemption conditions and VAT obligations for each commercial vessel and according to the different EU Member States in the Mediterranean (France, Monaco, Italy, Spain, Croatia).
- Regulatory, logistical and customs assistance for yachts in most French shipyards.
Your client wishes to have a pleasure boat repaired in the Mediterranean under the 18-month temporary admission scheme
Repairing a pleasure boat in France or in Monaco without paying VAT
Pleasure boats under the 18-month Temporary Admission scheme can benefit from a VAT exemption on their repairs in France and Monaco with the Inward Processing Relief customs scheme.
Conditions to benefit from the inward processing scheme for yacht repairs in France and Monaco
In practice, the pleasure boat must meet all of the following conditions:
- be registered in a non-EU country;
- be owned by a resident of a non EU country;
- never have paid VAT (including due to a prolonged stay in the waters of the European Union);
- obtained a customs agreement for repairs.
How to obtain a customs agreement for repairs in France ?
In order to obtain this approval from the administration, the pleasure boat must provide Customs – usually through a customs approved forwarder – with a list of the repair work to be done. The shipyard’s quotes usually serve as this list.
After studying the documents, the authorization is issued to a single holder. However, this temporary scheme for repairs can also be granted when there are several participants who invoice the vessel directly. This is called “multi-provider” inward processing scheme. A scheme – implemented with the agreement of the customs authorities – that can be granted to the person established in the Customs Territory of the European Union – who performs or has performed the processing operations.
The inward processing scheme in 3 steps
- Application: submission of an application for authorization in accordance with the model in Annex 67 of the Implementing Provisions of the Community Customs Code.
- After the authorization is issued: import the vessel under the inward processing scheme. This is carried out via a Single Administartve Document (SAD) or by using a simplified customs clearance procedure.
- Once the repairs are completed the yacht is re-exported and regains its 18-month Temporary Admission status
Top Tip
- The inward processing scheme allows suppliers and subcontractors to be invoiced without VAT.
- When re-exporting the vessel, the holder must obtain the Single Administrative Document (SAD) for re-export proving the end of the inward processing scheme.
- The duration of the work under the Inward Processing scheme is not included in the 18 months provided for in the Temporary Admission scheme. The maximum period of presence in Community waters (stay under 18-month TA+ inward processing) cannot exceed 24 months in total.
Repairing a pleasure boat in Italy without paying VAT
Pleasure boats under the 18-month Temporary Admission scheme can benefit from a VAT exemption on their repairs in Italy with the Inward Processing scheme.
Conditions for benefitting from the inward processing scheme for yacht repairs in Italy
In practice, the pleasure boat must meet all of the following conditions:
- be registered in a non EU country;
- be owned by a resident of a non EU country;
- never have paid VAT (including due to prolonged stay in EU waters);
- obtained an agreement from customs regarding its entry into Italy for repairs.
How do I get customs approval to enter Italy for repairs?
To obtain this approval from the authorities, the pleasure boat must provide Customs – usually through a customs approved freight forwarder – with a list of the repair work to be done. The shipyard’s quotes usually serve as the list. Authorization is then issued to a single holder.
Unique to Italy: it is compulsory to have an insurance for VAT based on the vessel’s value with the customs authorities. In 2020, the rate was 22%. In most cases, this guarantee is covered by the company which carries out the works via its insurance company. Only the warranty costs are then passed on to the customer.
Repairing of a pleasure boat in Spain without paying VAT
Pleasure boats under the 18-month Temporary Admission scheme can benefit from a VAT exemption on their repairs in Spain with the Inward Processing scheme. A formality called “TPA” in Spain.
Conditions for benefitting from the inward processing scheme when repairing yachts in Spain
In practice, the pleasure boat must meet all of the following conditions:
- be registered in a non-EU country;
- be owned by a resident of a non-EU country;
- never have paid VAT (including due to prolonged stay in EU waters);
- obtain agreement from customs regarding its entry into Spain for repairs.
How do I get customs approval to enter Spain for repairs?
To obtain this approval from the authorities, the pleasure boat must provide Customs – usually through a customs approved freight forwarder – with a list of the repair work to be done. The shipyard’s quotes usually serve as this list. The authorization is then issued to a single holder.
Repairing of a pleasure boat in Croatia without paying VAT
Pleasure boats under the 18-month Temporary Admission scheme can benefit from a VAT exemption on their repairs in Croatia with the Inward Processing scheme.
Conditions for benefiting from the inward processing scheme for yacht repairs in Croatia
In practice, the pleasure boat must meet all of the following conditions:
- be registered in a non-EU country;
- be owned by a resident of a non EU country;
- never have paid VAT (including due to a prolonged stay in the waters of the European Union);
- obtained a customs agreement for repairs.
