Temporary Admission of Yachts
EU VAT legislation allows for the procedure for the temporary admission of yachts. Such a procedure makes it possible for any non-EU privately owned/registered yacht flying a non-EU flag to operate in the territorial waters of the European Union for a period of not more than 18 months from the date of entering the EU territorial waters, which is known as ‘the period of discharge’. After this period lapses, the yacht is to leave the EU territorial waters to avoid permanent admission. The temporary admission procedure may be initiated in any EU member state, including Malta.
When a yacht is temporary admitted into the EU via Malta, the customs authorities will require the deposit of a bank guarantee or security covering a percentage of the payment of the VAT and customs duties which become payable if the yacht remains in the EU territorial waters after the period of discharge.
This procedure was previously referred to as ‘temporary importation’ which was an ambiguous title since a yacht under such a procedure is never actually imported under an EU importation declaration, but merely given a right of free passage throughout the EU, provided it is in compliance with the statutory requirements. For temporary admission to take place, the user of the yacht must be a non-EU resident, although EU resident guests can also accompany the non-EU resident. Moreover, the yacht must be used for a private purpose with the intention for re-exportation.
This temporary admission mechanism allows non-EU residents wishing to temporarily make use of their private yachts within EU waters to admit their yacht under temporary admission via Malta, being subjected to the Maltese customs authorities. This procedure would enable yacht owners to use their yacht freely in EU territorial waters, without payment of Value Added Tax (VAT), being able to freely move between Member States without any further custom duties or formalities, for the aforementioned period of 18 months. This is an important mechanism which makes it possible for non-EU resident yacht owners to enter EU territorial waters for a definite period, such as a holiday, without being required to pay VAT duties. In the absence of such a mechanism, non-EU resident yacht owners would be hesitant to visit European waters due to the cumbersome VAT duties to be paid.
Onward Supply Relief for Commercial Purpose
If a yacht is temporary admitted in the EU for a commercial purpose, the temporary admission mechanism will not be applicable, and the yacht will be subjected to the relative VAT and custom procedures. A mechanism which is relevant in this scenario is the ‘Onward Supply Relief’. The onward supply relief mechanism is an exemption from VAT on the importation of good imported into Malta from non-EU member state by a taxable person registered for VAT, where such imported goods are released into free circulation in Malta, and then dispatched to a taxable person into another EU country as an intra-community supply. Such a mechanism is regulated under item 3 of Part Four of the Fifth Schedule of the VAT Act of 1998. These provisions are also applicable to the temporary admission of yachts in the EU, acting as a tool against the import VAT payment, whilst allowing the yacht to circulate freely the EU territorial waters.
The temporary admission mechanism does not apply to yachts intended for boat exhibitions. Thus, if a yacht is temporary admitted in the EU territorial waters for the purpose of a boat exhibition, the applicable regime would be the ‘temporary admission relief for exhibitions’, which is to be filed before the boat exhibition commences.
Sale of Vessels
With regard to the sale of vessels, the temporary admission procedure is not applicable. Moreover, local customs can impose a security guarantee or deposit covering the VAT and customs duties that will be due if a particular yacht is sold or not removed within the prescribed period of time.
Refit and Repair
If a yacht is temporary admitted within the EU territorial waters to undergo major overhaul, refitting or refurbishment, the temporary admission procedure is not applicable. Instead, the applicable mechanism would be the ‘Inward Processing Relief’. Through this mechanism, import VAT, customs duties and the excise duty on third country yachts imported within the EU territorial waters are suspended, provided that the imported yacht is intended for re-exportation after its processing and that the applicable requirements are satisfied. However, such a mechanism should not be confused with the temporary admission procedure as there are different requirements.
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