It is vital that you know that avoiding the payment of VAT is considered a form of tax evasion and can result in a situation where the boat is arrested, or a company is hit with very large penalties. In this blog, we will look at how to correctly go about requesting and receiving an order VAT free.
Value Added Tax is a consumption tax that is charged on top of the sale price of a non-essential good or service. It represents a tax on the value that is added to the product throughout the process of its production. Ultimately, the burden of the VAT is placed on the consumer, so the more you spend, the more tax you pay.
There are three situations in which you are exempt from paying VAT on your order, and they are as follows:
- Inter-Community Sales
If you are based outside of the country where the seller is registered and have a valid EU VAT number, then the sale is considered to be a business-to-business (B2B) order between two VAT-registered companies who are in different member states of the EU. B2B sales to other member states are zero-rated. The delivery note will have to be stamped on arrival and kept as proof that it was indeed received outside of the member state where the seller is registered.
It should also be noted that if you have a valid EU VAT number from the same country that the seller is registered with, you will be able to reclaim the VAT back from the government on your end-of-year VAT returns. For example, if an order is purchased from Global Wine Solutions France, and you have a valid French TVA number, any VAT that we charge on the order will be claimable from the French government on your VAT return.
- Charter Vessels that are Commercially Registered
Commercially registered vessels are exempt from paying VAT, but that is not without its own list of requirements. Clients will often think that simply because they are commercially registered, they can receive all their orders VAT free, no questions asked. Unfortunately, this is not the case, and it is important that we are able to explain in a professional manner what is required from them in order to make the VAT free delivery possible.
First, as mentioned above, the yacht must be registered for commercial use as a charter vessel, and you will need to provide a valid boat registration document to prove this.
Second, the wines and spirits must be ordered specifically for a charter and must be consumed on that charter. To ensure this is the case, you will have to produce a valid charter agreement. Furthermore, the delivery can only board the vessel 48 hours before the charter, and the boat must then leave the port within a 48-hour window.
Third, you will have to produce an up-to-date crew list for when the bottles are delivered.
Fourth, and finally, you will need to provide a signature for an attestation. You should certainly read through the attestation carefully before signing, as customs will be checking that the vessel was outside of local waters for at least 70% of the previous year’s sailing.
Once all the paperwork is in order, our expert team can get to work on processing the paperwork with our customs agents. This can take up to 48 hours, and so this must be factored into the order time. It is important remember that customs in the port of delivery have every right be present at the time that the delivery is made.
- Export Sales
Orders delivered to a yacht when it is outside of the EU will qualify for a zero rate of VAT. It is important to understand that although the invoice is zero-rated, the order may still be subject to local VAT and Duty once it arrives at local customs. If the boat then re-enters the EU, it will have to declare this.
These three situations are based on the assumption that all vessels are liable for paying VAT on their wine and spirit orders. Although extremely rare, VAT exemptions may possibly be granted to commercial vessels for certain supplies if the relevant EU state deems this to be acceptable. If your vessel claims to have such VAT exemptions, it is important that it is noted well before the start of the season, and that all relevant paperwork is shared, to avoid confusion and delays when there is an order that needs to be delivered as soon as possible in the middle of the charter season.
It is wise for a supplier to be critical of its client’s claims of tax exemption, whilst maintaining a high level of respect and professionalism, and in return, it is wise for you to be critical of your supplier’s promise of a VAT-free delivery if something doesn’t seem quite right to you.