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EU returned goods relief and temporary admission

Published 18/05/2020

Minimising the risk of VAT and import duty becoming payable on your boat when arriving in the EU27 after the end of the transition period

Returned Goods Relief

The payment of VAT on a boat is not necessarily a one off event. In fact every time your boat leaves the Customs Territory of the EU, technically speaking, you risk having to pay VAT on its return. This is because, the EU VAT Directive states that a chargeable event for VAT occurs when goods (in our case a boat) are imported.

However, triggering a chargeable event for VAT doesn’t always lead to a VAT payment. If goods (the boat) are being re-imported in the same state [condition] as they were exported by the same person who exported them, and provided the goods are exempt from customs duties then the VAT Directive provides for an exemption from VAT.

Whether or not the goods are exempt from customs duties is determined by the Union Customs Code (UCC), which permits goods that have Union status when they are exported from the customs territory of the European Union to be granted relief from import duty provided they return to that territory within three years.

In summary, in order to be entitled to relief from VAT and, if applicable, import duty on arrival in the customs territory of the European Union (commonly called returned goods relief – or RGR) a recreational craft must:

  1. have had Union status when it was taken out of the EU; and
  2. have been exported from the EU by the same person as is importing it; and
  3. be in the same condition as when it was exported; and
  4. return within 3 years of export.

The result is that boat owners usually move seemingly seamlessly in and out of the EU, irrespective of the boat’s flag state, the nationality of the owner, or the EU Member State in which the VAT (and, if applicable, import duty) were accounted for.

EU Temporary Admission

The boat’s flag state (country of registration) is however a factor which determines whether a boat is eligible to enter the customs territory of the EU under a temporary admission arrangement.

Temporary admission allows non-Union goods (which includes non-EU boats which are brought into and used for private purposes in the 'customs territory of the Union’) to enter the customs territory of the EU (which includes territorial waters) for a limited period of time without payment of VAT and, if applicable, import duty as long as they:

  • are intended for re-export; and
  • are not intended to undergo any change, except normal depreciation.

Although the EU VAT Directive states that a chargeable event for VAT occurs when goods (in our case a boat) are imported, if the boat is placed under temporary admission with total relief from import duty, VAT only becomes chargeable when the boat ceases to be covered by those arrangements.

Conditions that must be met if total relief from import duty is to be granted for a means of road, rail, air, sea or inland waterways transport (in our case a boat) require that the boat:  

  • is registered outside the customs territory of the Union; and
  • is registered in the name of a person established outside customs territory of the Union or if the boat is not registered it must be owned by a person established outside the customs territory of the Union; and
  • must be used by a person established outside the customs territory of the Union (although there are a few exceptional situations in which this requirement does not apply).   

A person established in the customs territory of the Union is someone who has his or her habitual residence in the customs territory of the Union or in the case of a legal person or an association of persons, having its registered office, central headquarters or a permanent business establishment in the customs territory of the Union.  

Although the UK has left the EU, until the end of the transition period, the UK is still treated as part of the customs territory of the Union. This means that a UK registered boat or a boat owned by a person who is established in the EU is currently not eligible for temporary admission. Thereafter, unless the future relationship between the UK and the EU determines otherwise, a UK registered boat owned by somebody who is established outside the customs territory of the Union will be eligible for temporary admission.

The time limit for the discharge of the temporary admission procedure in the case of a privately used means of sea and inland waterway transport is 18 months. There is scope within the UCC for the period of temporary admission to be extended, but only in exceptional circumstances.

Documentary Evidence

Until the future UK – EU relationship has been finalised, we cannot be certain that UK boats will be eligible for temporary admission. Assuming they are, after the end of the transition period some UK flagged boats within the customs territory of the Union will have Union status and some will have been allowed to enter the EU under temporary admission, for a limited period with total relief from VAT and import duty. The boat’s flag state and the nationality of the owner might then become triggers which lead to increase interest in the customs status of UK flagged and / or UK owned boats.

If this is the case, it will be important to have the relevant documentary evidence to demonstrate the boat’s status, if requested.

In correspondence, the European Commission has advised that, the Union Customs Code states “The relief from import duty shall be supported by information establishing that the conditions for the relief are fulfilled”.

Whether your boat will be in the EU27 for an unlimited duration of stay on the basis of it having Union status or you intend to rely on a temporary admission arrangement to go boating in the EU27, we encourage all members to retain evidence to ensure that it can be demonstrated that all of the applicable criteria, detailed above, are met.

Additionally it is recommended that evidence of the location of the boat at the end of the transition period, is obtained and retained, to evidence eligibility for RGR in the future as the European Commission has previously indicated that a boat which is lying in the UK when the UK’s current relationship with the EU ends, may not meet the criteria for RGR as the boat, technically speaking, won’t have been exported from the EU.

Therefore, if Union status is important to your future plans, you may wish to locate your boat outside the UK at the point in time when the transition period ends and obtain documentary evidence of its location, as a boat which is lying in the EU27 will retain Union status and a boat which is elsewhere in the world, other than in the UK or UK territorial waters, should be eligible to re-enter the EU and claim relief from VAT and import duty as returned goods.

For more information about the RYA’s Brexit work, visit www.rya.org.uk/go/brexit.

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