Website Update Log

 Updated Feb, 2004

Note:  For the dual purposes of brevity and accuracy, I’ve rewritten this article after obtaining additional information over the Winter of 2003-2004.  The new information came from HM Customs in the UK and also from networking with some North American (NA) cruising boats wintering in other European Union (EU) countries.  The content of the original article has been retained but summarized.  Hopefully, this reflects a more thorough understanding of VAT-related practices within the EU, although I continue to believe that discussing VAT is the proverbial ‘peeling the onion’ exercise, given the unlikely goal of discovering a firm core around which one can operate with certainty.

 VAT – the acronym for Value Added Tax with which all Europeans are now familiar, resigned to and heartily detest – is short for Valued Added Tax.  As the fledgling European Coal and Steel Community of the early  1950’s matured into the current EU, member countries individually abandoned a complex mix of sales and use taxes in favor of one common EU-wide tax scheme known as VAT.  The EU has now established and placed into effect a set of guidelines on both what is assessed VAT and – of special interest to visiting sailors - what constitutes relief from VAT.  To dig into these guidelines, you can review the EU Official Journal at  We’re told that Article 561 and 562(e) are the relevant language for temporary relief from VAT for one’s boat.

 Whether you buy a pair of socks, that new Navtex receiver or a bottle of wine, you’ll find the advertised price anywhere in the EU to most likely include VAT.  But what cruising sailors want to know is how a VAT tax assessment might be applied to their boat, since the EU has mandated that an extended stay of a non-EU registered boat beyond 18 months within its combined members’ boundaries results automatically in compulsory importation of the boat and, consequently, liability for VAT.  When this occurs, your boat is impounded and you are assessed a substantial amount (e.g. 17.5% in the UK) on the estimated value of your boat…and the officials do the estimating (although you can influence that process).

 The VAT Basics:  Here are the realities of EU VAT administration as we’ve come to understand them so far.

1.      The EU has established a VAT tax scheme that in general provides VAT liability for boats purchased in or formally imported into all EU waters.

2.      Concurrently, the EU code provides for relief from VAT liability for up to 18 months (Article 562(e) as referenced above) when the boat is owned by non-EU residents and where the boat will subsequently be removed from EU waters (Article 561).

3.      We understand that this 18 month period can be extended for up to six months (maximum total: 24 months if, for a period of time, the boat is inactive, laid up and/or the crew leave the country).  Speak with the local Customs folks in the country where you are considering the use of this ‘held in bond’ process.

4.      EU legislation omits any reference to how long a vessel must remain outside the EU in order for the vessel’s “VAT Clock” to be restarted and for the boat to enjoy another 18 month period of VAT relief.  (Note that this means there is an absence of a guideline, which in the world of officialdom is different than an affirmative declaration about what constitutes an acceptable absence from the EU).

5.      While these are EU guidelines, they are interpreted, administered and enforced by each member country’s taxing authority.  So for example, in the UK it is HM Customs that administers the EU VAT tax code.  This is the first large wrinkle in what on the surface we all would like to believe is a common tax scheme, uniformly administered.

6.      Moreover, it is usually the local official who interprets and enforces these guidelines.  To the extent a given member country has a history of relatively local autonomy in civil matters, to the extent where the infrastructure of the taxing system is less centrally coordinated, computerized and audited, and/or to the extent the culture of the member country is more or less rigorous in administering such matters, the nature of implementing these VAT guidelines will take on its own flavor.  If this doesn’t weave enough variability into things, consider that this provincial flavor can ebb and flow over time in a given port as officials are rotated in and out due to staff rotation, promotion and retirement.  Over time, I think it’s reasonable to expect continued leveling in this variability but an absolute uniformity has not yet appeared on the horizon.

7.      And finally, the two normal methods by which VAT is administered and enforced by customs officials are a) via the clearance procedures when cruising boats enter an EU country, and b) routine inspections of cruising boats once the boat is within its borders.  Thus, VAT can in practice be less of an issue in countries that prefer NOT to emphasize clearance paperwork of privately owned yachts and/or who don’t emphasize routine inspections.  Spain is a good example of this, as are the Scandinavia countries.  Meanwhile, in countries with more vigorous clearance, port oversight and also active inspection programs such as France, VAT becomes a more relevant issue for the yacht owner.


A Caveat:  Perhaps you can begin to understand why I’ve been reluctant to write on this subject.  I have not yet found it possible to speak with the staff of one Customs office of one country and even expect an explanation on how and why things work as they do uniformly throughout that country.  How to summarize VAT administration accurately for ALL member countries is a task I can only attempt to accomplish.  Nevertheless, I’m writing this in the belief that presenting the facts we do know, while also pointing out the many variables, will be of some help.  However, please don’t overlook the fact that I’m just another sailor, not a tax attorney, and that what hard information and overall perspective I can offer is inevitably limited by all of the factors outlined above.

 Let’s review some common misperceptions about VAT re: non-EU boats, and then get to the meat of the topic:  What you must do to avoid VAT altogether.

 Rumors, Anecdotes and Old News:  Because there’s a large amount of now-dated anecdotal information that is passed around by word of mouth, in prior cruise reports, old SSCA Bulletins, boat web sites and such, I thought it would be useful to identify some of the common VAT-related misperceptions we’ve heard and try to clarify why they are incorrect.  (These may not be the only ones needing clarification!)

1.      “I’m told VAT won’t apply to my older boat.”  Since WHOOSH is now 24 years old, I surely wish this one were true.  In reality, boats built before December 31st, 1984 are deemed to be VAT-paid (‘grandfathered’ into the VAT scheme, as it were) but only if they were physically within the EU as of December 31st, 1992.  Both those facts must be proven with convincing documentation (e.g. original sales invoice; a slip lease receipt).  It’s the very rare NA boat that will fit into this category.

2.      “Buying a boat already located in the EU eliminates VAT liability, as it will be VAT-paid.”  In fact, numerous boats were initially purchased for delivery to tax havens like Gibraltar, Malta and the Channel Islands in order to initially avoid VAT…and then subsequently and quietly relocated to a third location within the EU where routine tax auditing is lightly enforced.  A great example of this is captured in “First Timers Tale:  Buying Secondhand”, Practical Boat Owner, #441, Sept., 2003.  You might find this a helpful reprint to order from PBO and, in any event, should not assume VAT has been paid on the vessel unless they can produce a valid VAT-Paid Certificate.

3.      “Since VAT is an EU tax, it matters little where it is assessed or paid.”  The question of where to pay VAT could be relevant if you are planning on a long-term presence in the EU and believe the cost of paying VAT on your NA boat is worth the reduction in the hassle and the freedom of movement it provides to the boat and crew.  Or perhaps you are considering the purchase of a boat in a EU country to start your cruising and are willing to accept VAT liability in order to avoid VAT hassles.  (In fact, you may be planning to subsequently sell it when leaving the EU, when the boat’s attractiveness to the next buyer will be determined by whether VAT has been paid or not.  This will help you get at least a portion of your VAT payment back in the sale price of the vessel).  Given such scenarios, there are at least two reasons why the country where VAT is assessed is important:  First, valuation of the boat is much more lenient in some member countries than others and, second, the actual VAT tax rate isn’t uniform within the EU.  So e.g. the VAT in Spain is currently 16% of a boat’s assessed value as opposed to e.g. 17.5% in the UK (and even higher percentages in some Scandinavian countries).  A good illustration of the variability in assessed value is the recent sale of the 1984 Westerly Seahawk reported in the PBO article referenced above.  HM Customs assessed a value of £45,000 on this boat while the Spanish authorities assessed it at €30,000 or about £22,000.  This 51%+ reduction in the actual out-of-pocket VAT paid is a good illustration of how local administration of EU-wide guidelines can create a wide disparity in the actual realities of paying VAT.

4.      “You can count on 18 months of uninterrupted tax relief wherever in the EU you choose to go.”  This is a factually true but not all boats have had it this simple.  As one example, in a recent development the EU decided to take Greece, one of its member countries, before the European Court because Greece implemented taxes against non-EU registered boats that were, in the eyes of the EU, just another form of VAT taxation.  The fact that the EU must prosecute one of its own member countries for compliance with the EU-wide tax code says a lot about the uniformity of VAT administration.  And if you were forced to pay a tax on your boat that went by another name, that wouldn’t make you feel less taxed, would it?  An example of another type surfaced in the December, 2003 SSCA Bulletin as reported by MARIAH after the crew sought a “Schengen Visa” so they could winter in Paris with a clear conscience.  In a classic case of no good deed going unpunished, the French officials decided that an extended Schengen visa made the crew instant residents of France, which in turn obliterated their 18-month VAT-free exemption as non-EU citizens.  (For more info on this, see my ‘You and the Schengen Treaty’ article).  The lessons seem to be that a) for most of us, 18 months ends up being VAT-free, but b) keep your ear to the yachtie grapevine for exceptions, and c) don’t take on too much of an entitlement attitude.

5.      “I heard the time limit on keeping my boat in the EU is 6 months.”  This was an earlier, interim time period as it relates to VAT relief, and no longer applies.  12 months is another interim time period, in case you’ve heard/seen that claim.

6.      “I heard I actually have 3 years of VAT relief.”  In fact, I was told this with absolute certainty by a Dutch boat owner who buys & sells boats both within and outside of the EU.  He was as vague about the details of this as he was adamant that it had been his experience.  (“There are ways…” he kept saying).  My suspicion is that it may in fact relate to a more informal and local understanding he has with his local tax officials although I don’t know this for a fact. I mention it here since it nicely illustrates how a concrete understanding of VAT issues can be so elusive in the face of individual anecdotes, firmly delivered by EU citizens.

7.      “Friends of ours restarted the VAT “clock” [the 18 month time period of VAT relief] by simply visiting Gibraltar for only a day.”  You will hear this in many forms and the specific anecdotes are most likely true.  However, it may distort the reality of VAT enforcement and here’s why:  The official decision to “restart the clock” is made by the authorities in the EU country into which one next clears the vessel; this decision certainly can not be made by a non-EU tax authority (e.g. Gibraltar authorities) where you are departing.  So…the critical issue is not where one goes when stepping outside the EU borders but rather where one re-enters them.  Moreover, we’ve heard of more than one boat that had a 2nd or 3rd EU country they visited decide that VAT liability existed on their boat even though, in clearing into prior EU countries, an opposite determination had been made.  France has been the culprit in these examples.  (And there I go, spreading more grapevine-related second hand information!  For more about this whole topic, consider purchasing the SSCA CD containing 8 years of SSCA Bulletins and do some topic searches on VAT and Europe.  At least in that format, you’re hearing [mostly] first-hand reports.  Just keep in mind that most of letters will now be dated relative to current EU legislation and, in any event, are anecdotal in nature).

8.      “So…who ARE the members of the EU, and where can I escape VAT liability?”  The composition of the EU is somewhat of a moving target.  As I write this (February, 2004), the countries which are full EU Member States are:










The Netherlands






United Kingdom

 In addition, 10 new members have completed the process of joining the EU and are formerly scheduled for full membership on May 1st, 2004. 


Czech Republic




Slovak Republic




Republic of Cyprus


 And before you get too comfortable with this list, keep in mind that Turkey, that favorite yachtie destination, has petitioned to join the EU along with Bulgaria and Romania.

 9.      “How will this impact me?”  Take a look at a map of Europe and reflect on where your current cruising plans will permit you to exit the EU.  (For a map showing current and future members, visit  Malta and Cyrpus have in the past been two destinations from which the VAT Clock could be restarted, but that will end shortly.  By the time you begin cruising Europe, Turkey may also have been moved forward into pending membership.

 The Mechanics of VAT Avoidance:  At this time, there are two methods by which non-EU yachts enjoy VAT relief.

1.      Temporary Importation:  As stated early in this article, the EU’s VAT legislation (Article 561 and 562[e]) provides for Temporary Importation (and thereby, relief from VAT) of non-EU vessels for up to 18 months.  The form this takes in some EU countries is as simple as officials looking at your clearance documents to verify that you remain inside the 18-month VAT-free window.  (If you’re thinking of “mislaying” your clearance papers into the Azores, which is when most NA sailors’ VAT Clocks begin, remember that your passport indicates your arrival into an EU country, as well).  Other EU countries are more formal and request you complete a Temporary Importation document (in the UK, Temporary Importation is done using a C108), a formalized way of establishing the time window for which VAT relief applies.  As you would suspect, when exiting the EU in order to restart your VAT Clock, you’ll want to collect all the documentation possible verifying that the boat has been outside the EU.  (Getting your passport stamped won’t mean anything to the Customs official wondering about your vessel’s VAT liability).

2.      Transfer of Residence Relief:  The EU has established law related to Transfer of Residence relief (TOR) so that people moving to the EU can arrive without suffering a huge tax assessment on their personal effects and vehicles (and boats) as, otherwise, they would be placing a financial hurdle in front of potentially new EU citizens.  TOR is enshrined in EU law in Articles 2-10 of Council Regulation 918/83 (for customs duty), and Articles 2-10 of Council Directive 83/181 (for import VAT).  This means that the EU has provided legal guidance on how member countries can institute TOR relief IF they choose to do so; it does not mean that member countries are mandated to provide such relief.  Moreover, it does not assure that TOR relief granted in one member country will be honored in another member country, even tho’ there is overarching EU law which provides for it.  I sought an explanation of what TOR was and how it worked within the EU from HM Customs while we wintered in London, and here is the main portion of their written reply:

“There are likely to be some variations in the way other EU Member States implement the [TOR] legal provisions, because some of the law is "permissive" i.e. it says "Member States may.......", thus leaving it to individual EU Member States to choose whether or not to implement the particular provisions concerned….


“The position regarding people first obtaining TOR in the UK on their vessel and then moving on to another EC country is that there are still no formally agreed control procedures adopted by the EC Commission and the Member States for such movements.  HM Customs staff can provide people with a copy of the officially completed C104A (Vessels) if it will help establish that TOR has been claimed and granted in the UK.  There is no guarantee however that other Member States will accept the UK's C104A as sufficient in itself.


If there are great problems in relation to UK TOR beneficiaries moving on to other Member States with their vessels, it is suggested [one] may wish to take up the matter direct with either the Member States concerned or the EC Commission itself.”


We were introduced to the option of requesting a C104A TOR from HM Customs by Joe & Lee Minick aboard SOUTHERN CROSS, made the same application and were granted TOR approval while wintering in London.  (To download this application, visit and select Other Forms).  Despite some of us now carrying TOR approvals, there are two open questions regarding our TOR relief.  First, would our status remain in effect if, for some reason, HM Customs (or any other tax authority) wished to challenge it?  In my experience, when any government begins to look closely at one’s perceived tax liability, things move quickly from the conceptual to the nitty-gritty.  If in probing my ‘permanent residence’ status while in the EU, I was asked questions such as ‘Do I own residential property?’ or ‘Am I registered to vote outside the EU?’ or ‘Do I have a legal residence somewhere else? – to which I would answer ‘Yes’ in each case –how does my ‘permanent change of residence’ status as acknowledged by my C104A remain valid?  The second open question relates to what validity UK-granted TOR relief has when visiting the next EU country, should our VAT Clock’s have expired in the interim.

 While I hate to pass along second-hand information, there are two additional data points worth mentioning here, both of which I hope to learn more about over time.  The first is that UK C104A approval has been successfully used, multiple times, by an American boat in France, one of the most troublesome countries re: VAT issues.  This is reported in the March, 2001 issue of the SSCA Bulletin by NANETTE and I have emailed them in hopes I can learn from the owners whether they had similar success with their C104A in other EU countries.  The second is a report, second hand from the U.S. sloop IWANDA, that a Canadian boat applied for similar TOR relief with the French officials and, after a far more probing process, was granted it.  I am attempting to learn about this first hand, as it would be useful to those cruisers who plan to winter in Paris or elsewhere in France.

 VAT-related Cruising Strategies:  There are ways to mitigate the VAT issue, which may or may not make sense to you, depending on your intended length of stay, cruising destinations, family lineage, and financial circumstances.  Here are some that come to mind…

1.      The plan most NA boats follow is to shape an itinerary in part with VAT in mind.  One example are the boats we met in the Azores (where we all first entered the EU) who next planned to visit the Atlantic Coast of Spain & Portugal, then winter on the southern French or Spanish coast.  The next Spring they still have a full half-year to meander through the Med islands enroute to Croatia or Turkey, where they planned to winter the following off-season.  They could then return westward the following spring, perhaps with plans to hit the French Canals and Northern Europe, with most of a new VAT clock ticking.  Another example would be boats that initially strike out for Northern Europe with plans to include a visit Norway when subsequently cruising the Baltic.   

2.      Pay the VAT upfront, in a country of your choosing where your vessel’s assessed value will be reasonably determined, and at a lower VAT rate relative to other EU countries.  We’ve met some folks who purchased a boat within the EU, plan on lengthy, relaxed cruising throughout Europe and the Med, and simply don’t want their plans to be effected by tax legislation and nosy Customs officials.  Spread over many years, perhaps that would also represent a bargain to the NA sailor who brings his/her boat into the EU from North America, given the overall expense of European cruising.

3.      Consult a tax attorney who specializes in VAT issues in the country where you believe the VAT issue could become a problem for you.  Suppose you plan on multi-year cruising in and around the UK and Ireland, Scandinavia, the north French coast and The Netherlands’s Inland Sea.  You plan to winter in a mix of UK locations with the boat ashore and/or you aboard and enjoying the sights (e.g. in London).  Thus, your potential VAT liability would be principally in – and enforced by – HM Customs.  Would a brief stop in Channel Islands erase your perceived VAT liability in the eyes of HM Customs?  (I got mixed, squishy answers on this when interviewing HM Customs officials).  Will being ashore or wintering aboard in one location qualify for a six month extension?  And if so, what procedure should be used?  Will a C104A be defensible given your plans?  Perhaps consulting a UK tax attorney would prove helpful, and perhaps you’d appreciate a qualified legal opinion vs. just reading what another sailor like me is writing.  Given the expense and effort of crossing an ocean and cruising Europe, a consultation fee is not by comparison more than a modest investment.  To the extent you can utilize UK legal advice when dealing with the UK tax authority, your interests would be well represented.  But to revisit an earlier point, keep in mind that getting legal advice in one member country may not guarantee you the same legal interpretation in the next.

4.      A totally different approach is to reflag the boat without formally affecting its tax liability, thereby ‘appearing’ to be less of a target to tax officials.  This might result from one of the owners being entitled to dual citizenship, an option that might be more available to some cruisers than they initially realize.  This has been documented in some of the logs written by Aubrey Millard, a Canadian sailor who with his wife Judy has been cruising in Europe for some years.  (See and select the VELEDA IV Logs).  Aubrey’s father was British, which entitled him to seek dual British citizenship.  This in turn made him feel entitled to fly the British Ensign, which in turn meant he appears to tax authorities in EU countries as just another EU cruising sailor.  And when he clears in, he of course produces his British passport.  In short, he’s flying a bit under the radar screen whereas our Stars & Stripes clearly distinguishes us as ‘non-EU visitors’ where VAT will inevitably be an issue for which we are accountable.  (A review of the UK Immigration website says anyone who is a citizen of a Commonwealth Country AND who has a parent or grandparent born within the UK is eligible for a British passport.  For more information, visit


*  *  *  *  *

As we climb higher on our VAT learning curve, I’ll amend this article accordingly.  However, my impression remains that writing on this topic is like peeling the proverbial onion; we can whip off the layers without ever getting distinctly to the core.

 © Jack Tyler – February, 2004

WHOOSH, wintering in London