It’d better be a good one – the Flag is truly a vessel’s passport to sail the world. But Flag can also be key to accessing import duties relief.
Consider the special customs regime called temporary importation – or ‘temporary admission’ in the EU nowadays (TA). If correctly used, TA ensures that yachts entering the EU customs territory are used with total exemption from import duty. The relief is based on a global convention in international trade which requires that import duties are suspended where imported goods are going to be re-exported after having been used only temporarily within the customs territory they enter.
The EU’s take on TA is predicated on the bloc’s distinction between Union and non-Union goods. ‘Union’ goods are ones that have entered the economic circulation of the EU’s internal market, meaning that any applicable taxes on their value have been paid. ‘Non-Union’ goods are not clear of such taxes, but because they will be used only for a limited period and re-exported outside the customs territory, they can claim relief under TA.
How to define a ‘non-Union’ yacht for use under TA? Well, the yacht must be registered outside the customs territory of the EU in the name of a person established outside the customs territory of the EU. The non-Union credentials of the yacht must be established at the time of entry into the EU customs territory. The fact of a yacht being registered determines how it is identified for this purpose. It is a non-Union yacht because the country in which it is registered (whose Flag it flies) belongs legally outside the Union.
TA is thus where the Flag of the yacht really matters. Along with the non-EU establishment of the registered owner of the yacht, a non-EU Flag semaphores the correctness of the yacht’s status to Customs and Port State Control authorities. Flag validates the presumption that TA relief is for visiting yachts and its users, not for domestic yachts and not for persons established within the EU.
The question is often asked what ‘established’ means in a context where owners and users of yachts can hold multiple citizenship or own several properties in which they live. That is a pertinent question always worth checking in detail.
Customs use a store of tools to establish the reality of a person’s establishment or residence, ranging from identity and address checks to the so-called “tie break” rules which may tip the balance in situations where a person’s occupational ties are in a country different from that of their personal ties.
The international trading landscape is marked with customs territories which seagoing yachts must navigate. Flag identity remains the commonly accepted badge they need to temporarily cruise in these territories without customs duties or VAT needing to be paid.
Information in our Blogs is very general in nature and should not be acted upon without first consulting with a tax advisor. Please feel free to contact Y & A Group, LP to schedule a complimentary consultation.
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