Owners were chartering on TIR and EU owners were applying for TIR on the strength of the offshore ownership of the yacht. Today, the authorities take a sword to the corporate veil and look at the real person behind the company; they have tightened up and more constriction is coming. Most recently, superyacht-based helicopters have become a target and I expect artwork will be caught next.
The basic rule is that if you are a European Union (EU) resident or you choose to operate your yacht commercially in the EU, or any combination of the two, you will have to account for VAT one way or the other. If you are not an EU resident or you choose not to operate your yacht commercially in the EU, you may take advantage of the EU TIR provided that you fully comply with the relevant conditions prescribed in the Union Customs Code (UCC), adopted as Regulation (EU) No 952/2013 and the UCC Implementing Act, adopted as Commission Implementing Regulation No 2015/2447 (the Implementing Regulations). It should be noted that while the UCC and the Implementing Regulations provide a uniform code to be applied to all member states, there may be some differences in interpretation of the provisions in each member state.
In order to be granted total relief from import duties, Article 212 of the Implementing Regulations dictates that the means of transport must be:
• Registered outside the EU in the name of a person established outside that territory, or, where means of transport are not registered, they are owned by a person established outside EU, and
• Used by a person established outside the EU.
Therefore, if a yacht is owned by a person who, or a company which, is not established in the EU and is non-EU flagged then the first condition will be satisfied.
The second condition stipulates that the users of the yacht must also be established outside the EU. There is, however, an exemption under the Implementing Act which relates to the use of a yacht or other means of transport by EU residents. In this respect, Article 215 provides that total relief from import duty will apply where means of transport is used by EU residents “privately and occasionally” and “at the request of the registration holder, provided that the registration holder is in the customs territory of the EU at the time of use”. However, this exemption will not apply where the registered owner of a yacht is a corporate entity established outside the EU because it will not be possible for such an entity to be within the EU while the yacht is being used.
In practice, this means that you should allow EU residents to use the yacht only when you are not on board, or when the yacht is owned by you as an individual and you stay within the EU while the yacht is being used.
TIME LIMITS AND USE CONDITIONS
In accordance with Article 217 of the Implementing Regulations, the period of relief for privately used yachts is 18 months. The time limit is not applied on a cumulative basis, so if you sail the yacht out of the EU and then come back again for another holiday, a new period of temporary importation relief will be triggered.
Most people believe that because the yacht is allowed 18 months, everything on board the yacht is also allowed 18 months. Wrong! The time limit for helicopters is six months and the helicopter on board the yacht will be treated as a separate means of transport notwithstanding the time period applicable to the yacht. The helicopter is not treated as a tender, which would be further exaggerated by the ownership of most helicopters being in different corporate structures from the yacht.
Another important point is that while spare parts, accessories and equipment for the yacht will be treated in conjunction with the yacht as part of the same ‘means of transport’, the use of helicopters on yachts will be treated separately for tax purposes and that probably goes for any helicopter spare parts kept on board.
As discussed above, if you have a helicopter on your yacht, it will be treated as a separate means of transport. You must have a clear understanding of who owns it and where it is registered to ensure that you comply with the requirements for total relief, and if the helicopter and its spare parts have to get out of the EU then it needs to leave.
WORKS OF ART
TIR rules are particularly difficult with regards to artwork on board the yacht. If the artwork is part of the fixtures and fittings then it would be covered by the yacht’s exemption.
If, however, art can be removed without damaging the yacht then it is arguably not part of the fixtures and fittings, and must be treated separately from the yacht. This becomes more complex, especially with fine art. In my experience, most fine art and sculpture on board yachts comes from the private collection of the ultimate beneficial owner, which may be directly owned by either a human being or a corporate vehicle. The art may have been bought by a company and held as such for all sorts of reasons, including tax and investment purposes. If that is the case, where is the paper trail that puts the art on board the yacht legally and justifiably? The likelihood is that it is nowhere to be seen, for when the yacht was being dressed, that art was treated as art as opposed to an asset capable of being bought, sold, imported or exported. Here’s the thing: if the artwork can be removed, TIR will apply only if it is:
• Works of art, collector’s items and antiques, imported for the purposes of exhibition, with a view to possible sale; or
• Goods other than newly manufactured ones imported with a view to their sale by auction.
Realistically, how much of the artwork on board yachts will tick those two boxes?
Up to this point, many have assumed that the 18-month TIR applies to the yacht and everything upon it. It is time to reassess that position before you set sail.
The legal provisions on temporary importation are complex and you must ensure that you fully understand all the implications.
Failure to comply with EU regulations can have serious consequences, including seizure of the yacht, the helicopter or artwork and/or severe financial penalties – and that is not a scenario anyone would wish to contemplate.
Written by John Leonida
Additional research by Anna Antipova
This article originally appeared in the November Issue of The Superyacht Report