VAT warning for boats visiting Portugal

A boat owner, who is facing a VAT bill and fine from Customs in Portugal, is warning skippers to avoid sailing there from any non-EU country

TAGS:

There are warnings that skippers who visit Portugal after sailing from outside the EU could face a demand to pay VAT on their boats, even if EU VAT has been paid on their vessel.

David Varley, who has been a Portuguese tax resident since March 2020, has been presented with a €155,000 IVA bill and a €10,000 fine by Portuguese Customs for his Oyster 62, Dalliance. IVA is the Portuguese equivalent to VAT.

The boat is owned by a New Zealand limited company; Varley and his partner, Peter McLean, who is a New Zealand resident, are equal company shareholders.

Dalliance was purchased by the company EU VAT paid in Malta in 2019; she has been kept in the EU ever since.

yachts berthed in a marina in Gibraltar

Gibraltar is a British overseas territory and is not part of the Schengen Area, although negotiations are still ongoing so always check before you sail there. Credit: Getty

In Summer 2019, Varley sailed Dalliance through the Adriatic to Greece and then to Port Grimaud in France, where the vessel overwintered in 2019/2020. 

In the summer of 2020, the Oyster 62 was cruised to Corsica, Sardinia, Majorca and Portugal, where the yacht overwintered at Vilamoura Marina in the Algarve. 

Varley said in the summer of 2021, he sailed Dalliance from Vilamoura Marina to the Balearics, the west coast of Italy, and then back to Vilamoura Marina. They sailed through the territorial waters of Gibraltar on their way to the Algarve.

Months later Faro Customs asked to see the VAT and boat registration certifications and insurance documents, which Varley sent to them. This was followed by a demand to pay 23% IVA (VAT) on the value of the boat, plus a fine.

Continues below…

‘Their claim is based on the fact that we initially told the authorities that when we left in early 2021, we were going to Gibraltar. In fact, we never did as the weather was against us. We did sail through the territorial waters of Gibraltar when we returned to Portugal. I had a meeting with Customs and they confirmed that every boat coming into their jurisdiction from Gibraltar would need to pay VAT immediately on arrival. As I understand it from my Portuguese lawyer, unless Portugal or any other EU country ratifies the agreement on the temporary importation of boats, for example, they can do what they like,’ explained Varley, who is keen to make contact with owners in a similar position to form a joint legal action.

Gibraltar is a British overseas territory and is not part of the EU Common Customs Union.

The RYA’s cruising manager and member of the European Boating Association (EBA), Stuart Carruthers said technically, every time a boat leaves the EU Customs Territory, the owner risks having to pay VAT on its return.

But, this doesn’t always lead to a VAT payment, and Returned Goods Relief (RGR) can be claimed if a recreational boat is returned within three years of export, has been exported and imported by the same person, has Union status when taken out of the EU and has undergone no more than running repairs.

He stressed that advice may differ for company owned boats and local advice on VAT should always be sought in these circumstances.

Carruthers said the European Commission has told the EBA that nationality of a boat or its owner has no effect on a boat’s status as Union goods.  

‘As far as I am aware, there is nothing in the EU Union Customs Code that specifies that the RGR rules are different for reimporting a boat from specific countries that lie outside of the community area such as Gibraltar,’ he added.

The European Boating Industry, which represents the European leisure marine industry, is aware of issues with the different interpretation of VAT certificates by different countries, and has asked the European Commission to provide clarity.

Yachting Monthly has contacted the Portuguese Direção-Geral de Política do Mar (DGPM) and is awaiting their comments.

Enjoyed reading VAT warning for boats visiting Portugal?

A subscription to Yachting Monthly magazine costs around 40% less than the cover price.

Print and digital editions are available through Magazines Direct – where you can also find the latest deals.

YM is packed with information to help you get the most from your time on the water.

        • Take your seamanship to the next level with tips, advice and skills from our experts
        • Impartial in-depth reviews of the latest yachts and equipment
        • Cruising guides to help you reach those dream destinations

Follow us on Facebook, Twitter and Instagram.