EU goods status for recreational craft: Yachting lawyer offers a solution

The specialist law firm in Kiel for yacht law Tanis from the Moselle has been working on this topic for many years. On her digital platform Boat owners can now have their documentation assessed free of charge. If the subsequent legal review provides robust evidence of the goods’ EU status, the lawyers will draw up a personalised status document – and will also stand by this legal assessment in dealings with the customs authorities. Lawyer Benyamin Tanis discusses the problem and its solution with YACHT online.

• ​EU publishes guidelines for recreational craft
• Click here for the EU guide
• Questions and answers on the new EU guidance

​Mr Tanis, on 30 April this year, the European Commission published its first set of guidelines on what is known as ‘Union goods’ status, including for sailing yachts. Is this a new issue?

No. The problem is not that this is a new issue, but rather the fact that the European Commission is addressing it so thoroughly. The issue of VAT has been a concern for the sector for decades. We therefore very much welcome this initiative by the European Commission.

A sailing yacht is considered ‘Union goods’ if VAT has ever been paid on it within the EU, is that correct?

That’s not entirely correct. The Union Customs Code defines what constitutes Union goods. To begin with, this includes any sailing yacht manufactured within the European Union. This must be distinguished from all boats that were not built in the EU. These are not, initially, Union goods, but become so upon proper importation and payment of import VAT. So, ultimately, in the vast majority of cases, it boils down to this: has VAT been paid or not? Strictly speaking, however, these are two entirely different matters.

Who’s in charge of that?

Customs authorities across Europe check this status. Buyers of second-hand boats require proof that VAT has been paid. The Commission’s new guidance criticises the fact that there is no standardised EU-wide document of proof for recreational craft and that checks are handled very differently in individual Member States.

Your law firm has recently started offering a service for property owners designed to resolve this issue as far as possible. How exactly does it work?

Our digital platform www.mwst-boot.org follows a two-stage approach. First, the existing documentation relating to the vessel – such as purchase contracts, invoices, CE documentation, maintenance invoices, leasing agreements or customs certificates – is reviewed entirely free of charge, without the need for registration, and automatically assessed to determine whether it is likely to provide sufficient evidence of Union goods status. If this assessment is positive, specialist solicitors from our firm will carry out a full legal review of the documentation. Only when we conclude that Union goods status can be reliably substantiated will we draw up a bespoke status document.

And are you sure that will be accepted at a customs check?

Yes. During an inspection, the customs officer is no longer presented with a jumble of documents to wade through, but rather a single document in which everything is listed in a standardised manner, assessed and presented in a transparent way. We have already drawn up well over 100 such documents and have never encountered any difficulties with them. In four or five cases, we have received enquiries from European customs authorities, to which we have replied in writing – and they were then satisfied with our response. What makes this special is that we do not merely provide a legal assessment; we also stand by it. Should a customs authority not agree with our assessment in an individual case, we represent the client before that authority at no additional cost. This means that the boat owner receives not only a document, but also the assurance that we stand by the underlying legal assessment.

Is it really all free?

The assessment of Union goods status on our platform is free of charge. If the user wishes to have the result verified by a solicitor and a status document drawn up, they pay a fee for this. We then vouch for this status document throughout Europe. Incidentally: should our platform conclude that there is insufficient supporting evidence, the user will also receive a specific explanation as to why this assessment has been made. They will then have the opportunity to submit further documents.

So, an all-inclusive package?

Absolutely. The moment we issue this status document and attach our guarantee of compliance, the problem is sorted for the individual. And looking ahead, there is also the prospect of cooperation with German Customs.

What should it look like, then?

We are currently working on making the T2L customs form available via the platform.

What is that?

The T2L is actually a cargo document that customs only issues when goods are being moved. However, we are currently clarifying with German customs whether self-propulsion also counts as such. Our view is that a movement of goods also takes place when it is powered by the vessel’s own means. The T2L is an official document which we could then offer in addition to our status document.

Does the status of Union goods change when you sail out of the EU?

Yes, because the status of a Union good is not a permanent characteristic of a good. On the contrary, it is extremely fragile: as soon as a boat leaves European waters, it automatically loses this status. However, it automatically regains this status if no more than three years have elapsed between departure and return, the person who exported the vessel is the same person who re-imports it, and no significant alterations have been made to the vessel during its absence. So you cannot sail the vessel to the Caribbean, have a refit costing millions carried out there, come back and say: ‘It’s still a Union good.’ Customs refer to this as processing outside the EU – and this added value must then be taxed upon re-importation.

What about round-the-world sailors who want to be at sea for more than three years?

This is a topic that comes up quite often here in our office, particularly when people buy or have a new boat built in the EU for a round-the-world sailing trip: shortly after they’ve paid the tax, they find themselves having to face the fact that, after three-and-a-half or four years of their dream trip, they’ll have to pay the tax all over again.

And what advice do you give in such cases?

There is no solution under customs law for such cases. The standard approach at the moment is for the round-the-world sailor to try to call at European overseas territories and to document this – then, as customs officials told us, the three-year period is interrupted.

Is the status of Union goods checked frequently?

In my experience, customs checks take place much more frequently in the Mediterranean and Atlantic than in the North Sea and the Baltic Sea. I’d say that 80 per cent of the customs checks that come across our desks take place in the Mediterranean or the Atlantic.

Why?

This is because there are hardly any EU external borders on the Baltic Sea. Most of the countries bordering the Baltic Sea are EU members, and Norway, as an EFTA country, is largely on an equal footing with EU member states. The situation is different in the Mediterranean and the Atlantic, and even in the North Sea: ships from various non-EU countries can enter those waters.

Is there an age limit for ships beyond which EU goods status no longer matters?

No, that is a common misconception. There are claims such as ‘vessels older than ten years’ or ‘vessels built before the introduction of the Recreational Craft Directive’ – but none of this is correct. There is no legal basis for this. It may well be that individual customs authorities have an internal practice of not checking Union goods status if a sailing yacht is older than x years. But this is then based purely on individual administrative practice.