Long-distance sailing: Watch out, tax trap!

Anyone returning to EU waters with a sailing yacht after a long period of time must expect a visit from customs. This is because, by law, VAT is almost always due on the ship upon entry. This can quickly become very expensive. However, the tax is apparently not collected everywhere. In one country, however, it is, as a recent case shows.

Stéphane Dubois (Name changed by the editors) is furious. In his opinion, the Belgian is facing unjustified tax claims from the French tax authorities. He has now told the YACHT editorial team about this and how it came about.

Customs demanded several tens of thousands of euros in VAT from him, which had to be paid to the French treasury for his ship. However, VAT has already been paid on Dubois' yacht many years ago. So why now a second time?

Tax already paid on purchase 15 years ago

The problem: the ship, a 19-metre blue water yacht from the French Garcia shipyard, had been sailing around the world with the first owners in recent years. They had bought the boat new in 2010 and also paid VAT in France as part of the purchase. Two years later, they left EU waters and set off on their long voyage. This lasted until 2016, when they headed for Martinique and ended their round-the-world trip there.

In the years that followed, the ship remained in the Caribbean state - apart from individual trips and repair stops on neighbouring islands. Important in this context: Martinique is a French overseas department and is therefore part of the EU.

Two years ago, Stéphane Dubois discovered the circumnavigator's yacht, which had since been put up for sale, and struck. He brought the ship back across the Atlantic to Europe. His first port of call in the EU was Baiona in Spain. He cleared in there. Spanish customs inspected the ship and confirmed that it had entered the EU. The officials did not mention the VAT that was automatically due in Spain.

EU Community status lost

Dubois continued his voyage without a care in the world. Next harbour: La Rochelle in France. Customs came on board there too - and to the owner's surprise, issued a hefty tax assessment. To determine the tax amount, they used the current value of the ship as a basis. The customs officers calculated this on the basis of the purchase price that Dubois had just paid to the previous owners.

"As the ship had been outside EU waters for more than three years without interruption during the circumnavigation with the first owners, it had lost its status as a Community good in accordance with the EU-wide tax regulations," explains Dubois. "This means it is treated by customs in the same way as any other goods imported into the EU from outside."

State cashes in several times

This means that VAT is levied in addition to customs duty. The amount depends on the value of the goods and the tax rate of the country to which the goods are first imported or for which they are destined.

Whether VAT has already been paid in the EU in the past, as in the case of Garcia, is irrelevant. "But that's just one aspect of the matter that I find unfair. Because even if I pay the tax again now, the first owners won't get back the tax they paid in 2010," explains Dubois. "So in the end, the state collects twice for the same product!"

Chained up in France

Incidentally, formally speaking, it is not VAT that is charged on the import of goods, but import VAT. However, the same tax rate applies to both.

What also annoys the Belgian: "Other countries turn a blind eye if the three-year period is exceeded by up to six months and then do not deny the ship its Community goods character. According to the previous owner's logbooks, my Garcia was outside EU waters for three years and five months, and yet the French tax authorities are now insisting on taxing it," complains Dubois.

When he arrived with the ship in La Rochelle in 2023, customs had put it on a chain. I had to pay a security deposit in the amount of the tax. Only when that was done was I allowed to continue sailing," reports the Belgian. He has been contesting the tax assessment ever since. So far with moderate success.

Lower tax rate in the overseas departments

After all, the authorities are probably prepared to deduct the tax that was theoretically already due when the ship entered Martinique in 2016. Actually a great concession. In Martinique, as in all overseas departments of France, the VAT rate is quite low at 8.5 per cent. This leaves "only" 11.5 percentage points difference to the French tax rate of 20 per cent.

However, there are several catches: the overseas departments are not officially part of the EU tax territory. This type of differential taxation, which France applies, is therefore not anchored anywhere in EU tax law. With regard to the Garcia, the next EU country to which the yacht travels could therefore object to the French differential taxation and correct it to the detriment of Stéphane Dubois.

Some countries handle tax issues more laxly

But even more problematic: the first owners had apparently not paid any import tax when they arrived in Martinique in 2016. As was later the case in Spain, the authorities there had probably waived it or simply failed to collect it.

"The EU has simply forgotten to take the specific needs of recreational boating into account in its tax legislation," says an annoyed Stéphane Dubois. He calls on the local maritime associations to urge politicians to address the problem. "You can't equate a ship that is used for living and travelling with just any commodity that is imported into the EU."

EU tax rules are a barrier to trade for yacht brokers

Jean-Paul Bahuaud shares this view. He has been selling second-hand yachts in Guadeloupe for many years. This Caribbean island is also a French department. "Many of our customers who buy a boat here and want to bring it back to Europe get into trouble with customs." Bahuaud is in favour of changing the status of the overseas departments as quickly as possible and extending the EU tax territory to them.

"Otherwise, it is left to chance whether or not you will be asked to pay when re-importing a ship into EU waters," says the yacht broker. Countries such as Spain and Portugal are known for not caring about the issue. Other countries, on the other hand, are known for their rigid approach. In the past, this included Italy in particular. Now France is apparently also keen to relentlessly collect tax debts from yachtsmen.

Tax dispute has landed at French ministry

Stéphane Dubois definitely wants to continue fighting for what he sees as more tax justice for boat buyers and long-distance sailors, as well as for an end to the uncertainty about what sailors will face when they return to the EU. After all, for many returnees, the yacht is often the only asset they own after many years at sea. They often lack the means to cope with a high tax demand.

Dubois: "My case is now with the arbitration centre of the French Ministry of Economy and Finance. I hope that they will be sympathetic to us sailors."