The European Union (Customs, Immigration, VAT)

Created by webmaster. Last modified on 2008-02-05 11:36:14
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Topic: European Union

On 1 January 1993 all countries belonging to the European Union became a single market by enforcing the Single European Act and merging into a common customs and Value Added Tax (VAT) zone. (Gibraltar and the Channel Islands have special status, outside the VAT zone but part of the EU). VAT is a special tax applied to both goods and services. The rates vary from country to country, and in some countries there are different VAT rates, although the VAT rate charged on boats is invariably the highest. VAT rates vary between 15 per cent in Spain and 25 per cent in Denmark.

Because of the lifting of customs controls within the European Union, the flying of the Q flag is no longer obligatory if one sails from one EU country to another. However, immigration rules still apply and if there are holders of non-EU passports on board, the immigration authorities must be contacted on arrival.

The importation of duty-free goods from one EU country into another is no longer permitted. However, one is allowed to buy duty-free goods outside of the EU customs territory, such as the Channel Islands or Gibraltar, and import them into any EU country. In such cases the same allowances apply as those used for air passengers. Where the single market has made a great difference is in lifting all restrictions on the importation of duty-paid goods. In the case of goods bought in normal shops or supermarkets, there are practically no limits provided the goods are bought for your own consumption. There are, however, some limits to the allowance, over which you must prove that the goods are indeed meant for your own consumption. Especially in some of the Nordic countries there are severe restrictions on the importation of alcoholic drinks, even from another EU country. The allowances are quite generous for the UK: 800 cigarettes, 10 litres spirits, 20 litres fortified wines, 90 litres wine and 110 litres beer.

The changes in regulations brought about by the single market, and the way these regulations are applied, have implications both for owners of boats registered in one of the EU countries and to visitors from outside the EU. The countries belonging to the EU are: Italy, France, Germany, Belgium, Luxembourg, the Netherlands, United Kingdom, Ireland, Denmark, Spain, Portugal, Greece, Austria, Finland and Sweden. On 1st May 2004 ten new countries became members of the European Union: Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, the Slovak Republic, and Slovenia. On January 1 2007 Romania and Bulgaria became the newest members of the European Union. Membership of the EU now stands at 27 countries.

Island groups belonging to some of those countries, such as the Azores, Madeira, Canaries, Channel Islands or Åland, have a special status and this will be explained in the relevant section. Different regulations also apply in dependent territories, such as Gibraltar or Greenland.

Customs regulations have been largely harmonised and non-EU flagged vessels may now spend a maximum of eighteen months within the EU, whether in only one or in several of the EU countries. Those who wish to remain longer in any one EU country must deposit the ship's papers with the local customs office, who will put the vessel under bond, or seal. The clock will then be stopped until the owner returns on board. During the period the vessel is in bond, the boat must not move from its berth, and the owner or crew are not allowed to sleep on board, although they may visit the boat and also carry out a certain amount of work. (It has been reported that Spanish customs will allow the crew to live on board while the vessel is in bond as long as it is not moved from the marina facility).

Non-EU boats remaining inside the EU for over the permitted period, and being used by the owner or the crew during this period, must be imported and VAT paid on the value of the boat. Anyone intending to do this would be well advised to import the boat into one of the EU countries with a lower VAT rate, such as Madeira. The alternative is either to put the boat into temporary bond, so that the clock is stopped, or sail into a non-EU country for the remainder of the year.

The Schengen Agreement

The commitment of the EU to free movement of persons led to the creation of the Schengen Agreement, which was signed by Belgium, France, Germany, Luxembourg and the Netherlands in June 1990. Since then, Italy, Spain, Portugal and Austria as well as Greece and all of the Nordic countries, have joined. Included in the Schengen area: are theAzores and Madeira, Ceuta, Melilla and the Canary Islands.

From 21 December 2007 the following EU countries joined the Schengen area: Poland, Czech Republic, Estonia, Lithuania, Latvia, Malta, Slovakia, Slovenia, Hungary. Switzerland is due to join in 2008 and also Cyprus in 2009 and Bulgaria and Romania in 2011. Bulgaria and Romania are EU members therefore their nationals are not requested to get Schengen visas.

The Republic of Ireland and the United Kingdom have limited membership only and have not signed the Schengen Agreement.

Schengen abolishes internal border controls between its members, so, for example, a Portuguese person travelling to Spain would not be subject to systematic passport checks. The removal of internal borders between the participating states obviously means that the criteria for who is allowed across the external border of the Schengen countries is of crucial importance. This is because within the Schengen area, if only one member state had a lax immigration policy or ineffective external controls, the other member states would have reason to fear that they would as a consequence see the entry of large numbers of illegal immigrants. The Schengen countries have therefore committed themselves to abide by a common policy on issuing visas. A uniform visa valid for the entire territory of the Schengen countries is to be introduced. This visa may be issued for visits of up to three months in any one year. Normally, such a visa shall be that of the principal destination. Occasionally a government may decide to temporarily suspend the provisions of the Schengen Agreement, usually in special circumstances such as an unexpected influx of refugees following a regional or international crisis.

Visa requirements for non-EU citizens must not be confused with VAT regulations as, in principle, non-EU citizens will not be allowed to spend 18 months in the EU without having to renew their visa. In some countries (such as Greece) a tourist visa is only valid for 90 days and extensions are normally only granted once in every six month period. Similarly, in some countries, such as France, private vessels owned by non-French citizens, that are used for over six months in any 12 month period must be temporarily imported and local navigation fees paid. In such cases, formalities must be carried out at the local customs office. Boats that remain in France over the six month period, but are not being used, must be put in bond with customs.

As there are different regulations and requirements for EU or non-EU vessels, they are treated separately.

EU vessels

A boat owned by a resident of the EU has the right to free movement throughout the EU, provided VAT has been paid on that vessel in one of the EU countries. Although there is no legal time limit on the length of time a EU registered boat, VAT paid, can spend in any EU country, it appears that some countries occasionally enforce local regulations once the boat has been in that country for six months.

Although the new regulations came into force in 1993, considerable confusion still reigns. This should improve once the VAT situation is cleared up as there are thousands of boats belonging to EU residents who, for some reason or other, have not paid VAT on their boats. In many cases these boats are based in another EU country than the one where the owner resides and therefore they are liable to VAT. The rules are very clear and a boat belonging to a EU citizen, or flying the flag of a EU country, must be VAT paid. This means that both in home waters and when sailing between any EU countries, such boats should carry evidence of VAT payment. This could be the original boatbuilder's receipt or paid invoice, or some other original document showing clearly that VAT has been paid. Those who are exempt from this rule must have on board a document issued by customs or the relevant authority stating the reasons for such exemption.

Non-EU vessels

Boats owned by non-EU residents and registered outside the EU are entitled to tax free temporary importation into the EU for a total period of eighteen months. The permitted period, or temporary importation, applies to the entire EU area and therefore at the end of the period the boat must be sailed to a country outside the EU or VAT must be paid. The temporary importation period may be extended, at the discretion of local customs, for various bona fide reasons, such as if the boat is left unattended and unused, if the owner leaves the EU, or if the boat is left in the care of a boatyard for repair.

Those who wish to remain longer in any one EU country must deposit the ship's papers with the local customs office, who will put the vessel under bond. The clock will then be stopped until the owner returns on board. During the period the vessel is in bond, the boat must not move from its berth, and the owner or crew are not allowed to sleep on board.

Non-EU boats remaining inside the EU for over the permitted period must be imported and VAT paid on the value of the boat. Anyone intending to do this would be well advised to import the boat into one of the EU countries with a lower VAT rate, such as Madeira.

There has been a harmonisation of formalities concerning VAT in recent years, but there are still certain inconsistencies so the owners of boats from outside the EU should treat the matter with utmost caution and avoid being caught out. It must be stressed that the above 18 month VAT relief applies only where the boat is owned and sailed by a person not resident in the customs territory of the EU. The relief is invalidated if the boat is hired, sold or put at the disposal of a EU resident.

It is essential to ascertain on arrival in a new country the exact situation concerning VAT. As non-EU boats are required to contact immigration whenever crossing a border between EU countries, this may be the time to make such enquiries. Generally, however, it may be better to find out the true state of affairs from a fellow sailor before starting to ask questions from the authorities.

Customs procedures in the European Union

Departure from a EU port to another EU port: no formalities required. Arrival in a EU port directly from another EU port: no formalities for EU vessels and EU citizens. Immigration must be contacted if there are non-EU citizens aboard. Customs must be notified if there is anything to declare, such as firearms.

Departure from a EU port to a non-EU port: customs and immigration must be notified.

Arrival in a EU port from a non-EU port: Q flag must be flown when entering 12 mile limit. Customs and immigration must be contacted on arrival.