Temporary Admission: What is it and how does it work?

Owning a private yacht can be a luxurious and exciting way to explore the world and its many wonders. But for yacht owners, it can also be a complicated process when it comes to navigating international waters and the laws that govern them.

Fortunately, the Temporary Admission regime can provide private yacht owners with an easier and more efficient way to navigate these waters.

In her latest article, Head of Marketing and New Business, Lesley Walker explores the regime, also known as TA, how it works and how it can help make the experience of owning a private yacht more enjoyable.

Yachts and VAT

VAT is chargeable on yachts imported into the EU and on yachts purchased and owned by residents of the EU who are using their yachts within the EU. VAT is also chargeable on yachts, irrespective of ownership, which spend more than 6 months in any calendar year cruising in the EU, although there is scope to enable an owner to use a yacht in the EU without being liable for VAT.

In general terms, any EU resident who buys a new build or second-hand yacht, which is not VAT paid, will be required to pay VAT on the hull at the VAT rate applicable at the place of delivery unless the yacht is acquired for commercial purposes or through a leasing scheme.

What is the TA Regime?

Temporary Admission is a Customs tax relief regime that enables non-EU resident owners of private yachts the ability to bring their yachts into Europe for a limited time without having to pay VAT on the value of the yacht.

It is undeniably an important mechanism, without which many non-EU resident yacht owners would likely avoid visiting European waters due to the prohibitive cost of paying VAT on arrival that would ordinarily be applicable.

Eligibility

The TA conditions are fundamentally concerned with accommodating non-EU residents, flag states and owning entities. The main eligibility requirements are:

1. The yacht is registered outside of the Customs Union – the flag state of the Yacht is non-EU, for example, the Isle of Man, United Kingdom, Cayman Islands, or Marshall Islands.
2. The yacht is used by an individual established outside of the Customs Union – the owning entity is established outside the EU, for example, in the Isle of Man.
3. The yacht must be operated by an individual established outside of the Customs Union – the Ultimate Beneficial Owner must be resident outside the EU.
4. The yacht must be operated for pleasure/private use only.

Other conditions to note:

1. The goods must be imported with the intention of re-exporting at a later date, maximum 18 months.
2. No alteration of the goods is intended (allowing for maintenance/upkeep), i.e. no value is to be added.
3. The yacht can be clearly identified, e.g. hull identification number etc.
4. The overall Customs requirements are met.
5. A guarantee is provided if required (specific to the Member State).  

Subject to the above and meeting the broader TA conditions, an owner would subsequently be entitled to use the yacht in the EU under TA.

Time Limit

Under TA, a yacht can operate in the EU for a period of up to 18 months, for a maximum total period of 10 years. TA begins when the yacht enters the EU and ends when the yacht exits the EU.

Before the 18-month period is completed, the yacht must either pay EU import VAT or leave EU waters, calling at a third country port and obtaining appropriate evidence of the same.

Restrictions

A yacht will not be eligible for Temporary Admission if the importation is for the purpose of:

1. Refit and repair – Inward Processing Relief is applicable.
2. Boat shows – Temporary Admission for Exhibition is applicable.
3. The sale of the yacht (under TA, this would breach the conditions of the relief).

Be Prepared

When entering the EU under TA, it is important to be prepared should the yacht be required to complete/provide documentation to local authorities that evidences/supports the yacht’s temporary admission status.

Such documentation might include an oral or written declaration to the competent authorities, particularly to the Customs office of the first port of entry within the EU; an official temporary admission document completed when the yacht first enters the EU at the start of the 18-month period; a Costituto D’Arrivo, if entering Italian waters, which is issued by the maritime authority; or evidence to show that the principal user of the yacht is genuinely not established in, or a resident in the EU.

Conclusion

From simplified border crossings, reduced paperwork, and streamlined customs procedures, TA is a great way for private yacht owners to operate their yacht without the need for it to be formally imported, thus avoiding the Customs formalities, inevitable import VAT costs and structuring costs associated with EU importations.

However, it should be highlighted that there is far more to TA than that above, particularly in respect of EU crews, guests travelling on board, time limits and EU works undertaken etc., so the above only provides an overview of TA for the purpose of this article.

For this reason, I would always recommend that an owner seek appropriate professional advice from a qualified tax/VAT advisor, both in the form of written advice and practical safeguarding recommendations, before entering into any transactions of this kind.

About the Author

Lesley-Anne Walker, Head of Marketing & New Business, has over 15 years of marketing experience within the financial services sector, more recently with a heavy focus on the luxury asset markets, including yachting, aviation and real estate.

Lesley has a comprehensive understanding of a range of marketing principles and practices, including brand development, digital and social media marketing, public relations, advertising and event management.

In addition to her full-time role, she is currently a Director of Isle of Man Maritime, Chairman of the Isle of Man SuperYacht Forum and a volunteer in the Isle of Man for Breast Cancer Now.