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Mention yacht importation amidst the flurry of solicitations toappoint Tax Representatives in Italy, and faces instantly dim. Ithad not crossed the mind, because nobody had mentioned it. They hadsupposed, as indeed most of the pamphleteering has declared, thatall they needed to do in order to charter their yachts in Italy wasappoint a Tax Representative there to register them for VAT andassume responsibility for the correct management and settlement ofVAT on their behalf in accordance with the local regulations. Theywould hence be able to bring their yachts into Italy and conductcharters, charging VAT at the fantastic rate of 6.3% of the charterfee. Well, not quite so simple. Yachts are after all goods that areowned (‘movable property" in the VAT legalese), and assuch they must first be imported and VAT accounted under EU VATrules before they can be used as ‘EU goods" in theoperation of charters or other services. Now, you tell a yachtowner that they would have to put up front VAT, even at the toutedrate of 6.3% of the value of their yacht on importation, oralternatively, that they must post a bond in favour of the TaxRepresentative, and they are bound to perk up to consider theseriousness of the offer and fire back a few more need-to-knows. A not so prosaic VAT scene VAT representation is hardly uncharted waters. It is a trite areaof VAT law laid down by the dated Article 21 of what used to be theSixth Directive. It was particularly relevant in situationsinvolving non-EU companies trading in the EU. Its significance neednot be exaggerated or glamorized, nor should it be doom-mongered. Reflecting the provisions of that wider EU legislation, the taxcode of literally all EU countries requires the Tax Representativeto ensure that the foreign trader is properly registered with thelocal tax administration. ‘Foreign traders"(inelegantly referred to as ‘non-established taxablepersons" in the lingo) are ones not already registered forVAT in any EU country. The Tax Representative must additionally ensure that the foreigntrader is fully compliant with the general VAT operational rulessuch as invoicing, VAT treatment, exchange rates and the like. Hemust ensure the trader"s accounting records are maintained tolocal standards and are readily available for inspection by the taxauthorities. All the trader"s VAT and associated filingsshould be correctly prepared and submitted, and enquiries and taxinspections from the VAT office should be dutifully fielded andhandled. These are exacting requirements which, in effect, make theTax Representative the local exponent of the foreign trader. Thisis why the tax authorities hold the Tax Representative jointly andseverally liable for the taxes of the trader; and why most TaxRepresentatives would require a full bank guarantee from theirprincipal to protect them from losses. However the context here is the EU, whose whole basis is that of aborderless "Single Market" in which people, goods,services and capital move internally among the Member States asfreely as within one country. Yes, the system does not quite workas fully as the founding ideologues conceived it. The EU has turnedout to be a complex marketplace currently comprising of 27countries, each with its own customs and tax authority, speaking 23official languages. Without the right expertise it can be difficultfor the uninformed to navigate successfully. Such practicaldifficulties may dictate a need for a professional agent orconsultant in some situations. But the appointment of a formal TaxRepresentative is not a mandatory requirement in all casesinvolving EU trade in goods and services, and it would bedisingenuous to pretend otherwise. Businesses already registered for VAT in one EU member state havein fact ceased to be required to appoint a VAT representative since2000, thanks to EU Directive 2000/65/EC. This Directive simplifiedthe rules substantially, and withdrew the option of Member Statesto require the appointment of a Tax Representative. EU businessesthus continue to have the wide choice and scope to organise theirtrade to avoid the liability to register for VAT in Italy orelsewhere, and obviate the appointment of any kind of tax agent. The Tax Representative is now only an option for foreign traders,particularly those carrying out transactions in the EU with privatecustomers who cannot tax that operation by self-invoicing. That iswhy the Tax Representative provisions have since been largelyremoved from the VAT Directive itself - and recast in terms of theThirteenth Directive covering arrangements for the refund of VAT totaxable persons not established in the EU territory. And even thenit is within the rights of such foreign companies to request todirectly register with the relevant tax authorities, rather thanappoint a Tax Representative. Ode to joy Another trite but critical point about the EU is that it is acustoms union. It has a fiscal ‘fence" around it, witha common customs duty tariff and VAT against goods from outside thefence. This is to protect EU traders against foreign competition aswell as being a producer of tax revenue. There is no customs dutyon superyacht imports, but there is certainly VAT. The VATliability is triggered on importation of yachts from outside the EUand the person liable for payment of the tax on such importation isthe owner. Holding out as their Tax Representative makes the latterjointly and severally liable with the owner. Like other Member States, Italy makes that clear in its lawestablishing and regulating VAT (the infamous Article 17) whereby‘Persons supplying taxable goods or providing taxableservices shall be liable to VAT; those persons shall pay the tax… to the tax authorities …The rights and obligations… with regard to transactions carried out in Italy by or onbehalf of persons not established in Italy and not having a fixedestablishment there may be exercised or fulfilled in accordancewith the usual conditions by a representative established in Italy…, who shall be jointly and severally liable with the personrepresented for the performance of the obligations arising…" That in essence reiterates the provisions of the wider EU law whichallow Member States to impose directly on foreign persons the sameobligations as those which apply to established taxable persons intheir territories. Not for the last time Italy wins first prize for grabbing theheadlines at the onset of the yachting season. But hold your breathand wait for the truly sensational two pieces of good news to come- if they do indeed come. Firstly, that Italy will waive its importVAT accounting requirement for foreign traders who appoint anItalian Tax Representative. Secondly, that the profit and capitalgain from the yachting trade, as might be earned post registrationthrough their Italian Tax Representative, will be ignored forItalian direct taxation purposes. As we wait in joyful hope reality is, it is raining on this headyparade. Italy requires VAT to be levied on importations, regardlessof who effects them. Italy has a live history of arresting yachtsfor not accounting for VAT on the hull value. Italy requiresyachting businesses already established there to import the yachtsthey operate and account for VAT on their value. Italy charges itstaxpayers a yacht ownership tax on top of VAT. Ayuk Ntuiabane Director Moore Stephens Consulting Limited Last Updated ( Wednesday, 16 May 2012 ). We are high quality suppliers, our products such as Stainless Steel Flat Bars , China Glass Wall Fittings for oversee buyer. To know more, please visits Stainless Steel Flat Bars.
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