The trade fair season offers the best opportunity to view and compare new boats. And prospective buyers can take advantage of the special trade fair offers to fulfil their dream of owning their own boat. Particular attention should be paid to the respective contract design. Price adjustment clauses, for example, but also VAT regulations and delivery clauses can have a significant impact on the final price of a boat. Buyers should therefore check the legal and financial framework at an early stage in order to avoid unpleasant surprises and be prepared.
More about buying a boat:
I. Price adjustment clauses in the contract
In most cases, the ships to be purchased still have to be built, and delivery times are often twelve months or more. Price adjustment clauses play a central role here, which are used in particular for longer production and delivery times. These can either be included directly in the purchase contracts or submitted for signature as a separate agreement. They serve to minimise risks such as increases in material costs, currency fluctuations or other external influences for the seller.
For the buyer, however, such clauses often harbour the risk of unforeseen cost increases and should therefore be closely scrutinised. Price adjustment clauses, in particular for consumers, are subject to strict legal requirements in Germany and are often partially invalid.
However, boat buyers should not rely on this and should check the clauses carefully before concluding the contract and, if necessary, renegotiate them to avoid getting into a legal dispute with the seller before delivery.
The following points should be observed for the clause to be effective:
- The circumstances that may justify a price adjustment, such as material and labour costs or changes in the law, are listed numerically.
- For example, an index is used to show exactly how the price adjustment is calculated. Care should be taken to ensure that the selected reference price actually reflects the relevant cost factor. It should also be checked whether the calculation basis appears to be comprehensible and reasonable. Calculation bases such as future price lists of the shipyard are not permitted.
- It is defined when and how often a price adjustment can be made - for example, quarterly or when a certain cost threshold is exceeded - and it can be checked whether a fixed price is agreed for fixed periods or sections.
- A limit on the possible price adjustment protects the buyer from excessive price increases. Such limits can include, for example, a maximum percentage increase in the purchase price and an adjustment period after which no further increases are possible.
- The seller is obliged to justify the adjustment in writing and with appropriate evidence.
- The seller is obliged to pass on the price reduction if costs fall.
- It is ensured that all adjustments are documented in writing and with sufficient evidence.
If a price adjustment is made by the seller, it must be possible for the buyer to check its legality. This is primarily based on the conditions set out in the contract. For example, there must be an objective reason for the price adjustment. This is always the case if the cost of materials has risen. The adjustment must also be proportionate and based on the agreed scale.
Price adjustment clauses in boat purchase contracts are an important instrument for taking unforeseen price developments into account. However, it is crucial for buyers that such clauses are formulated fairly, clearly and comprehensibly.
A careful examination of the clause by experts and the negotiation of limitations can help to avoid unpleasant surprises. This way, nothing stands in the way of buying a boat - and the financial risks remain manageable.
II. Which law applies in the contract?
If a boat is sold at a German trade fair, German law applies, unless otherwise agreed in the contract, and the place of jurisdiction is the buyer's registered office. Foreign shipyards often stipulate the application of the law of their country in their contracts. However, if the German buyer is - explicitly or indirectly - deprived of the option of taking the matter to a German court in the contract, the clause is invalid.
In principle, German consumers can always take legal action in German courts, even if the seller is based abroad. This is very important because the enforcement of claims before foreign courts often takes considerably longer than before German courts, and the language barrier is also a disadvantage that should not be underestimated.
The seller is freer to choose the applicable law. This means that the Italian seller in our example can effectively agree to the application of Italian law in the purchase contract. However, according to EU consumer protection laws, the restriction applies here that foreign laws may not restrict the rights of the consumer any further than German law provides. The choice of law is therefore less important, as in case of doubt the law that is more favourable to the buyer applies.
In case of doubt, these EU regulations can lead to foreign law being applied if the buyer brings an action before a German court. But don't worry - ideally, no legal action will be brought. And if it does, then European law protects you from being unreasonably disadvantaged.
For the sake of completeness, it should be pointed out here that the signature under the contract is binding. It is not possible to buy a ship at the trade fair by signing a contract and then change your mind on the way home, contracts must be honoured.
III Agreements on delivery
While price adjustment clauses are often necessary to minimise economic risks for buyers and sellers, delivery clauses and tax provisions can be decisive for how the total cost of a yacht develops. In connection with the purchase and delivery of boats, there are often discussions about whether and how value added tax (VAT) can be avoided or reduced through clauses or delivery terms. In principle, it is not permitted to avoid VAT within the framework of the statutory regulations. However, there are legal structuring options, particularly in international trade, which can lead to tax savings.
In the European Union, including Germany, the purchase of a boat is generally subject to VAT if the boat is new or sold by a commercial dealer. VAT is charged in the country where the boat is sold or delivered. For private buyers, the tax rate is usually the respective national VAT rate (19% in Germany).
Can VAT be avoided by contract?
A frequently used option for avoiding VAT is tax-free export to a country outside the EU, such as Norway or the USA. Such deliveries can, under certain conditions, be treated as tax-free exports (§ 6 UStG in Germany). The seller must then prove that the boat was actually exported to the third country. Dealers often state the net prices in their contracts and offers and point out below that the applicable VAT must be paid in addition, depending on the agreed place of delivery. It is already normal for international sellers to present VAT as a soft factor that can be avoided. We are often told things like: "Seek legal advice. There are many ways to save tax."
A reality check is also required here. If you, as an EU citizen, want to use a ship privately within the EU, you must pay VAT in any EU country. Ideally in Germany, as the tax rate is lowest here. However, if you want to set off on a round-the-world voyage with your new ship and are not sailing in EU waters, you will not have to pay any tax if the contract is skilfully drafted.
Attempts to circumvent VAT through dubious delivery clauses or unclear regulations harbour considerable risks. Tax authorities scrutinise such cases closely and demand clear evidence. What's more, if the boat is later imported into the EU without VAT having been paid, there is a risk of significant additional payments and legal consequences.
Some questions are frequently asked in this context and can be answered as follows:
- The French overseas territories of Guadeloupe, Saint-Martin, Martinique, Saint Barthélemy, Mayotte and Réunion belong to the EU, but are not connected to the EU VAT system and are therefore treated as a third country for tax purposes.
- The so-called 18-month rule states that ships owned by non-EU nationals or companies in other EU countries can, under certain conditions, travel untaxed in EU waters for up to 18 months. However, the skipper must not be an EU citizen either, which is why this regulation does not represent a tax loophole for EU citizens, contrary to popular opinion.
- Turkey is still not a member of the EU. Ships from Turkey are therefore considered to be imported goods from a third country with regard to certain conditions, particularly in terms of CE conformity.
So if you are thinking of buying a boat during the current trade fair season, then think this purchase through strategically and don't make any spontaneous purchases. With a little planning in advance, many problems can be avoided.
Expert for yacht law issues Benyamin Tanis
Together with his team of lawyers, boat builders and international partner law firms, the Kiel-based yachtsman and lawyer advises and represents clients in all legal matters relating to yachting.
