For months, Croatia's accession to the EU on 1 July this year has been causing concern among boat owners from EU member states whose boats are permanently based in Croatia and who have not yet paid VAT on their boats. They all know this: With Croatia's accession, import duties (import VAT and customs duty) will become due, allowing boats to be permanently imported into the "free movement of goods in the Community".
Until December last year, it was completely unclear in what form and according to what rules Croatia would implement this import procedure. However, the Croatian parliament passed a new VAT law at the beginning of December and a new customs law at the beginning of January. This has cleared the fog a little. Nevertheless, some questions remain unanswered.
Boat less than eight years old? Buy it now!
As of today (end of January 2013), the following can be stated: Owners of previously non-EU-taxed boats can finally import their boat to Croatia from 1 January up to and including 31 May 2013 for 5% import VAT and 1.7% customs duty (in each case on the current value of the boat) (2.7% customs duty is due for inflatable boats weighing up to 100 kg). With this import process to Croatia, all conditions for EU taxation are fulfilled on the day of accession (1 July): The boat is then considered a "Community good".
However, this "import at a bargain price" is subject to certain conditions. For example, the boats must be entered in the Croatian shipping register at the same time as they are imported and receive the Croatian flag and a Croatian licence plate. However, this will only be issued if the cancellation certificate from the previous "register" is presented. This could cause problems for boat owners whose boats are financed by third parties and are therefore entered in the ship register. In this case, the ship's papers are held by the financing banks as security for ownership. Deletion of the register entry is therefore only possible with their consent (we will describe what a solution could look like in the next issue of BOOTE).
It has now been clarified that boats reflagged for import purposes will be able to return to their original flag or register (boat document) from 1 July. It has not yet been clarified what formalities and fees are associated with this in Croatia. During the "boot" trade fair in Düsseldorf, the Croatian Chamber of Commerce suggested that Croatia could possibly dispense with a cancellation certificate, especially as the International Boat Certificate (IBS) and small craft licence (WSA licence plate) are not "official registers" anyway.
Nevertheless, for all boat owners without proof of VAT whose boat is no more than eight years old on the date of accession (1 July 2013), the import at a bargain price is an offer they should not refuse.
Why? Because from 1 July the regular import sales tax will be 25%.
Boat older than eight years? Wait and see!
But why are we currently only recommending cheap imports to owners whose boats are no more than eight years old on 1 July? Because there is a possibility that Croatia will pass a law before the date of accession granting full tax exemption to boats that are older than eight years on 1 July. This would comply with Article 410 of the EU's VAT Directive and would also be in line with the procedure followed by all recent accession countries, including Slovenia, for example.
The signals in favour of applying the "eight-year rule" are certainly positive. In a letter to the ADAC at the end of January, the Croatian Chamber of Commerce referred to the Ministry of Finance's draft of a new VAT law, which explicitly states in Article 138 that boats older than eight years at the time of accession remain exempt from customs duties and import VAT. The Chamber of Commerce assumes that the corresponding law could be passed by the end of March.
We therefore recommend that owners of boats that were commissioned before 1 July 2005 remain calm and do not panic and take refuge in "bargain imports". Your chances of not paying any import duties at all after 1 July 2013 are good. Even if the new VAT law is not yet known at the end of March, there is no deadline: the actual subsequent taxation does not have to have been carried out by 31 May. The decisive factor is that the corresponding applications for subsequent taxation and reflagging must be submitted by 31 May!
So if in doubt, there is still enough time to decide in favour of the "bargain import" later.
Which boats are considered taxed?
Owners who can present proof of VAT in the form of an invoice of origin from an EU dealer or an import certificate stamped by the customs authorities of an EU country, including a receipt, are initially "off the hook". But be careful: the "Community status" of the boat evidenced by these documents is lost if the boat has been outside the Community for more than three years. This means that EU-taxed boats that have been stationed in Croatia for longer than three years have lost their Community status and would therefore have to be re-imported into the Community subject to duty. The Community status is retained if it can be proven that the boat was registered in any EU country before the three-year period expired. This would renew the three-year period. It is currently unclear how Croatia will deal with boats that have allowed this three-year period to expire. It cannot be ruled out that Croatia will waive "double" taxation and let these owners get away scot-free. However, this is pure speculation at the moment.
Owners who have had their boat delivered to Croatia without paying tax or - in the case of used boats - have not received suitable proof of the VAT paid from the previous owner are liable to pay tax without any ifs and buts: They are faced with the decision: bargain price or 25 %.
Customs details
Boats with European proof of origin (movement certificate EUR.1 or declaration of origin from an authorised freight forwarder) remain exempt from customs duties during the "bargain phase". However, only if these documents are not older than four months. The documents are only issued in connection with an export transaction from an EU country. Subsequent issue is not possible.
From 1 July, the EU customs tariff will apply to all boats in Croatia in accordance with the "Customs Code". According to this, boats less than 12 metres in length will be subject to customs duties of 1.7%. Boats over 12 metres in length can be imported duty-free.
Open questions
It is still unclear how Croatia will deal with boats that have lost their temporary import status because they have exceeded the officially permitted period for this status of 18 or 24 months. A statement from the Croatian Main Customs Office is circulating that these boats will not be dealt with "very strictly" and that owners will be able to import them at a reduced rate.
What needs to be done?
In order to make the rather complex process of registration and subsidised import a little more transparent, the Croatian Ministry of Maritime Affairs has published the leaflet "Notice to shipowners regarding the registration of vessels in Croatian ship registers" and posted it on the Internet: www.mppi.hr/default.aspx?id=668
According to point 9 of this notice, import customs clearance can be carried out on behalf of the owner by authorised freight forwarders based in Croatia. The registration of vessels may be carried out on behalf of the owner by law firms, consultants, freight forwarders, charter companies and marinas based in Croatia.
For time or other reasons, many owners will hardly be able to carry out taxation and registration on site without professional help. There are currently four companies that offer a complete service package and also provide up-to-date information on the Internet:
The small fly in the ointment: these service providers will also cost money in the end. However, as their costs do not have to be based on a "scale of charges", but can be calculated freely, we advise all affected boat owners to compare the offers of several companies and only then decide in favour of one of them.
Individual questions from boat owners are answered via the e-mail hotline nautika@hgk.hr (currently only in English, Italian or Croatian).
