VAT on leased assets


K

Keith

Can someone please verify the VAT situation on the following scenario.

A UK company, VAT registered, purchases an asset which it then exports
and leases to an overseas company.

Having paid VAT on the original purchase -

i) can the lessor reclaim the VAT on the purchase when the asset is
exported?

ii) as the revenue is from outside the UK it is not VATable. Can the
company de-register if its total income from all sources is below the
relevant threshold.

(Ronald, this is one for you - the asset is a new Bavaria 37 and the
lessor is based in Thailand)
 
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R

Ronald Raygun

Keith said:
A UK company, VAT registered, purchases an asset which it then exports
and leases to an overseas company.

Having paid VAT on the original purchase -

i) can the lessor reclaim the VAT on the purchase when the asset is
exported?

ii) as the revenue is from outside the UK it is not VATable. Can the
company de-register if its total income from all sources is below the
relevant threshold.

(Ronald, this is one for you - the asset is a new Bavaria 37 and the
lessor is based in Thailand)
I'm not really into the finer points of VAT, but here are some thoughts.

You mean the *lessee* is based in Thailand. The lessor is the owner,
and as a UK company is by definition based in the UK, no?

Surely VAT is reclaimed upon purchase irrespective of whether the
asset is subsequently exported.

Doesn't the definition of "export" imply transfer to foreign ownership?

If it does, it strikes me that a UK company, if leasing
it to a foreign company, is not parting with ownership and so
the yacht is not actually being exported as such, merely based
abroad. It remains under UK ownership and continues to fly the
red duster.

If it does not, and you therefore would be exporting, why bother
with a VAT registered company at all? Get the dealer to magic
away the VAT for you, and export it personally, or use a non VAT
registered company to own it if there is good reason to use a
company.

If there is good reason to use a company, there is probably good
reason to use a company for this purpose only, and it's not a good
idea to use a company which really specialises in something else.
 
K

Keith

Ronald said:
I'm not really into the finer points of VAT, but here are some thoughts.

You mean the *lessee* is based in Thailand. The lessor is the owner,
and as a UK company is by definition based in the UK, no?
Yes - my error.
Surely VAT is reclaimed upon purchase irrespective of whether the
asset is subsequently exported.
Are there not special criteria with regard to asset purchases? Is it not
like, for example, motor vehicles - the VAT cannot be reclaimed in
certain circumstances?
Doesn't the definition of "export" imply transfer to foreign ownership?
Not by my understanding. Goods can remain in domestic ownership but can
be exported.

How do Sunsail manage it? How do the oil excavation platform operators
work it? Why is it that ex-flotilla boats for sale in Turkey are 'VAT
unpaid'?
If it does, it strikes me that a UK company, if leasing
it to a foreign company, is not parting with ownership and so
the yacht is not actually being exported as such, merely based
abroad. It remains under UK ownership and continues to fly the
red duster.
Which is important. My question centres on this - if goods are exported
for leasing can the VAT on purchase be recovered?
If it does not, and you therefore would be exporting, why bother
with a VAT registered company at all? Get the dealer to magic
away the VAT for you, and export it personally, or use a non VAT
registered company to own it if there is good reason to use a
company.
The dealer cannot 'magic' away the VAT without declaring it an export.
Which would invoke prohibitive rates of import duty into Thailand upon
its 'import'.

For the class of goods we're discussing the 'country of registration' is
crucial. Think flags.
If there is good reason to use a company, there is probably good
reason to use a company for this purpose only, and it's not a good
idea to use a company which really specialises in something else.
Eh? The 'good reason' is to recover the VAT on the purchase when the
goods are shipped to Thailand under a leasing agreement. It also avoids
the import duties and tariffs imposed in Thailand.

A UK company, registered for VAT, buys a boat. Commissions it in the UK,
then ships it as deck cargo, under a long term leasing agreement, to a
company in Thailand. Can the UK company legitimately reclaim 100% of the
VAT paid on purchase/ commissioning?

On a 94 grand boat there's 14 grand VAT, so it's not peanuts we're
talking about.
 
R

Ronald Raygun

Keith said:
Are there not special criteria with regard to asset purchases? Is it not
like, for example, motor vehicles - the VAT cannot be reclaimed in
certain circumstances?


Not by my understanding. Goods can remain in domestic ownership but can
be exported.
Isn't that only if you do it as an individual? As an individual if you
change your residence anything you take with you is thereby exported, but
isn't it that case with a UK company that it is always remains notionally
"UK resident"?
How do Sunsail manage it?
Perhaps by arranging for the boats to be owned by individuals and only
managing them.
How do the oil excavation platform operators work it?
Perhaps because oil platforms are "offshore".
Why is it that ex-flotilla boats for sale in Turkey are 'VAT unpaid'?
Because Turkey is outside the EU.
Which is important. My question centres on this - if goods are exported
for leasing can the VAT on purchase be recovered?
I think the "for leasing" is irrelevant, and they're either exported
or they're not exported.
The dealer cannot 'magic' away the VAT without declaring it an export.
Which would invoke prohibitive rates of import duty into Thailand upon
its 'import'.
I think you've hit an insurmountable problem. You can't export from
one place without importing it elsewhere. Otherwise it'd be too good
to be true. Like getting married without having to put up with a wife.
For the class of goods we're discussing the 'country of registration' is
crucial. Think flags.
So what you want is to operate a Red Ensign vessel in Thailand without
importing it into Thailand. Presumably to charter. Does Thailand
allow that? Many countries don't. Not even the EU. At least not
long term.
Eh? The 'good reason' is to recover the VAT on the purchase when the
goods are shipped to Thailand under a leasing agreement. It also avoids
the import duties and tariffs imposed in Thailand.

A UK company, registered for VAT, buys a boat. Commissions it in the UK,
then ships it as deck cargo, under a long term leasing agreement, to a
company in Thailand. Can the UK company legitimately reclaim 100% of the
VAT paid on purchase/ commissioning?

On a 94 grand boat there's 14 grand VAT, so it's not peanuts we're
talking about.
Have you thought about exporting the boat to and registering it in
somewhere like Jersey? That's Red Ensign but outside the EU.
 
K

Keith

Ronald said:
Keith wrote:
So what you want is to operate a Red Ensign vessel in Thailand without
importing it into Thailand. Presumably to charter. Does Thailand
allow that? Many countries don't. Not even the EU. At least not
long term.
The vessel will be leased by a Thai company but remain the property of
the UK (?) company/individual (a similar situation to charter boats
managed by Sunsail in Turkey and other non-EU waters, as I understand
it).

I cannot see this as being 'illegal' although I will naturally be taking
advice from my Thai colleague.
Have you thought about exporting the boat to and registering it in
somewhere like Jersey? That's Red Ensign but outside the EU.
That's well worth considering from the VAT perspective.

At least we're talking monohull here. Siamese cats are not renowned for
their handling on water ;)
 
R

Ronald Raygun

Keith said:
The vessel will be leased by a Thai company but remain the property of
the UK (?) company/individual (a similar situation to charter boats
managed by Sunsail in Turkey and other non-EU waters, as I understand
it).

I cannot see this as being 'illegal' although I will naturally be taking
advice from my Thai colleague.
What might make it 'illegal' is that by being leased to a Thai company
the boat would clearly be seen as 'based' there, and it could hardly then
be claimed that it was only visiting and thereby taking advantage of such
exemption from import taxes as might be given in the case of 'temporary
importation' typical of vessels just 'passing through'.

If 'portation' (be it ex- or im-) isn't determined by ownership but
by long-term physical presence, I can't see how you could argue that
export of the boat from the UK (or Germany, for that matter, being a
Bav) had taken place without it also having been imported to where it
is to be based.

I don't know how kindly the Thai authorities take to tax evasion, but
given what they do to drug smugglers, I wouldn't take any chances.
They might even think the purpose of your tub is to conceal drugs in
the keel; they've heard how easily they come off. :)
That's well worth considering from the VAT perspective.

At least we're talking monohull here. Siamese cats are not renowned for
their handling on water ;)
Yes, in the case of monohulls you should channel your energies into
registration in Jersey or Guernsey, to get the paperwork absolutely
water-tight (Hermetically, as it were, but don't let's be Sarky about
it). With cats of course one should obviously opt for Manx registration.
 
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K

Keith

Ronald said:
What might make it 'illegal' is that by being leased to a Thai company
the boat would clearly be seen as 'based' there, and it could hardly then
be claimed that it was only visiting and thereby taking advantage of such
exemption from import taxes as might be given in the case of 'temporary
importation' typical of vessels just 'passing through'.

If 'portation' (be it ex- or im-) isn't determined by ownership but
by long-term physical presence, I can't see how you could argue that
export of the boat from the UK (or Germany, for that matter, being a
Bav) had taken place without it also having been imported to where it
is to be based.
Understand.

I have put the question to my contact over there - hopefully he will
come up with a definitive answer.
I don't know how kindly the Thai authorities take to tax evasion, but
given what they do to drug smugglers, I wouldn't take any chances.
They might even think the purpose of your tub is to conceal drugs in
the keel; they've heard how easily they come off. :)


Yes, in the case of monohulls you should channel your energies into
registration in Jersey or Guernsey, to get the paperwork absolutely
water-tight (Hermetically, as it were, but don't let's be Sarky about
it). With cats of course one should obviously opt for Manx registration.
<Chuckle>
 
R

Ronald Raygun

Keith said:
<Grin> At least it's not a cantilever keel - I could envisage Cambodian
stowaways trying to sneak into the keelbox of a maxi.
You could smuggle live (rare-breed wild) pigs in there. That would give
a whole new meaning to sending someone below to "feed the keel-hog".
 
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K

Keith

Ronald said:
You could smuggle live (rare-breed wild) pigs in there. That would give
a whole new meaning to sending someone below to "feed the keel-hog".
So long as it's rice.

Hence Keel-hogs Rice Crispies

(I'll get me hat..)
 

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