Refits are part of a yacht’s lifecycle. The costs incurred in restoration and repairs are significant and often include an additional 20 to 22% of VAT, depending on the country where the refits are made. If you are incurring these costs as a business and such costs are entirely linked to your business activity, you can recover that VAT in most cases.
Several refit suppliers charge VAT on their invoices by default. This means that no analysis is made on the VAT treatment of these services. Unfortunately, a wrong VAT treatment will make VAT non-recoverable.
To decide whether VAT should be charged on refit invoices, we should first look at the supplier and client´s country of establishment. If both parties are established in the same country, VAT would be normally charged on these refit services. However, if the supplier is established in one country, for example Spain, and the client is established in a different country such as UK, we should determine if these refits involve a supply of goods or a supply of services in order to decide if VAT must be charged.
A detailed analysis is required to define the refit services as supplies of goods or services. In case they are defined as goods, VAT would be charged. If these are services, VAT would normally not apply on the invoice provided the rest of the conditions are met. This distinction is the cornerstone of VAT treatment on refits, so we recommend contacting Marosa to ensure that your refit services are properly invoiced from a tax perspective.
From our experience, holding a valid invoice is another important requirement that is often overlooked by the person receiving the service. In order to recover VAT, the client must ensure that the invoice received is complete and correctly issued. In other words, it is the client who is responsible to hold a valid invoice in order to recover VAT. For example, as a client, you must provide your VAT number to the refit supplier and make sure that it is included on the invoice issued for their service.
How can we help you?
Marosa is VAT firm specialized in the yacht and maritime industry in Europe. Our focus is VAT recovery and VAT compliance, including registrations, fiscal representation and VAT returns. Contact us to get advice on how to recover VAT on refit services or any other VAT question in Europe.