When ‘Free at Sea’ is not Free at At Sea

[BunnyHutt]

8 hours ago, KeithJenner said:

This is how it works:

 

Somone produces some raw material and sells it on the a manufacturer for £100. They add on £20 VAT which they pay to the government. The manufacturer pays them the £20 VAT, but then claims that back off the government. Total net VAT paid to date is zero.

 

The manufacturer does some work to the product and sells it to a retailer for £200. They charge the retailer £200 plus £40 VAT, and they pay the VAT to the government. The retailer pays them that £40 and claims it back off the government. Total net VAT paid to date is zero.

 

The retailer then sells it on to the end customer for £300 plus £60 VAT. They pay that VAT to the government. The end customer pays that £60 to them and can't claim it back. Total VAT paid to date is £60, all of which was paid by the end user.

That is similar to how it is in the US. If goods are purchased for further manufacturing then they are exempt from sales tax. I *believe* the same is true if a resale certificate is provided but I am much less versed in that as the bulk of my career was spent in the manufacturing world. 
 

But, yes, typically only the end user is subject to sales tax. 

[cruiser2015]

12 hours ago, KeithJenner said:

This is how it works:

 

Someone produces some raw material and sells it on the a manufacturer for £100. They add on £20 VAT which they pay to the government. The manufacturer pays them the £20 VAT, but then claims that back off the government. Total net VAT paid to date is zero.

 

The manufacturer does some work to the product and sells it to a retailer for £200. They charge the retailer £200 plus £40 VAT, and they pay the VAT to the government. The retailer pays them that £40 and claims it back off the government. Total net VAT paid to date is zero.

 

The retailer then sells it on to the end customer for £300 plus £60 VAT. They pay that VAT to the government. The end customer pays that £60 to them and can't claim it back. Total VAT paid to date is £60, all of which was paid by the end user.

Are you quite sure about that Keith?

I really hate to dispute someone from the UK, but that really makes no sense.

If at each stage, the company pays the VAT and then claims it back, then they have not paid any VAT at all (which is what you said). In that case, why pay it at all? The whole VAT transaction is nil.

 

My belief is that each company involved pays their VAT - but does not get it back. The end user essentially pays it all because the retail price includes all costs along the way, including the VAT.

Now, if you want to say that each company along the way claims the VAT against what they owe for INCOME TAX, that would be logical under this theory.

 

It's called a value added tax because it's a sort of sales tax at each level of production or resale. Each next level company pays only on the increased value, not their sales price out the door. So, I believe that even if the final receipt shows the full amount of all the VAT to the customer, it was still paid in pieces along the way. Otherwise, there would be no point to not just calculating it at the end, like an ordinary sales tax.

[KeithJenner]

2 hours ago, cruiser2015 said:

Are you quite sure about that Keith?

 

Yes, 100% sure. I’m an accountant and I have been dealing with VAT as part of my job for about 30 years.

[Asawi]

4 hours ago, cruiser2015 said:

My belief is that each company involved pays their VAT - but does not get it back. The end user essentially pays it all because the retail price includes all costs along the way, including the VAT.

Now, if you want to say that each company along the way claims the VAT against what they owe for INCOME TAX, that would be logical under this theory.

@KeithJenner is absolutley right and your belief is wrong. VAT in and out is declared totally separate from company income. It is "just" basically an in/out declaration (although any accountant dealing with it would give me a death stare for using words like "just" in connection with VAT). The VAT kind of runs alongside the product (and therefor is paid by the en user) if that makes sense

 

Edit: Very well explained by @KeithJennerby the way! Maybe it really is simple and the word "just" can be used after all! 😄 

Edited October 1, 2023 by Asawi

[SteveH2508]

@KeithJenner 's explanation is virtually identical to the one I used to use to introduce VAT to my AAT(accountancy) students.

 

The devil in me wants to bring in zero-rating to further confuse our US cousins, but I shall refrain. The concept of Input and Output tax for registered VAT traders is enough😈.

[suncote]

On 9/28/2023 at 5:44 PM, macattack1111 said:

if you pay £150 for a drinks package and are charged 20% VAT  for this package...then the VAT Is £30...its not rocket science...I purchased the package in the UK...not on the ship and not in Spain.

Spot on!

[suncote]

On 9/28/2023 at 5:47 PM, graphicguy said:

But, you should only pay the VAT on what drinks you order, not what you might or might not order as paying the VAT on the entire package would make you do.

The price paid for the package say £150 this may well be for as little as 2 drinks or perhaps 12 drinks per day it's a package price, so charge the vat if applicable on the package price. 

[cruiser2015]

8 hours ago, KeithJenner said:

Yes, 100% sure. I’m an accountant and I have been dealing with VAT as part of my job for about 30 years.

Then I bow to your expertise.

BTW, I'm a retired financial manager & CPA.

[cruiser2015]

6 hours ago, Asawi said:

@KeithJenner is absolutley right and your belief is wrong. VAT in and out is declared totally separate from company income. It is "just" basically an in/out declaration (although any accountant dealing with it would give me a death stare for using words like "just" in connection with VAT). The VAT kind of runs alongside the product (and therefor is paid by the en user) if that makes sense

 

Edit: Very well explained by @KeithJennerby the way! Maybe it really is simple and the word "just" can be used after all! 😄 

I have been properly chastised by Keith.

Apologies.

[insidecabin]

4 hours ago, SteveH2508 said:

@KeithJenner 's explanation is virtually identical to the one I used to use to introduce VAT to my AAT(accountancy) students.

 

The devil in me wants to bring in zero-rating to further confuse our US cousins, but I shall refrain. The concept of Input and Output tax for registered VAT traders is enough😈.

Then there is the additional confusion of non vat registered traders that pay the VAT but can't claim it back and don't add extra VAT for their added value.

(Think I got that right)

[yakcruiser]

I thought the idea of a VAT was to replace the income tax and all the crazy tax codes, but it seems from reading this thread that the VAT is just as complicated. Oh well I guess all the government workers would get to keep their jobs.

[RocketMan275]

53 minutes ago, yakcruiser said:

I thought the idea of a VAT was to replace the income tax and all the crazy tax codes, but it seems from reading this thread that the VAT is just as complicated. Oh well I guess all the government workers would get to keep their jobs.

The purpose of the VAT is to generate revenue while disquising how much taxes you're paying.  The only VAT the consumer sees is the VAT placed on top of the last to add value.  However, as many others stated the consumer is really paying all the vat.  It's slight of hand.  

[DCGuy64]

This thread has veered off course from its originally intended NCL-bashing and has drifted into the territory of common sense about VAT. That's not allowed! Now let's back to blaming NCL for everything, people! 😆🤣😂

[kirtihk]

On 9/27/2023 at 12:54 PM, PollyMurg said:

No we are only sailing from France to Italy and back. Not in Spanish waters

We had a tax applied for drinks in NY city, too (even though, we had a beverage package).

[JimMaCruise]

On the epic now and it's a bit worse than expected. 

Vat on the cruise, the whole cruise and nothing but the cruise 🙄

 

20% on all shop items and alcoholic beverages

10% on all non alcoholic beverages and food (a la carte items and specialty dining)

We have some obc that we planned to use in starbucks, but we'll need it for the vat instead.

We received the info on paper during check-in and it's mentioned in the daily.

[davidcraig2003]

Just off the Norwegian Gem on Sunday, sailing Spain > Gibraltar > Spain > France > Italy. I don't want to get into the morality of it but I can explain how it worked. We had free at sea.

 

In Spanish ports and waters, we would order a drink, swipe our card, be given a receipt with the full drink cost including service charge and VAT to sign. Normally the waiter circled the VAT cost. That is all that was charged, despite having a receipt and signing for the full amount. Generally after leaving a spanish port at 7pm, the charging regime was dropped around 9pm and then there were no receipts issued. In restaurants <9pm we were not charged VAT on drinks, I assume they tallied up the bill upon completion of the meal, after 9pm, which was helpful.

 

We visited Gibralter which is not in the EU, therefore our cruise left Europe and we were not charged in France, Italy or Gibraltar.

 

 

[greg2014]

2 hours ago, JimMaCruise said:

On the epic now and it's a bit worse than expected. 

Vat on the cruise, the whole cruise and nothing but the cruise 🙄

[....]

 

What's your itinerary ? Where have you started and finishing your cruise ?

Basing on other post charging of VAT could depend where cruise is starting/finishing. If both ports are in Spain, it was reported that NCL charge VAT all the cruise including sea time.

Edited October 3, 2023 by greg2014

[davidcraig2003]

2 minutes ago, greg2014 said:

 

What's your itinerary ? Where have you started and finishing your cruise ?

Basing on other post charging of VAT could depend where cruise is starting/finishing. If both ports are in Spain, it was reported that NCL charge VAT all the cruise including sea time.

Epic doesn’t leave the EU, hence VAT is charged in all ports. It must touch a non-eu port such as Gibraltar, Isreal or Turkey to avoid VAT, except in Spanish ports/waters, where it is always applied 

[JimMaCruise]

1 hour ago, greg2014 said:

 

What's your itinerary ? Where have you started and finishing your cruise ?

 

We start and end in France (Marseille), going to Spain and Italy

[terrillja]

On 10/3/2023 at 10:10 AM, JimMaCruise said:

On the epic now and it's a bit worse than expected. 

Vat on the cruise, the whole cruise and nothing but the cruise 🙄

 

20% on all shop items and alcoholic beverages

10% on all non alcoholic beverages and food (a la carte items and specialty dining)

We have some obc that we planned to use in starbucks, but we'll need it for the vat instead.

We received the info on paper during check-in and it's mentioned in the daily.

It’s extremely poorly implemented, I purchased drink specials and was charged the non-special price. When I said well that’s not the correct price I was told well you have the package so it doesn’t matter, my counter that I still pay tax and it should be the correct price was met with a shrug and well that’s how it is. 

[schmoopie17]

On 10/3/2023 at 3:10 AM, JimMaCruise said:

 

10% on all non alcoholic beverages and food (a la carte items and specialty dining)

 

Wait a minute. Now they're charging VAT on Specialty Dining? Even with the FAS package???

 

[DCGuy64]

21 minutes ago, schmoopie17 said:

Wait a minute. Now they're charging VAT on Specialty Dining? Even with the FAS package???

 

Not necessarily.

 

Edited October 4, 2023 by DCGuy64

[terrillja]

1 hour ago, schmoopie17 said:

Wait a minute. Now they're charging VAT on Specialty Dining? Even with the FAS package???

 

No charges on FAS dining, but they are charging VAT on gratuities. Now if I wanted to add another dining plan while at sea, I have no clue what they would charge but anything FAS or FAS plus there has been no VAT charged. Wine purchased at dinner however there was VAT. 

[schmoopie17]

8 minutes ago, terrillja said:

No charges on FAS dining, but they are charging VAT on gratuities. Now if I wanted to add another dining plan while at sea, I have no clue what they would charge but anything FAS or FAS plus there has been no VAT charged. Wine purchased at dinner however there was VAT. 

 

I don't see Specialty Dining excluded. And Is this specifically for France? What about Spain?

[terrillja]

43 minutes ago, schmoopie17 said:

 

I don't see Specialty Dining excluded. And Is this specifically for France? What about Spain?

Wasn’t charged any VAT for specialty dining in France or Spain.