Focus Law & Taxes on Charter in the EU II

Statement: Changes on the Spanish matriculation tax

read more in Boote EXCLUSIV: Ausgabe 2/2014 – Charter als Betriebskonzept?

Chartering in Spain. November 2014 update

Since October 2013, the changes in Law 38/92, of Special Tax, that regulates the Tax on Certain Means of Transports, commonly known as MATRICULATION TAX, allow that yachts over 15 metres in length be exempt form the tax, aiding the entrance of Spain into the super yacht circuit. The MATRICULATION TAX, 12% of the value of the yacht, must be paid by owners or lessee that register a yacht in Spain or undertake commercial activities with a yacht in Spain. This means the tax must be paid on foreign flag yachts, which do not qualify or claim for exemption, being used for charter in Spanish waters. Irrespective of the exemption or payment of the Matriculation Tax it is furthermore necessary to apply for a CHARTER LICENSE and sea worthy certificate. DESPACHO. 

On this note we will analyze from a legal perspective the requirements for chartering a non-Spanish flag yacht, exempt form Matriculation Tax in Spanish waters.

Matriculation Tax and VAT

Before commencing any charter activity in Spain it is necessary to request a MATRICULATION TAX exemption from the Tax Agency. To do so, the owner or legal representative, must be registered for VAT, register an address in Spain and submit the documentation of the yacht. Acquiring MATRICULATION TAX exemption is a relatively easy process. That said, it is extremely IMPORTANT to note that, once the exception is authorized, it is imperative to fully comply with the following requirements:

1. The yacht must be used exclusively for charter.

Private or others commercial activities, i.e. sailing school or racing, are NOT allowed and the owner must provide evidence that the yacht has been chartered, if not the exemption may be revoked.

2. The yacht cannot be lease to people linked with the owner.

This means that the partners of the Owner Company, directors of the Owner Company or relatives cannot use the yacht even when paying for it. Is important to highlight that this limitation is not applicable to associated people with permanent residence outside of Spain. For more information follow the link: http://www.nauticalegal.com/en/reports/154-alquiler-por-el-propietario-y-la-exencion-del-impuesto-de-matriculacion

3. The yacht cannot be leased for more than three months a year to the same lessee.

It is not necessary to comply with this requirement when the yacht is leased to a charter Company with the purpose of leasing to third parties.

Is vitally IMPORTANT to note that the Tax Agency will investigate and insure that all requirements are complied with on the commencement of activity in Spain. Furthermore an investigation can take place at any time over the following four years after the exemption is given and any irregularities can result in the application of the Matriculation Tax and a fine.

In relation to the VAT, when a charter originates in a Spanish port, the Spanish VAT of 21% in applicable. Obviously, the owner then has the right to tax deduct VAT paid for good or services contracted in Spain.

The Charter License

The yachting industry commonly refers to the compulsory authorization for chartering from the Government of the “Comunidades Autonomas”(i.e. Balearics or Catalonia) as a: CHARTER LICENSE. With the exception of Catalonia it is necessary to apply for a CHARTER LICENSE in all Mediterranean communities. In the case of the Balearic Island, which we consider of particular relevance being the foremost destination for charter yachts, the method known as “Responsible Declaration” is used. On the presentation of this document (“Responsible Declaration”) to the local authorities the owner declares that the yacht and the owner himself comply with all material and legal requirements to perform the activity in Spain. The principal legal requirements are to posses civil indemnity insurance and passenger insurance.

Special consideration must be taken to yachts flying non-European Union State flags. European and Spanish law reserves the cabotage navigation (charter) for European Union flag vessels, with the exception of situations where no other similar EU flag vessel is available for charter. Due to this legal prevision, it is necessary to get a special authorization. Therefore in the case of non-EU flag vessel planning a visit Spain it is strongly recommended to apply for the CHARTER LICENSE with enough time to avoid delays or inconveniences.

Note that in the case of non-European Union flag yachts it will be also necessary to show proof that import and VAT tax obligations have been met.

Sailing authorization or Despacho

The last step, once MATRICULATION TAX exemption and a CHARTER LICENSE have been obtained, is to pass the “sea worthy” certificate, the DESPACHO with the Maritime Captaincy of the local Port Authority. The documentation required for a DESPACHO varies between each local Maritime Captaincy but usually includes:

  • Identification documentation of the owner and vessel certificates
  • Crew licenses and employment contracts
  • Certificate of civil liability and passenger insurance

Only vessel certificates issued by relevant international authorities will be accepted.  Special care must be taken when homologating Captain and Officers licenses to insure that the licenses comply with legal requirements of the country of origin under whose flag the boat sails.

The DESPACHO is usually given for a period of three to six months and allows sailing in the area permitted by the vessel´s certificates.

Others aspects to consider

To operate in Spain is also important that the owner receive advice on a number of other legal considerations, for example:

  • Obligation to declare and pay Company tax or non-resident tax for earnings obtained in Spain.
  • Obligations to pay social security relative to crew contracts
  • Possibility of purchasing duty free gasoil
  • Tax on goods and services contracted in Spain
  • And while not a direct obligation of the owner, insuring the crew abide by tax regulations for earnings in Spain

source: Yamandú R. Caorsi Abogado / Lawyer