Changes to Spain's charter licences and tax

20 January 2015By Benjamin Maltby
Spain’s strict enforcement on its multiple taxes on yachts makes problems for owners and is harming the economy of ports.

At a time of economic uncertainty, one would have thought that most countries blessed with stunning cruising grounds would be looking to encourage an influx of foreign cash from high-spending charterers. Not so, Spain. It seems that Madrid is too far from the coast to understand the benefits that yachting brings.

The Spanish government wants to raise money and yacht owners are an easy, politically uncontroversial target. Not only is Spain keeping the requirements for charter yachts to have a charter licence and pay matriculation tax, (and in certain cases for private yachts to pay the tax), it is now taking a new letter-of-the-law approach to ensure those without the correct documentation are severely penalised. It has also reversed some of its previous rulings, making it necessary for owners to double-check they have received the right advice, and if necessary to remove their yachts from Spain.

For a while now, the Spanish authorities have been investigating foreign-flagged yachts more closely, as well as those already chartering in Spain. Checks have been undertaken while on passage, at anchor and marina-berthed.

While polite, the officials have clear instructions and seem unconcerned about the immediate damage their investigations are doing to the local economy.

Yachts have been seized until demands for payment are met or, if challenged, funds placed in escrow until the case is heard and decided.

According to the Spanish Federation of Marinas & Yacht Harbours Associations, the inspections and investigations are aimed at value-added tax (VAT), as well as the infamous matriculation tax. Both of which must be accounted for in order for a yacht to charter, and sometimes simply for a yacht to remain in Spain.

Matriculation tax and VAT

Confusion reigns among many owners and brokers – partly because of poor quality (if well-meant) translations of official documents and advice in circulation; the complexity of Spain’s national and regional system of government and lawmaking; and the lack of uniformity of application nationwide.

To be clear, in order to charter your yacht in Spain, you need to:

Obtain a charter licence,

Pay the matriculation tax, and

Account for the VAT on the vessel.

Charter licences

To receive a charter licence, the owner (or a charter management company) must register as a taxpayer in Spain.

The yacht itself must be registered for commercial use, and those under 24m in length overall must be surveyed to ensure compliance with Spanish safety regulations.

Only EU-flagged yachts may be chartered in Spain. It seems that the Spanish authorities are prepared to consider the Isle of Man as part of the UK, but this does not apply to other British flag states.

Paying the matriculation tax

The matriculation tax is payable by all Spanish residents on their new and used yachts, just as it is on their cars and aircraft, whether chartered or not, when first registered in Spain.

The tax amounts to 12 per cent of the present, depreciated value. Values of many yachts produced on a production-line basis are prescribed, just as they are for vehicles. For yachts not listed and given official values each year by the Spanish tax authorities, the builder’s invoice (in the case of new yachts) or bill of sale (in the case of used yachts) will provide the best evidence of value.

Matriculation tax will also need to be paid where the beneficial owner lives in Spain for more than 183 days per year or has his or her main economic centre of interest in Spain.

Proof of non-residence in Spain may be required. This can be done by the production of a tax resident certificate from another country.

When the owner of a vessel is a company, the matriculation tax must be paid when the company is incorporated in Spain or the yacht is used by a Spanish resident or company.

Account for VAT

While there is no requirement for the VAT on the yacht to have been accounted for in order to obtain a charter licence. The liability remains if chartering is to take place. If the yacht is found to have been chartered without the VAT having been accounted for, the yacht is liable to be impounded and fines imposed.

As the chartering services will be undertaken in Spain, VAT will be chargeable on the charter fees. The owner or his fiscal representative will have to submit a quarterly VAT declaration and pay the VAT.

Mere possession or navigation in Spanish waters by a non-resident does not create any liability to pay the tax. Indeed, a liability to pay matriculation tax does not depend on the length of time that the yacht has been in Spanish waters.

Liability can also be avoided when the owner is changing his or her place of permanent residence to Spain – if certain requirements are fulfilled.

Many non-EU owners rely on the 18 month temporary importation concessions in order to avoid paying VAT. However, yachts may not then be chartered. Where owners are able to avoid paying VAT on this basis, they will not be liable to pay the matriculation tax.

Inconsistent application of laws and complicated government systems cause problems for yacht owners and brokers in Spain.

Changes are due

So, what’s changed? Has Madrid listened to the opinion of the European Commission on the validity of charging matriculation tax on foreign-flagged yachts? Have they listened to the MYBA (formerly the Mediterranean Yacht Brokers Association) report on the devastating effect the tax is having on nautical tourism? Of course not.

Instead, the authorities have decided to reinterpret the rules so that the beneficial owner cannot use his own boat while it is licensed to charter. Previously this was not the case.

If the owner does use the vessel, even if booking through an broker and paying charter fees on an arm’s length basis, a fine will be imposed and the matriculation tax demanded.

Searching for the owner

Some crewmembers have reportedly been asked whether anyone has been on board who has been acting as if he or she was the owner. Naturally, this has caused much mirth around the marinas among the crews, but there is the serious issue that trusts are not usually recognised in Spain, and owning companies may be transparent for tax purposes.

The authorities are also checking valuations provided in order to calculate the matriculation tax itself, to see if their own valuations were, in fact, too low.

When exemptions no longer apply

By way of highlighting the lengths they are going to find revenue, the authorities are detaining yachts and demanding that matriculation tax is paid even where these yachts are exempt as being less than 15m in length. Just because exemption certificates had not been applied for – even though it was accepted practice that it wasn’t necessary to actually bother obtaining these pieces of paper.

Even where issued, the authorities are even challenging their own exemption certificates if the vessel in question had not been transferred to Spanish registration.

Demands for payments of matriculation tax have also been made in respect of yachts that have already left Spain, where the (Spanish-based) party who agreed to be fiscally responsible for those chartered yachts is still in Spain.

Further, where matriculation tax has been deemed to have been payable, owners have been charged interest on the outstanding tax, as well as being fined 50 per cent of the tax on top. Should they challenge the tax and lose, this fine increases from 50 per cent to 100 per cent of the tax.

Up until now, the understanding has been that if a charter agreement states that the charter begins and ends outside Spain, then no licence will be required and no matriculation tax will be payable. But if the official line on chartering generally is anything to go by, this understanding should no longer be taken for granted, and advice must be taken for each port.

What is particularly unfair is that this ongoing purge is hitting the honest charterers, who have sought to ensure that they have followed the law as closely as possible. Those who have never bothered to obtain a charter licence or pay the matriculation tax will not be appearing on the tax authorities’ radar so readily, and are less likely to be targeted for inspection in this current round.

Putting aside the sheer short-sightedness of the Spanish government’s clampdowns, it is clear that all non-Spanish owners with yachts in Spain need to make sure that they have taken every precaution to make sure that they are abiding by Spanish law. Assumptions based on experience cannot be relied on.

This means discussing the matter with a Spanish maritime lawyer, in the region that the yacht is due to be moored or chartered, seeking and paying for vessel and client-specific advice, receiving a receipt for payment of the advice, and adhering to what the lawyer says.

Benjamin Maltby is an English barrister with consultants MatrixLloyd, providing impartial guidance on all aspects of large yacht purchase, building, ownership and operation.

Originally published: November 2009. Updated September 2012.