Features
YACHT TAX AND LEGAL MATTERS
VAT Import planning for yachts
Part 1
(Part 2 follows in September issue.)
In this issue we shall take a look at VAT international tax planning, being the object of the planning to mitigate completely the VAT cost of importing and operating a yacht in the EU. When a yacht is imported into the EU, import VAT is due before the yacht can be entered into free circulation.
Once the import VAT has been paid the yacht can sail freely around the EU without any further import VAT consequences. In instances where the yacht is used for private purposes the import VAT is irrecoverable.
The tax planning seeks to avoid the irrecoverable VAT cost with the target profile being yachts over €1,5Million.
We can distinguish three typical situations:
1. - A Spanish company is importing a yacht into EU
2. - A UK company is buying a yacht, which does not have VAT paid status and but is in Spanish waters
3. - A UK company purchases a yacht from another EU Member State.
Previous considerations:
- Provided a UK company which purchases the yacht intends to carry on yacht chartering business (chartering to third parties at market rates etc.) we have been told that it can register for UK VAT even if all charters take place outside of UK territorial waters.
But here you have to bear in mind that in case that the charter client, charter company or the owner is resident in Spain for tax purposes the vessel would be liable to the 12% Matriculation Tax (see previous article May 2006), then the tax obligation exists when the user of the yacht – individual or company - is resident in Spain or holds an Establishment here.
- Consideration of charter as hire of means of transport: On the other hand, most VAT authorities, including Spain, regard the yacht charter as hire of means of transport (so our VAT Act Art. 70 applies), which is treated differently for VAT purposes. Consequently, the place of supply of this service is always the place of establishment of the company i.e. the UK, and no overseas VAT should be due. However, we are aware that the French VAT Authorities collect French VAT on the proportion of the time the yacht spends in French waters. In Spain we have, in fact, a Consultation from the Tax Authorities from 05.10.2002 declaring that the service of charter of yachts is located in Spain, no matter which registration or where the yacht physically is placed, when the charter company is established here.
- As the UK consideration is based upon Customs interpretation of the nature of the service, this could easily change, so if the charter were considered in the UK as hire of means of transport, then the charter activities of a UK company in the EU would be subject to UK VAT.
Next month we will look in detail at some practical scenarios around these three possibilities, in the meantime if you are intending to buy a yacht or refurbish under such circumstances, feel free to contact us:
By Carlos Espinosa
Abogado
Yacht Tax and Legal Adviser
IURISNAUTIC
info@iurisnautic.com
In Puerto Portals:
Benito Feijoo, 2 Local 4
Tel: + 34 971 67 94 77
Fax: + 34 971 67 74 47
Mobile: + 34 627 41 32 01
Also in Palma:
Paseo del Borne , 14, 3.Floor,
Palma de Mallorca
Tel: + 34 971 22 74 66
Fax: + 34 971 22 74 67
Mailto: carlos.espinosa@iurisnautic.com