What do the changes to the Spanish Matriculation Tax really mean?
After years of lobbying and a summer with multiple delays, the Spanish Official State Gazette (BOE) adopted measures on 30 October, officially becoming law today, regarding tax and financial measures. But what does this really mean for the superyacht industry?
As the Tax Bill amending the Matriculation Tax on charter yachts has now been passed by Congress and Senate and all levels of Spanish Government, it formally becomes law as of today. SuperyachtNews.com spoke with two Spanish experts helping to spearhead the cause from the front lines. Patricia Bullock of Network Marine Consultants shares that "we are delighted with the positive results of the lobbying which so many people have been involved with and invested so much time. The amendment is simply removing the 15 metre limit for charter yachts to be able to apply for exemption from the tax, which will enable all correctly registered charter yachts to apply for the exemption".
Miguel Angel Serra, lawyer and economist at Garrigues firm in Palma spoke to SuperyachtNews.com this morning that while it has been a long and drawn out process, Spain is finally seeing the fruits of its labour. "The legal process has been tedious as the legal modification had been announced by the Council of Ministers of the Spanish Government on 28 June 2013, and after a long and somewhat confusing amendments period, has finally been approved and published." As Serra continues "The Preamble of he Law itself recognises that this measure will bring the Spanish tax regulations closer into line with those of other European countries, strengthen the Spanish yachting industry ... and produce a revitalising effect on other productive industries, with the consequence of increasing the capacity to generate wealth and employment. It will also help Spain with the diversification, deseasonalisation and deconcentration of traditional tourism".
To help readers better understand what these new changes mean for them, Serra has provided a few key points below:
"We should bear in mind that the matriculation tax itself has not been abolished ... the tax benefit continues to be subject to the fulfillment of the required conditions:
• The matriculation tax is charged at the rate of 12% on the market value of the vessel.
• The taxable event of the matriculation tax is: i) the first matriculation of a charter vessel in Spain and ii) the use or circulation in Spain of charter vessels. In the case of EU flagged vessels, this latter taxable event is coherent and in line with EU legislation and EU Single Market principles as there is no obligation to register under the Spanish flag.
• The tax exemption does not apply automatically to any of the aforementioned taxable events but needs to be applied for by filing the relevant tax form with the Spanish tax authorities.
• The conditions and requirements for the yachts to benefit from the tax exemption are basically that they must be effectively and exclusively engaged in the charter activity (no private use is allowed).
• Based on precautionary measures, the tax exemption will not be applicable where the owner transfers the use of the vessel (e.g. to a company resident in Spain or abroad) and he or any related parties are the final users."
While not an exhaustive list, Serra thinks "it will be necessary to carefully analyse on a case-by-case basis the specific circumstances surrounding the yacht and the owner in order to determine the best way to operate in Spain from a tax standpoint, considering not only the matriculation tax but also income tax and VAT." As the superyacht industry is constantly compared to other luxury markets such as private jets, Serra feels we should incorporate this into the way we charter as well. "In the air navigation sector, Spanish law allows the air crafts chartered to air navigation companies to be used by the charterer (generally the owner) or related parties up to a maximum of 5 per cent of the flying hours within the last 12-months period".
While this is certainly a step in the right direction, there are still matters tied up in the European Commission relating to the proportionality process. As a result of the infringement proceeding against Spain from October 2011 that requested it amend its legislation governing the matriculation tax to bring it into line with the proportionality or be referred to the Court of Justice of the European Union, Serra shares that "on 23 March 2013 the Commission issued a confidential reasoned report, so it appears that conversations are still being held."
However, as Spain continues to pressure the government to allow for greater clarity within the legislation, the yachting community in Spain remains hopeful for what the future holds. As Bullock recently commented "after so many years of difficulties, we can now open up the whole of the Spanish coast to charter clients who want to enjoy cruising in Spanish waters."
Serra also reminds us that "most Spanish regions require obtaining a charter licence before commencing the charter activity in their territories". For further details, please review the Spanish Charter Licence Requirements 2013 here.
Miguel Angel Serra, lawyer and economist at Garrigues firm in Palma spoke to SuperyachtNews.com this morning that while it has been a long and drawn out process, Spain is finally seeing the fruits of its labour. "The legal process has been tedious as the legal modification had been announced by the Council of Ministers of the Spanish Government on 28 June 2013, and after a long and somewhat confusing amendments period, has finally been approved and published." As Serra continues "The Preamble of he Law itself recognises that this measure will bring the Spanish tax regulations closer into line with those of other European countries, strengthen the Spanish yachting industry ... and produce a revitalising effect on other productive industries, with the consequence of increasing the capacity to generate wealth and employment. It will also help Spain with the diversification, deseasonalisation and deconcentration of traditional tourism".
Palma de Mallorca (image credit: Geoff Williamson)
To help readers better understand what these new changes mean for them, Serra has provided a few key points below:
"We should bear in mind that the matriculation tax itself has not been abolished ... the tax benefit continues to be subject to the fulfillment of the required conditions:
• The matriculation tax is charged at the rate of 12% on the market value of the vessel.
• The taxable event of the matriculation tax is: i) the first matriculation of a charter vessel in Spain and ii) the use or circulation in Spain of charter vessels. In the case of EU flagged vessels, this latter taxable event is coherent and in line with EU legislation and EU Single Market principles as there is no obligation to register under the Spanish flag.
• The tax exemption does not apply automatically to any of the aforementioned taxable events but needs to be applied for by filing the relevant tax form with the Spanish tax authorities.
• The conditions and requirements for the yachts to benefit from the tax exemption are basically that they must be effectively and exclusively engaged in the charter activity (no private use is allowed).
• Based on precautionary measures, the tax exemption will not be applicable where the owner transfers the use of the vessel (e.g. to a company resident in Spain or abroad) and he or any related parties are the final users."
While not an exhaustive list, Serra thinks "it will be necessary to carefully analyse on a case-by-case basis the specific circumstances surrounding the yacht and the owner in order to determine the best way to operate in Spain from a tax standpoint, considering not only the matriculation tax but also income tax and VAT." As the superyacht industry is constantly compared to other luxury markets such as private jets, Serra feels we should incorporate this into the way we charter as well. "In the air navigation sector, Spanish law allows the air crafts chartered to air navigation companies to be used by the charterer (generally the owner) or related parties up to a maximum of 5 per cent of the flying hours within the last 12-months period".
While this is certainly a step in the right direction, there are still matters tied up in the European Commission relating to the proportionality process. As a result of the infringement proceeding against Spain from October 2011 that requested it amend its legislation governing the matriculation tax to bring it into line with the proportionality or be referred to the Court of Justice of the European Union, Serra shares that "on 23 March 2013 the Commission issued a confidential reasoned report, so it appears that conversations are still being held."
However, as Spain continues to pressure the government to allow for greater clarity within the legislation, the yachting community in Spain remains hopeful for what the future holds. As Bullock recently commented "after so many years of difficulties, we can now open up the whole of the Spanish coast to charter clients who want to enjoy cruising in Spanish waters."
Serra also reminds us that "most Spanish regions require obtaining a charter licence before commencing the charter activity in their territories". For further details, please review the Spanish Charter Licence Requirements 2013 here.
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