Mat Tax exemption for charter vessels and own use by the owner.

Frequent question:   you have your boat affected to charter activity – no matter if Spanish or foreign flag – you have recorded the economic activity to the Spanish Tax Authorities, you got your Spanish Fiscal Nr, also the pertinent charter license from the Govern Balear and Despacho from the Capitanía Marítima; and what is absolutely determinant, you have received from the same Spanish Tax Authorities the “ACUERDO DE LA CONCESION DE LA SOLICTUD DE EXENCION DEL IEDMT” , that is the so called Matriculation Tax Exemption because of the charter activity, and the question is:

Can we use the vessel – even partially – for our own private use?

The immediate answer is clearly no.

If so we would lose the benefit of the Mat Tax exemption as in art. 65 1, b) de la Ley 38/1992, de 28 de diciembre de Impuestos Especiales (Special Taxes Act 38/1992) is said clearly that the exemption can only be granted to vessels affected exclusively to charter, rental or hire under the following circumstances:

  • Bona fide charter, that is for a period of less than three months to same person
  • To individuals or companies not related parties with owner
  • No use for pleasure purposes by the owner, spouse and children

Does that mean that I cannot step on my vessel if affected to charter? What about maintenance, guardiennage or repair works and correspondent sea trials? And deliveries in order to bring the vessel to a new marina to pick up charter guests?

The main pitfall is the concept of “own use for pleasure” and its limitations; from the moment that a pleasure vessel is presumed to be used for recreational purposes even if commercial coded it is not always easy to distinguish private use from “business use”. That is why the Spanish Tax Law interpretational body the “Dirección General de Tributos” has made the following statement in a binding enquiry CV 0806-06, in which the following is stated: “Complementary tasks to the main activity of charter such as maintenance and sea trials carried out directly and personally by the ship owner of the vessel are admitted and not considered private use provided these are done close to the port base of the vessel and do not mean a final and real use of the vessel for his own pleasure.”

As you see there still grey areas – nothing is said for example about deliveries – and each situation might subject to interpretations by the tax officer, that is why the more evidences the owner might show – for example no family , relatives or friends on board, but just technicians or engineers, no champagne, etc. – the best position we will have if they challenge the use for commercial purposes. The first thought of the tax office is always the vessel is being used privately so that we will have to be in a position to provide as more evidences as possible of the real charter activity even with you on board; that will depend also on other issues like the size of the vessel, the effective bona fide charters done in the year, the correct and updated recordings, certificates and competences of crew and vessel.

Do not forget that challenging the commercial use means removing the matriculation tax exemption and the nightmare of the vessel seized for 12% of the real value plus aprox. 10% for sanctions, penalties and interests on arrears and as long this is not paid or a bank guarantee extended in case of claiming.

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