Question: I have a Cayman Island flagged vessel which is not VAT paid, can I charter here in Spain? Answer: since 10th of October 2018 , yes you can!
Then after the pressure of the yachting and nautical industry lobby the Spanish Customs & Excise Tax Authorities recently issued an informative letter about pleasure crafts entering and leaving EU territory (“Nota informativa del Departamento de Aduanas e Impuestos especiales sobre la entrada y salida de emabarcaciones de Recreo en Territorio Adunaero de la Unión”) clarifying important aspects in Import, Export and charter activity of EU and non EU flagged vessels.
Besides some considerations about the Temporary Import VAT and customs duties relief and the Returned goods scheme the most relevant news is that official acceptance of non VAT paid vessels under the 18 months Temporary Import relief to be chartered in Spain.
Until now the Temporary Importation (TI) VAT relief for non-EU vessels was applicable for re-export vessels temporarily brought into and used for private purposes the EU, or more strictly in the ‘customs territory of the Community’, (which includes territorial waters) without customs duties or Value Added Tax (VAT). Now the “private purposes” disappears and the vessel under TI might be affected to economic activity, thus chartered just in Spain but not in other EU member States – without VAT paid status as long as the vessel:
- it’s registered outside the customs territory of the EU in the name of a person established outside that territory
- if it’s not registered, it must be owned by a person established outside the customs territory of the EU
- it’s used by someone established outside the customs territory of the EU
A boat is temporarily imported into the EU and not into one of the Member States; thus it can move from one Member State to another with no further customs formalities during the 18 month period allowed. In case that the vessel shall not be moved the owner might apply to the Customs & Excise Office to put the vessel in bond, that is, the boat is laid up for a certain period of time not counting the period of non-use. Before starting new navigation said bond must be removed by the Customs.
The vessels concerned have to be placed under the TI with Customs and the period of use in the EU is limited in time. The period doe the customs duties and VAT relief under TI is of 18 months When the time is up the boat has to leave, in official jargon this period is called ‘the period of discharge’. The non EU flagged vessel is just placed under temporary import by arriving in any EU and any kind of evidence is accepted not being necessary any written customs declaration. The re-exportation of the goods from the customs territory of the Community is the usual way of ending or ‘discharging’ a temporary importation procedure. If the boat does not leave before the end of 18 month period, nor the provisions and procedures are fulfilled, then customs duty and VAT -in Spain the VAT rate 21% – are immediately due and assessed together with sanctions (being the vessel seized as guarantee or otherwise filing bank guarantee if you want to go to a years long financial court procedure).
Finally, the note also admits no Matriculation Tax exposure if the one who uses the vessel – we understand the charterer, the owning Co and the beneficiary owner individual – are non resident for tax purposes nor established in Spain.
As you see great news for the charter industry that will also mitigate the impact of Brexit (whenever – or if – it happens) for red ensign vessels that could loose in the future the VAT paid and EU status.
Carlos Espinosa
Solicitor & Tax Adviser
+34 627 41 32 01
carlos.espinosa@iurisnautic.com
