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Tag Archives: VAT

Adios! Spain To Abolish Private Luxury Yacht Charter Tax

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The cost to enjoy a Balearic Island yacht charter vacation should soon be going down, as the Spanish government announced that they have ceased implementation of the IEDMT (Impuesto Especial sobre Determinados Medios de Transporte), better known in the yachting industry as the Matriculation Tax.
Spain yacht charter tax lifted matriculation tax withdrawn private luxury yacht charter
First introduced in 1992, the tax equaled up to 13.7% of a vessel’s value and was applied to all yachts over 15 meters used commercially, such as charter vessels.
Coupled with the standard VAT imposed on charters, the cost to own a superyacht or rent a yacht in Spanish waters became prohibitive when compared to other European Union countries. 
Protests by the Spanish and Mediterranean maritime industry have been ongoing ever since.  Numerous reports outlined how the tax was causing economic harm, not benefit, to employment and economic activity in Spain.  Some studies showed losses to the economy of 10 million euro per weekend alone, in high season.
For years, Spain ignored the calls to rescind the matriculation tax .  In 2011, the European Union Court of Justice declared the Spanish Boat Tax an “unlawful practice,” yet Spanish authorities ignored the guidance laid down by the EU.
Fortunately, the Spanish government finally listened.
 According to a statement released by the Spanish Ministry of Finance and Public Administrations in July, the Ministry will, “…cease the application of  Matriculation Tax to vessels of 15m+ engaged in commercial activity.”
While the news is widely heralded as positive, many hurdles remain before chartering in Spanish waters becomes competitive with other regions in the European Union. 
“Spanish IVA (VAT) remains at 21% – nearly double the typical fees found in other EU countries,” states Jana Sheeder, President of SailAway Yacht Charters and 1-800 Yacht Charters. Sheeder adds, “A myriad of permits and registration requirements makes it difficult for charter vessels to commit to cruising in Spain.Without Spanish registration, these yachts cannot begin and end a charter within Spanish waters.  So the combination of  administrative burdens and high IVA keeps most charter yachts out of Spain.”     
It should also be noted the matriculation tax has not been eliminated.  
Sheeder explains, “The tax has not been eliminated. The Ministry was careful to use the words, ‘Ceased to be applied.’   While we expect the Spanish Parliament to vote in favor of the Ministry’s position on the matriculation tax, there is no guarantee that a future administration won’t vote to reinstate it.”
Still, the abolishment of the matriculation tax is a step in the right direction.  Parliament’s approval is expected within the next few months and the new exemption should be in place in time for the summer 2014 charter season.=====================================

To charter a luxury yacht for your corporate special event or private vacation, contact 1-800 Yacht Charters at https://www.1800yachtcharters.com/book-now-contact-us/

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France Yacht Charter VAT Faq’s

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In July, we informed our readers about the new regulations imposing French VAT on yacht charters taking place in that country.

The new regulations will apply from 15 July 2013 to charter agreements for yachts for the purposes of leisure travel. 

photograph of marina with multiple white superyachts docked there . Marina is surrounded by hills and pastel-colored buildings

We sat down with Jana Sheeder, President and corporate Maven of SailAway Yacht Charter Consultants and 1-800 Yacht Charters, to review the answers to the three most frequently asked questions regarding the new rules.

Question #1:  What rate will apply to French charters after 15 July?

“The rate has been set at 19.6% and will increase to 20% on January 1, 2014.  However, the taxable base can be reduced by 50% if the yacht is used outside European Union territorial waters, which by definition extend out 12 nautical miles from the coastline. Thus, if you started a charter in Nice, France, and cruised out beyond the 12 nm limit, and concluded the trip the next day in Sardinia, the tax would drop to 9.8%.”

 

Question # 2.   Does it apply if the charter starts and ends outside France?

“No. The law reads VAT is applicable on the charter if the vessel is put, ‘…at the disposal of the charterer in French waters.'”

 

Question #3.  Will charterers need to be involved with VAT registration and compliance in France?

“Not at all.  It is the responsibility of the yacht owner to make the necessary arrangements to register his or her vessel with the French taxing authorities.  As to the collection and processing of the tax, most owners are hiring local French-based fiscal agents.”

“As charter consultants, our responsibility is to clearly explain the new regulations to our clients. Many are repeat charterers who cruised multiple times in France in the past. For some, it will be a shock to hear their next Western Mediterranean yacht charter vacation may be subject to a tax of nearly 20%.  We will work with them to modify their itineraries, in an effort to mitigate as much of the tax liability as possible.”

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French Yacht Charter VAT Now In Effect

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France’s efforts to seek an exemption from VAT on yacht rentals has failed, and starting July 15, 2013, charterers can expect to pay an additional 9.8% for their Côte d’Azur yacht charter.

For years, the majority of Mediterranean yacht charter vessels based in France were registered as commercial vessels, a strategy that allowed their owners to sidestep VAT on the purchase of fuel and on the prices charged for charters.  The European Union prevailed in court to force France to follow EU VAT guidelines, and beginning July 15, charters will be subject to the nearly 10% fee.

french yacht charter megayacht tax extra costs additional fees mediterranean yacht charter vacation
Jana Sheeder, President of 1-800 Yacht Charters and SailAway Yacht Charter Consultants, Inc. is working closely with her preferred clients to explain the new fees and to explore alternative destinations where the VAT fees are lower or even not applicable.  Sheeder says,
“We are investigating other countries in the European Union as alternative Mediterranean yacht charter destinations.  Gibraltar, for example,  has no import duty for yachts over 18 meters – and no VAT.”
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Luxury Yacht Charter Maven Reflects on Industry in 2013

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With many of her clients still onboard their yachts enjoying their 2013 year-end St Barts yacht charter vacations, Jana Sheeder, President of SailAway Yacht Charters and 1-800 Yacht Charters, takes a few minutes to reflect on the year that was (and offers us a glimpse of what’s to come in 2014).

Jana Sheeder, President of 1-800 Yacht Charters standing with yacht Vertige female crewmember on dock in front of boat. Jana wearing halter long dress and gold name badge, and crewmember wearing short black skirt and white short-sleeved shirt.

Q:  The charter industry still seems to be recovering from the global economic downturn of the past couple years.  Did 2013 represent an uptick in the volume of charter business?

Sheeder:  “Our research indicates 2013 showed significant improvement in charter revenues when compared to both 2011 and 2012.  Many newly-built yachts entered the  charter marketplace in 2013.  These are builds that had stalled while under construction during the height of the downturn.  As the global economy began to pick up, delayed construction projects commenced.

The result is a beautiful new fleet of superyacht charter vessels that hit the seas in time for the 2013 summer Mediterranean charter season.”

 

Q:  Did the year end on an uptick?

Sheeder:  “We haven’t seen any industry data yet, so we can’t speak for our competitors.  We can tell you in terms of the Caribbean yacht charter marketplace,  SailAway (1-800 Yacht Charters) had its strongest December in over 3 years. While the inquiries for smaller vessels did not grow, our bookings of superyachts – some of the largest yachts in the world –  increased significantly.

Presently, we have the two largest charter vessels currently docked in St Barts for 9 night charters – motor yacht LAUREL (240 feet, $525,000 per week) and the Lurssen yacht charter motoryacht MARTHA ANN (230 feet, 600,000 EUROS per week).”

Laurel Megayacht Delta Marine yacht charter caribbean cruises mediterranean europe superyacht boat yacht rental charters
Q:  What was the biggest change you witnessed in 2013 in the charter industry?

Sheeder:  “I would have to say the ending of VAT exempt charters in France. For many years, our clients enjoyed St. Tropez yacht charters and summer vacations along the Cote d’Azur, free of the burden of VAT.  That all changed in the summer of 2013 when the French yacht charter VAT went into effect.   As of July 15, 2013, charterers can expect to pay an additional 9.8% for their Côte d’Azur yacht charter.”

Q:  Are you optimistic as you look ahead to 2014?

Sheeder:  “Our team is extremely optimistic as we focus on incremental growth in 2014. During the economic downturn, while many of our competitors hunkered down to ride out the storm, we took a contrarian approach.  We focused our efforts on increased marketing. Our strategy was simple – stay in touch with existing clients and prospects. We wanted to be “easy to find” once the economy turned around.

Internally, we call it our “Tip of the Tongue” project.  Clients had tightened their belts during the downturn, and we were committed to be the brand they remembered (always on the tip of the tongue) when they were ready to loosen their discretionary income belts again!

Now that 2014 is here, we are excited to announce that:

  • Our newly-designed website is nearing completion
  • We are launching a new subsidiary to provide luxury yacht tenders to megayacht owners
  • We are opening additional satellite offices
  • We are focused on charitable causes — helping others, helping marine life, and helping the environment — Paying it Forward and Making a Difference for all that’s been given to us! 

The sky’s the limit!  It will be an exciting, challenging, and awe-inspiring year!”

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For more information about yacht vacations around the world, please visit 1-800 Yacht Charters at https://www.1800yachtcharters.com/book-now-contact-us/ and share our information with your friends, family, and associates!

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Monitoring International Laws Keeps Yacht Charter Maven On Her Toes

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Digging Deeper

You would think Delivering the Superyacht Experience to boating clients would be pretty straightforward:  A client expresses interest in a yacht for a family vacation; the charter broker presents several options; and the client makes a selection.

In reality, it’s not nearly so clean and to the point  – at least not for the handful of super-brokers who handle the world’s elite travelers.   Just ask luxury yacht charter maven Jana Sheeder, President of 1-800 Yacht Charters.

According to Sheeder, matching a yacht to the client’s budget is just the starting point.

“While our clients are most interested in a yacht’s layout, amenities, and price, we dig deeper – into the yacht’s registration, the nationalities of the crew, and any governmental regulations and laws that might impact the success of the charter and comfort and respect of our clients.”

 

photo of large red Maritime book on its side with a gavel lying on top

 

El Método Español

As an example, Sheeder mentioned the rules affecting yachts for hire in Spanish waters.  “We’ve seen a significant increase in interest in Spain, particularly Balearic Islands yacht charter vacations,” says Sheeder.  “Many yachts based in the South of France and Monaco are willing to deliver to the Balearics to accept theses charters.  However, yachts not in possession of a Spanish charter license are at a significant disadvantage, and face restrictions as to where the charter can begin and end, and what nationalities are permitted in the crew.  Something as simple as bringing on a Spanish resident to offer therapeutic massages to the charter guests could be a problem if the yacht is not licensed for charter in Spain.”

Other licensing and legality issues Sheeder and her staff monitor are:

  • Local regulations regarding the charter guests’ use of watertoys such as waverunners.
  • VAT implications of chartering in certain European Union countries.
  • Advance entry requirements prior to arrival in certain ports of call.

 

“Not understating these regulations and laws can result in a negative experience for the charterer and  guests, and in some cases increase the overall cost of the charter by 10% or more – a significant sum considering many charters are priced in the €500,000 to €1,000,000 per week range.”                 

 

La Manière Française

Currently, Sheeder is monitoring the possible impact of French social security tax responsibilities on yacht crews.  In March 2017, a decree was passed to require crewmembers and their non-French employers (the yacht owners) to make contributions to ENIM – the French mariners’ social security agency. Any yachts and crews spending more than 90 consecutive days in France or French waters are subject to the tax.  The decree was suspended Sept 13, following a disastrous summer tourist season that saw France luxury yacht charter revenues plummet by 40%.

Sheeder is waiting to see if the decree is actually overturned in 2018, or if it will come back in a modified form. “These increased costs associated with crew wages end up being are passed on to the charterer, in the form of higher rates for yacht rentals,” says Sheeder.    If the decree is reinstated, Sheeder plans to either offer her clients yachts with French crew, or to convince them to bypass French waters and charter elsewhere in the region.

 

Going The Extra Mile

Do affluent charter clients realize the level of detail involved in orchestrating a vacation on a superyacht?  Sheeder chuckles at the question: “Probably not, but that’s fine with us. It’s like an attorney getting your traffic ticket dismissed in court.  You don’t care how he or she does it –  as long as you don’t have to pay the ticket!  It’s a similar scenario for us – we obsess over the small details in order to deliver a memorable vacation experience to our clients.  A pat on the back is nice, but a satisfied charterer who becomes a repeat customer is even better!”

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A luxury yacht charter is the ultimate vacation for today’s elite travelers.  Wired, connected, and driven by sustainability and the greater social good, they want to immerse themselves and participate in unique cultural events. 1-800 Yacht Charters understands that their chartered yacht must serve as a platform to an eco-friendly adventure – a chance to reconnect with family and friends, embrace diverse cultures, and rejuvenate mind, body, and spirit.  If this sounds like your next vacation, CONTACT our charter consultants at:  1.800.922.4824 (North America) or 305-253-7245 (local South Florida and international) today.

 

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Planning a Croatia Yacht Charter? Expect To Pay More

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In November, the Croatian government voted on a fiscal consolidation package to reduce the country’s deficit. One of the measures included an increased intermediate Value Added Tax (VAT, or PDV, as it is called in Croatia) rate from 10% to 13%.
Travelers organizing a yacht charter vacation in Croatia need to be aware of this increase, as the costs will certainly be passed along by the yacht owner to the charterer.
According to Jana Sheeder, a luxury yacht charter industry expert, other increases should be expected as well. 
“In each of the past three summer seasons, we have seen an increase in interest in Dalmatian yacht charter adventures in Croatia,” says Sheeder.  “We are advising our clients to budget not only for the increase in VAT, but also for the higher excise taxes on fuel that were approved in November.  In short, the cost to enjoy both a Croatia bareboat rental or a fully crewed yacht vacation will cost about 5% more in the summer of 2014.”
Aerial photograph of mountains, green trees, turquoise water, and waterfalls flowing from the lakes
Trips to the Dalmatian Islands in Croatia now challenge locations in Italy and France as the most popular Mediterranean yacht charter destination. Wild and mostly uninhabited, many of the islands are environmentally protected as national parklands and offer a varied and diverse cruising ground for sail boat charters.
“Must-see” itinerary stops in Croatia include
  • Kornati National Park
  • The Town of Split, a UNESCO City
  • The Islands of Hvar, Brac, and Vis
  • Trogir, a World Heritage Organization City
  • Plitvice Lakes National Park (photo above)
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Ruling Spells End of France Yacht Charter VAT Exemption

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Back in February, we speculated the cost to rent a private yacht in the fabled south of France was about to go up, due to a ruling by the European Union the VAT exemption on chartering yachts in France was not compliant with EU VAT rules.  Now, France’s efforts to seek a VAT exemption have failed, as the European Court of Justice has ruled the French tax exemption for commercial vessels is illegal.

What does the ruling mean?

 With the majority of Mediterranean yacht charter vessels in France registered as commercial vessels, the VAT exemption these yachts have enjoyed for years will end.  Luxury yacht charter customers will now find the yachts they rent subject to VAT, and this expense will almost certainly be passed on by the yacht owners to the charterers.   

Photograph of a yacht with brown rock mountains in the background.  Yacht is at profile. Swimming pool at back of yacht, and side balcony out over the water, at the waterline. No people present.

On March 21, the European Court of Justice (in European Commission v. France; C-197/12) held that French legislation providing a VAT exemption for some commercial vessels used for navigation on the high seas that carry passengers for remuneration or are used for commercial activities, “…does not comply with Directive 2006/112/EC (the VAT directive), specifically with article 148(a), (c), and (d).

 With the approach of the summer charter season at hand, yacht managers and owners are scrambling to make sure all paperwork is in compliance with the ECJ’s ruling.”

 Consequences for non-compliance may go from large penalties to even seizing the yacht. For more background and detailed analysis of the ruling, click on http://www.reedsmith.com/files/Publication/1b5deaa1-8214-4734-b723-ac4953457ee1/Presentation/PublicationAttachment/b8ec6cab-a4a3-49e0-8df0-b27c669444ad/70TI0022-Borenstein.pdf?goback=.gde_2873423_member_230933860
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We Say, “No Mas!” To Excessive Ibiza Yacht Charter VAT

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Piggybank painted in yellow and red with spanish flag on the side and a gold coin that says TAX dropping into the slot

If Spain is hoping to entice more private luxury yacht charter business in the Balearic Islands, they have a funny way of showing it.

Regular readers of our blog might recall the controversy surrounding Spain’s 13.7% yacht charter Matriculation Tax (blog September 14, 2013).  Heavy lobbying by the Spanish yachting and marina industries saw that tax removed. Spain, however, is still imposing far greater taxes on charters than fellow European Union countries like France, Italy and Malta.

Case in point – a specific yacht that is legal for charter in both Spain and France will incur TWICE as much VAT liability in Spain, even though the tax percentages are nearly identical!

A yacht charter example:

Formula 1’s Eddie Jordan often keeps his Sunseeker 155 motor yacht BLUSH in the Balearic Islands for the summer charter season. When there is demand, the yacht can easily reposition to the South of France for clients who prefer a French yacht charter vacation, even dipping into the coastal areas of Italy and nearby islands of Sardinia and Corsica.  The weekly charter rate remains the same between both destinations (€220,000 per week in high season), and the VAT rates are almost identical:  20% in France and 21% in Spain.

A client who charters Sunseeker 155 yacht BLUSH in Ibiza, however, will see a tax of €46,200 on his charter agreement, while a client chartering the yacht in Cannes, will incur a charge of just €22,000.

If you’re the client taking the yacht in Spain, one word comes to mind (well, maybe a few words…), most notably, “OUCH!”

So what is the explanation?  Why the drastic difference if the tax rates are nearly identical?  The answer can be found in Article 58 of European Union Council Directive 2006/112/EC.

We’ll let our company President, Jana Sheeder, explain why this is the case:

“The European Union  directive on VAT, as it relates to private yacht charter revenue, has a clause entitled, ‘criterion of effective use and enjoyment.’  This clause allows member states to implement a VAT reduction scheme. However, it is not compulsory.  Popular cruising destinations like France, Italy, and Malta all take advantage of this opportunity to reduce VAT.   Unfortunately, Spain does not.”

 

In our example above, the client who charters motor yacht BLUSH in France, ends up with an effective tax rate of 10%.   The client who charters this yacht in Spain pays the full rate of 21%.

Note – the tax savings only kicks in when the chartered yacht cruises beyond 12 nautical miles – in essence, into international waters and out of the borders of the European Union.  This is a simple task and almost all charter yacht captains will implement this strategy in order to save the charter customer 50% of the VAT rate.  However, even if a yacht in Spain sails beyond the 12 nautical mile boundary, the Spanish government still insists on collecting the full VAT fee.

The Member States of the European Union include:

  • Austria
  • Belgium
  • Bulgaria
  • Croatia
  • Cyprus
  • Czech Republic
  • Denmark
  • Estonia
  • Finland
  • France
  • Germany
  • Greece
  • Hungary
  • Ireland
  • Italy
  • Latvia
  • Lithuania
  • Luxembourg
  • Malta
  • Netherlands
  • Poland
  • Portugal
  • Romania
  • Slovakia
  • Slovenia
  • Spain
  • Sweden
  • United Kingdom

For those readers who enjoy the technical details, here is the verbiage of the directive:

In order to avoid double taxation, non-taxation or distortion of competition, Member States may, with regard to the supply of the services referred to in Article 56(1) and with regard to the hiring out of means of transport:

  • (a) consider the place of supply of any or all of those services, if situated within their territory, as being situated outside the Community, if the effective use and enjoyment of the services takes place outside the Community:
  • (b) consider the place of supply of any of all of those services, if situated outside the Community, as being situated within their territory, if the effective use and enjoyment of the services takes placing within their territory.

 

Alex Chumillas, the director of Tax Marine explains the directive and the result of Spain’s decision:  “As is clearly defined in paragraph (a), the provision seeks to minimise VAT taxation applicable to certain services, among them the hiring out of means of transport (for instance charter),” “However, the provision has not been implemented in Spain.  Therefore, chartering in Spain is subject to a flat VAT rate which does not benefit from any reduction, even when sailing beyond 12 nautical miles.

Paragraph (b) allows Spain to levy VAT charges on certain services that have been provided outside of Spain – if the services are enjoyed inside of Spain.  Let’s say a charter starts in Gibraltar.  The yacht will need to register for VAT and pay VAT on the length of the charter in Spain (and of course, pass then expense on to the charter customer).

By choosing to implement paragraph (b) only, the Spanish government has chosen to only apply the more burdensome element of the directive.  Is this the right thing to do to people wanting to experience travel in your country?

Gorgeous ocean and coastline in spain

 

Like they did with the repeal of the oppressive matriculation tax in 2013, let’s hope the legislators in Spain come to realize a reduction in VAT will make the Ibiza yacht charter market competitive with neighboring France and the rest of the European Union states that derive strong financial benefits from the private luxury yacht charter industry.

VISIT https://www.1800yachtcharters.com/yacht-charter-monaco/ for a sampling of private yachts for hire in the Balearic Islands and throughout the Mediterranean this summer, courtesy of 1-800 Yacht Charters.We will be happy to create The Superyacht Experience for you.

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