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Tag Archives: what is 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Spain yacht charter tax lifted matriculation tax withdrawn private luxury yacht charter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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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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