According to the Spanish Tax Office, an off-shore company, whose only asset is a boat, CANNOT benefit from the temporary importation regime if it has resident personnel with power of attorney, is based in a Spanish port and is given to a non-resident shareholder to use.
VAT and IESDMT (Matriculation Tax) payment in Spain, for the uncertainty of advisers and the risk of shipowners, was, is and will continue to be a treacherous ground. Recently, tax authorities have identified new circumstances that require the payment of these taxes. No doubt, if the Tax Office continues on this path, shipowners will have to change the way they use their boats in Spain, based on the criteria that we are about to examine in this article.
Temporary Importation Regime
The EU Customs Code allows the use of yachts in EU waters without paying VAT, in the following case:
1) If the yacht flies the flag of a non-EU country.
2) If the users are not residents of the EU.
3) If the yacht is for private use.
In Spain, under the same circumstances, IESDMT tax (Matriculation Tax) is not payable. Yachts that meet these conditions can spend a maximum of 18 months in EU waters, unless the period is expressly extended; however, failure to meet the above conditions will lead to the payment of the relevant taxes. Up until the implementation of the new EU Customs Code, on 1 May 2016, if conditions (1) and (2) above were met, the Temporary Importation regime applied, immediately, from the moment the yacht entered EU waters. With the new Code, the application of the Temporary Importation Regime is subject to presenting a written declaration, curiously named "Oral Declaration", which marks the start of the 18-month period. The stay must end with an Oral Declaration in writing to be presented at the Customs Office of the EU country within 18 months. This new system offers more security, as it clearly documents the date in which a yacht enters and leaves a country. Previously, the yacht owner had to demonstrate, using any means admitted by the law, that they had stayed in EU waters less than 18 months. Unfortunately, it seems that some EU countries have not implemented the system yet, apparently because not aware of its existence. It is worth mentioning that in Spain some customs are aware and apply the new regulation, while others are not aware of its existence. As usual, nothing is simple when it comes to boating.
Temporary Importation boats staying in Spain
If the requirements are met, as we mentioned above, a yacht can stay in EU waters, in the same country or in different countries, for 18 months. This doesn't mean that users can stay on board all this time, as they could become residents and have to pay taxes, if they stayed more than 183 days per a year. Many boats stay moored in a certain port and are used by their owners only for short periods, while the rest of the time a captain or a crew member takes care of the vessel. It is worth mentioning that the Customs Code allows the owner to recruit a crew member resident in the EU, without this affecting the requirements for the application of the favourable fiscal regime. This is obviously an essential crew member; not a user, but an employee.
However, this arrangement has been contested by the Spanish Tax Office when the owner of the yacht is a company and the vessel remains almost permanently in a Spanish port (within the 18-month period, of course), for the following reasons:
· When the captain of the yacht, or another member of the crew, has the power to act in the name of a company, the company is considered to have a permanent base in Spain.
· When the user, whether or not a stakeholder of the company, uses the boat receives a remuneration in kind, the company is thus considered to be conducting a mercantile activity and to be based in Spain.
· When the vessel is the only asset of the company – which is the most common scenario – the company is considered to be based in Spain, the place where its only asset is located.
Surely, the most common situation for a private yacht on Temporary Importation Regime is to be owned by a company that gives a stockholder or a third party non-resident in the EU, the use of the boat without receiving any compensation; a structure that may be dismantled if the trend is confirmed. The solution would be to register the vessel in the name of the non-resident user and/or to constantly move out Spanish waters. The judges will tell us what it is to be.
Yamandú Rodríguez Caorsí