The Yachting Industry: Vital for Island Economies
The yachting industry plays a crucial role in the tourism sector, offering high purchasing power, diversification, and economic growth potential. However, Spain's unique matriculation tax on yachts has raised concerns due to its impact on the nautical industry and legal uncertainties. Efforts are being made to address this issue in line with EU principles of free movement and establishment.
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THE YACHTING INDUSTRY: ESSENTIAL FOR THE ISLANDS Miguel ngel Serra Guasch Legal&tax advisor of the Spanish Yachting Association (ANEN) Partner at Albors Galiano Portales Brussels, Abril 5, 2019
Some basics Yachting is an Industry Yachting is Tourism High purchasing power High average stay in destinations Diversification and deseasonalization of traditional tourism Low consumption of territory Huge growth potential Spain (direct, indirect and induced impact, 2016) (multiplying effect: 3,25) (multiplying effect: 4,97) (multiplying effect: 4,20) GDP: 11,900 M GVA: 4,800 M Employment: 82,500 Approximately 40% in the Balearic Islands
Some basics Spain compared to Italy, England and France (2009)
Spanish Matriculation tax (I) Origin European Single Market launched on January 1, 1993: elimination of increased VAT rate (28%) on luxury assets (e.g. means of transport) Creation of a 12% mat tax on top of VAT general rate (16%) to make 28% To date this is anachronistic and do not collect any money (16 M in Spain) To date is just a political issue (accused of removing taxes to wealthiest) Non-harmonized tax Taxable event 1. Registration in Spain of boats longer than 8 metres (new or used) 2. Use of yacht in Spain by Spanish residents or non-residents with establishment in Spain (only since January 1, 2011) Rate: 12% on the purchase price (market value when used)
Spanish Matriculation tax (II) Consequences Spain is the only EU country where exists such a matriculation tax Hinders the development of a strong and powerful nautical industry Causes both real and opportunity economic costs Legal uncertainty (undefined legal concepts) Dislocation of investments Parliamentary question by ALDE Group on December 14, 2010 Is it against principle of movement of persons and capitals and freedom of establishment? Answer of the EC on February 8, 2011: not an harmonized tax, no need to take actions Commission (there was only 1sttaxable event):
Spanish Matriculation tax (III) Currently matriculation tax is contrary to EU principles Principle of free circulation of persons and capitals Principle of freedom of establishment Complaint to be filed soon to the European Commission Announced by ANEN (Spanish Nautical Association) and AEGY (Spanish Large Yachts Association) on March 14, 2019. EC and TAXUD should have opened infringement procedure against Spain The industry has realised that needs a strong presence in Brussels
UCC: Union Customs Code (I) Regulation (in force since May 1, 2016) Regulation (EU) No 952/2013 of the Parliament and Council of 9 October 2013 Commission Delegated Regulation (EU) 2015/2446 of 28 July 2015 Commission Delegated Regulation (EU) 2015/2447 of 24 November 2015 Commission Delegated Regulation (EU) 2018/1063 of May 16 2018 The UCC is an EU Regulation Primary EU Law (vs Directives) Direct application (no need to transpose to internal law) Addressed to EU citizens (not to countries) Should be efficient to create Unified EU Law
UCC: Union Customs Code (II) Different criteria and formalities in the EU countries Legal uncertainty Negative International image Consequences if failing to comply: VAT on the hull !!! Importation of commercial yachts (148 VAT Directive) France (FCE, 2004, ECJ March 21, 2013) Italy (ICE, 2018) Spain: not possible EC should be aware of discriminatory criteria in the application of EU legislation
UCC: Union Customs Code (III) Customs regimes (yachts) Temporary Admission (TA) Non-EU yachts may be used in the UCT without payment of customs duties or import VAT under certain conditions and re-exported afterwards (18 months) Returned Goods Relief (RGR) Eu yachts in free circulation within the EU at the time of export may be re-imported within 36 months into the EU without payment of customs duties or import VAT Inward Process Relief (IPR) Enables to get relief in customs duties, import VAT and excise duties n yachts imported from outside the EU to be processed and then reexported outside the EU
Tax on Fuel Regulation Council Directive 2003/96/EC, of 27 October 2003, on energy products Article 14.1 (c): not applicable to energy products supplied for use as fuel for private pleasure crafts Applicability to yachts commercially operated (charter) in the EU: France: exemption was applicable until September 20, 2015 Italy: exemption still applicable as of today Spain: Never admitted
Non-Resident Income Tax Taxation of non-residents activities operating without PE Double Taxation Treaty (DTT) in place Business profits (article 7 OECD Model Convention) Taxed only where the Company is resident (not source of income) No Double Taxation Treaty in place Business profits taxed at source Rate: 24% on taxable income (income less some expenses). France or Italy Double Taxation Treaty (DTT) in place: same treatment No Double taxation Treaty in place: NO taxation (only if operating with PE)
Thank you very much and happy sailing!
