Tax Marine Spain has announced a new approach for yacht chartering operations in Spain, in line with the Spanish tax authorities.
Currently, where a yacht is chartering in Spain the income is classed as a business profit, in accordance with OECD international tax conventions. This means that yachts are potentially having to pay a 24% withholding tax, in addition to the VAT they are already paying, due to the absence of a double tax treaty.
However, Tax Marine Spain has explored an alternative for yacht charter in Spain with the Spanish tax authorities. This is in response to an enquiry submitted by the company, whereby the Spanish Directorate of Taxes clarified that the income of a commercial yacht chartered in Spain but owned by an Isle of Man entity, was not subject to withholding tax.
According to Tax Marine Spain, the criteria which charter yachts must meet in order to benefit from this exemption are:
I. The charter agreement must qualify as a bareboat charter agreement. This implies that the charterer is responsible for the operating costs of the charter. It’s currently common practice for the charterer to bear the APA (Advance Provisioning Allowance) which is usually 30% of the charter fee. In addition, necessary arrangements should also be made concerning the yacht’s crew.
II. The navigation (charter) must qualify as international navigation in the sense of the OECD international tax conventions. Therefore, the charter must start and end in two different countries; so in this case, the charter must end outside of Spain.
If these conditions are met, the income obtained from chartering a yacht in Spain, even where there is not a tax treaty in place, will no longer be subject to the additional 24% withholding tax.
For more information, visit Tax Marine Spain.