5th April 2021
VAT must be paid on any yacht sailing EU waters unless it falls under the temporary import relief. The rules are not prescriptive about the basis for VAT except that it should represent the market value, but if you have bought it recently the price you paid could be used as a base value.
Although the Spanish VAT rate (21%) is not one of the lowest in the EU, Spanish VAT on yachts can be reduced using a formula based on a "book" value that takes depreciation into account. Spanish Customs Instruction 1/2004, dated February 27, sets out a procedure to determine the customs value of used yachts not coming from an immediate sale.
Said instruction stipulates that the customs value will be assessed on the basis of the current owner’s purchase invoice or any other document evidencing the purchase price paid, which will be subject to certain percentages of depreciation according to the years of use of the yacht, which can range from 10% for one-year-old yachts to 90% for yachts over 14 years.
The depreciation mechanism has some particularities, for instance different percentages of depreciation are established for motor and sailing yachts. Besides, the valuation of the yacht’s engine must be assessed independently according to its power.
The validity of this mechanism has been confirmed by the Spanish Tax Authority in several tax rulings and is widely used by Spanish Customs. Furthermore, the Spanish General Tax Law 58/2003 states that a taxpayer using a valuation system approved by the Spanish Tax Authority cannot be subject to review and that determining the customs value with this system cannot raise the chance of imposing a penalty in the event of a potential discrepancy.
This is a particularly interesting option in the current post-Brexit times that could be of use for many Britons to settle VAT on their yachts and avoid the inconvenience of sailing outside the EU every 18 months as requested by the temporary import customs regime.