When we think about the acquisition of a vessel, from the legal point of view a technical question arises as to whether we are facing the acquisition of a movable or immovable good. Although is quite logic and obvious that we are dealing with movable good it also participates from the real estate nature to the extent that the Naval Mortgage Law allows mortgaging this type of property.
The purchase must be formalized in a written contract for its registration. The current legislation has not expressly regulated the contract for the sale of vessels, boats nor pleasure crafts , so it will be governed by the rules established in articles 1.445 Civil Code for the purchase contract in general. Regarding the form of the contract, there is freedom of form, which can be done through a public deed or private document. Although some legal provisions mentions the need for a public deed, Circular 4/1990 clarifies that, for vessels on the sixth and seventh list (charter and private recreational vessels ), evidence of the legal title demonstrating ownership can be showed by means of the purchase invoice, bill of sale or any private document, provided the taxes are duly paid.
When buying a vessel, and more if it is second hand one , the following two major aspects must be observed:
The first thing to do is a kind of legal due diligence to check if the one who is selling has enough legal title and the vessel is duly recorded into his name with no liens, burdens and encumbrances, or third parties rights like a leasing structure. A copy of the purchase invoice, bill of sale and recording in the correspondent ship´s registry of the flag sate will give us said information. When the vessel is new the important documents are the invoice, EU homologation or Declaration of Conformity and the Builders´ Certificate.
If said due diligence is positive a purchase contract or Memorandum of Agreement (MoA) shall be signed. This can be either a simple one page – easy to find in internet – contract or a more than fifty pages document including extended reps and warranties an large Annexes enclosed. Although it is quite common to use standard models these are not always suitable as each case is different and they do not admit changes. Our advice is always to draft one specific contract or MoA for each case with all particulars that both parties decide.
In this contract normally a deposit of about 10% of the purchase price is given as guarantee until completion. In the meantime the purchaser might survey and make the correspondent sea trial before declaring acceptance.
Taxation. There are mainly three taxes directly involved with the acquisition
- a) VAT: The acquisition of a pleasure craft form a business or entrepreneurial (taxable person) will generate in general the obligation to pay the Value Added Tax, at the 21%.
If the vendor is business or entrepreneur from another the European Union Member State ( that is a EU VAT recording) and also the purchaser in Spain business or entrepreneur ( for example charter company) , we will have a zero rated intra-EC acquisition with reverse charge , no matter if it is a new or second hand vessel.
If buyer is a private individual resident in Spain for tax purposes and purchases a new boat from an EU business or entrepreneurial , we are also faced with an intra-EC acquisition that will accrue in Spain and should be filed by the purchaser through model 309 to be paid -here there is no reverse charge as the purchaser is not VAT taxable person – to the Spanish Tax Authority 30 days after the acquisition.
Lastly, if the seller is a resident in a third country (non EU) and the buyer is resident in Spain for tax purposes , we are in the presence of an import to be dispatched and cleared at the Spanish Customs – if the vessel arrives to Spain’s waters firstly – through the correspondent Single Administrative Document (SAD or DUA in Spanish) together with the payment of the 21% Import VAT (plus 1.7% custom duty by small vessels if they are under 7.5 m LOA).
- b) Transfer Tax: Transfer Tax is accrued in the sale of used boats from individuals not entrepreneurial (or business and entrepreneurial that have not deducted VAT on acquisition) provided that the purchaser has Spanish tax residence or the boat is usually in Spanish territory. However if the purchaser is not Spanish Tax resident and after the acquisition does not register the change of ownership in Spain but changes flag – deletion in the Spanish Ship´s Registry and new registration in another jurisdiction – tax exposure is quite limited. However in those case better mention the delivery of the vessel our of Spanish waters.
- c) Matriculation Tax: finally we have the our very much hated Mat Tax which is levied by the first recording of new or second hand vessels of more than 8 meters in the Spanish Ship Registry. The obligation to record in a Spanish Ship’s Registry a new or used vessel exists – only in this Tax Law but not in the Maritime Law – when it is destined to be used in Spain by resident companies or individuals or holders of establishments (place of business) in Spain. Technically there are two different taxable facts:
- a) The first and definitive recording in the Spanish Ships´s Registry of vessels, pleasure yachts and boats, new or second hand with more than 8 m LOA. Taxable person: the owner.
- b) The circulation or use of said means of transports (boats or motor vehicles) in Spain or in Spanish territorial waters if they have nor applied within 30 days for the recording in the Spanish Registry being obliged to as far as they are destined to be used in Spain by resident companies or individuals or holders of establishments in Spain. So here the taxable person is not the owner but the user. That is why the status of resident in Spain, or permanent establishment – although the Mat Tax Law only says “established” – becomes essential since the navigation carried out by a resident on a boat not registered in Spain and who has not paid the tax requires the payment of the same.
Finally, there is a tax exemption for vessels under 15 m and if the destination is an exclusive economic activity like charter.
