Spain: Charters starting in Melilla, Ceuta, and the Canary Islands - what applies?
Many of you will have heard lately about Melilla and Ceuta, and the Canary Islands, two Spanish regions which are outside the VAT territory. Everybody knows where the Canary Islands are, but for the ones who do not know where to find Melilla and Ceuta just look for them on the Northern Coast of Africa, in front of Gibraltar.
Being outside the VAT territory they do not apply VAT, but they have their local tax, that is called IGIC in the Canary Islands and it's 7%, and it's IPSI in Melilla and Ceuta and it's 4%.
Until last year a charter starting in one of these two regions and cruising to mainland Spain or the Balearics had to pay not only the local tax we just mentioned, but also Spanish VAT 21% on the time spent in Spanish waters. But in December 2020 the Spanish Government decided, jointly with the tax and port authorities in those territories, to eliminate the application of the "use and enjoyment rule" for charters starting from, Ceuta and the Canary Islands, Spanish territories located as commented outside the VAT area.
So this means that, effective January 2021, a charter starting from one of these places and reaching mainland Spain or the Balearic Islands is only and exclusively subject to the local tax that's applied there. No VAT is due for the time spent in Spanish waters.
A special mention goes to Melilla, that has in the last years really been working hard to attract superyachts, pushing on the fiscal benefits it can offer: it is outside the VAT territory as written above, but it's also outside the European Customs Territory and the Excise Duties Area.
This means yachts can benefit from duty free fuel; they can use Melilla to enter the Schengen area from the Carribean, and they can also use it to renew their TA status after the 18 months in the EU, as well as to finish their Inward Process Relief customs procedure after a VAT exempt refit in Spain or any other EU country.
Being IPSI a municipal tax, it can be modified and it's already been confirmed that from April it will be reduced to 0,5%.
A quick example: a charter starting from Gibraltar and cruising to Spain doesn't pay VAT there, but will be subject to Spanish VAT 21% for the time spent in Spanish waters; while a charter starting from Melilla and cruising to Spain this season will only be subject to the 0,5% IPSI.
Contact SOS Yachting Spain info.spain@sosyachting.com for more information and guidance.
