The applicability of VAT on APA funds and delivery fees is a controversial issue, as different jurisdictions have different approaches to the situation. We will try to provide here our view on the correct tax treatment in accordance with Spanish tax regulations.
We must remark that there is no binding ruling issued by the Spanish tax authorities about this subject. Therefore the opinion given here is our firm’s view based on existing legislation and similar cases not strictly related to yachting.
Advance Provisioning Allowance (A.P.A.) amount is to be paid in order to cover operating costs such as fuel, harbor, customs fees, food, beverages, etc. incurred during the navigation of the chartered vessel through the charter period. Therefore these funds can be considered a fund provision for the operating costs which will be incurred.
In this sense, we consider relevant the binding ruling V1944-09 of the Spanish tax authority, which deals with the VAT treatment that should apply to funds provisions received by professionals who, in the course of their activity, arrange several payments on behalf of their clients. The ruling considers that the final recipient of the services, the person who actually enters into a contractual relationship with the supplier, would be the one who should be the recipient of the supplier’s invoice, regardless of who is the person that settles the invoices. Therefore, the invoicing relationship is established between the final recipient of the service and the supplier, the VAT being applied to that primary invoice, but not from the intermediary to the final client.
In light of the above, when all the supplies and provisions made to the charterer are invoiced to said charterer, no additional VAT should be charged on the APA. A different situation would be if the invoices were billed to the owner; in this case, in our opinion, it should be included in the tax base of the charter and VAT added to the final invoice, which should be settled by the fiscal representative together with the VAT due on the charter fees to the Spanish tax authorities.
Delivery and re-delivery fees
Regarding delivery and re-delivery fees, we must consider the cost of positioning the yacht for the charterer, in order to make the vessel available at a specific port different from its home port prior to the charter itself, or its relocation after the charter is finished.
In our opinion, and in accordance with the regime applicable to ancillary services, these should be included in the tax base of the charter and subject to VAT under the same conditions as the main charter agreement.
As concluded in the joint judgments of the Court of Justice of the European Union, Cases C-308/96 Madgett and Baldwin and C-94/97, a benefit must be regarded as ancillary to a main benefit when it does not constitute an end in itself for the customer but rather a means of enjoying the main service under the best conditions.
Following this interpretation and the Spanish tax authority binding ruling V11320-16, in the event of a services operation which is ancillary to another, none of them (ancillary operation and main operation) will be taxed autonomously and independently for VAT purposes, but the ancillary operation will follow the tax regime applicable to the main operation on which it depends.
Therefore, for all of the above, we understand that, for the delivery and re-delivery fees charged to the client and mentioned in the charter agreement, Spanish VAT is applicable and due at the same rate as it is on the main charter.