In Spain, the sale and purchase of ships and yachts is regulated by Law 14/2014 of 24 July on Maritime Navigation (Ley de Navegación Marítima, hereinafter LNM). This regulation is of a dispositive nature, in the sense that what the parties have agreed to in the contract will prevail, so it is essential that the contract be drawn up by legal experts in the field. If the seller is a businessperson or a company and the buyer is a private individual, the laws on consumer protection will also apply.

In the legal sense, we speak of a yacht (embarcación) when its length is less than 24 metres, and a ship (buque) when it exceeds this length and has a continuous deck. However, the applicable rules are quite similar, with some exceptions, so in this article we also refer to the ship even if we only mention the yacht.

Given the technical and mechanical characteristics of a yacht, problems may arise or be discovered after it is acquired. In order to avoid disputes, it is very important that the contract regulate in detail the obligations of the parties, as well as the liability of each party in such situation.

In addition, the purchase of a yacht involves a series of complex administrative and registration procedures to publicise the change of ownership.

In this article, we summarize the steps to be taken for the successful acquisition of a yacht.

1. Legal due diligence of the yacht

Once the decision to buy a yacht has been made, it is essential to check the documentation of the same, in particular the following:

• Certificate of registry – Navigation permit (certificado de registro – permiso de navegación)
• Seller’s title deed
• Copy of the registration sheet of the Registry of Ships and Shipping Companies of the Maritime Authority (Registro de Buques y Empresas Navieras, Capitanía Marítima)
• Extract from the Ships’ Section (Sección de Buques) of the Registry of Movable Goods (Registro de Bienes Muebles)
• CE marking and/or seaworthiness certificate (certificado de navegabilidad)
• Proof of payment of VAT and registration tax (impuesto de matriculación)
• Certificate of suitability for the radio electronic equipment
• Invoices and manuals for equipment, engines, auxiliary…
• Trailer registration certificate, where applicable
• Proof that the seller is up to date with the payment of debts with maritime lien (crew salaries, social security, port and mooring fees)
• Copy of the seller’s identification document

It is especially important to check the registration status of the yacht in the Ships’ Section of the Registry of Movable Goods, in the same way that the Land Registry is checked when buying a real estate property. All ships and yachts under the Spanish flag must be registered in this Registry (as well as in the Registry of Ships and Shipping Companies of the Maritime Authority, which is an administrative registry), with the exception of pleasure or sports ships and yachts. The Registry of Movable Goods records the ownership and encumbrances (for example, seizures or naval mortgages), in order to provide legal certainty to the contracting parties.

2. Purchase contract

The purchase contract must be in writing, and if the yacht is registered in the Registry of Movable Goods, it must be formalized in a public deed or notarial policy.

The content of this contract is usually as follows:

Firstly, the names and contact details of the parties and an exact description of the yacht (type of yacht, name, registration number, hull number, model, year and place of construction, construction material, beam and length, etc.; with regard to the engine, also the make and model, serial number, power and hours of use). It is highly recommended to attach an inventory of the equipment or additional elements (the so-called belongings) and accessories of the yacht.

The description of the object will enable the buyer to claim in case the delivered yacht, belongings and accessories turn out to be different from what is described, since this would be a breach of contract by the seller. Depending on the seriousness of the breach, the buyer may be entitled to claim a reduction of the price (e.g. in case the electronics are damaged) or even a termination of the contract in the most serious cases (e.g. irreparable damage to the engine preventing navigation).

Secondly, the price, method of payment and date of delivery must be clearly indicated. It is strongly recommended to regulate the distribution of costs and risks, as well as the carrying out of a sea trial and an expert examination (condition survey) by the buyer or by experts appointed by him.

Thirdly and finally, it is very important to indicate the law applicable to the contract and to determine the competent courts in case of dispute.

3. Warranties

Usually, after using the yacht for a while, the buyer may detect hidden defects that were unknown at the time the contract was concluded. The most common are: failures in electronic equipment (battery, radio-emitter, bilge pump, lighting, probes and transducers, radars, etc.), engine failure (inadequate maintenance, rust and loss of oil, damaged propeller, etc.), as well as hull problems (osmosis).

In view of this situation, the period of time for which the seller will be liable for such defects, and the time available to the buyer to assert them, must be taken into account. In this matter, the LNM is exclusively applicable, and not the general rules of the Civil Code or those of consumer protection legislation regarding the lack of conformity of products.

The seller is liable for hidden defects in the yacht provided that three requirements are met: that they are discovered within three months of the actual delivery of the yacht, that the buyer notifies the seller of them within five days of their discovery, and that, in the event of a lack of agreement, the seller files a claim within six months of the notification. Remember that we are always talking about second-hand yachts; the terms of liability in the shipbuilding contract are different.

4. Tax obligations

The buyer’s tax obligations are as follows:

• Value Added Tax (VAT) or equivalent (in the Canary Islands, Ceuta and Melilla): as a general rule this tax is payable when the seller is a businessperson or company and the delivery is made in Spanish territory or in Spanish waters, the tax rate being 21% (except in the Canary Islands, Ceuta and Melilla).
• Transfer Tax (Impuesto sobre Transmisiones Patrimoniales Onerosas, ITP-TPO): this tax is due when the seller is a private individual, not a businessperson or a company, and the yacht is located in Spanish territory or Spanish waters at the time of sale or, if not, the buyer is resident in Spain. The taxable base is the actual value of the yacht (which does not necessarily have to coincide with the price). The tax rate varies depending on the Autonomous Community where the competent Registry of Movable Goods is located (which is that of the port of registration):

– Andalusia: 4%, and 8% in the case of pleasure yachts over 8 meters in length.

– Balearic Islands: 4%.

– Valencian Community: 6%, and 8% in the case of pleasure yachts over 8 metres in length or whose value is equal to or greater than 20 000 €.

– Catalonia: 5%.

• Tax on Documented Legal Acts (Impuesto sobre Actos Jurídicos Documentados, ITP-AJD): this tax is due when the ITP-TPO is not applicable (but is compatible with VAT) and the sale is formalised in a public deed. The tax rate depends on the Autonomous Community where the competent Registry of Movable Goods is located, and usually varies between 0.5% and 1.5%.
• Special Tax on Certain Means of Transport or “Registration Tax” (Impuesto de Matriculación): this is an excise tax to which the first registration in Spain of yachts registered in the sixth or seventh list of the Registry of Ships and Shipping Companies is subject, with certain exceptions. Therefore, this tax will not be applied to second-hand purchases, unless the seller has obtained an exemption (e.g. charter) and four years have not passed since the purchase.
• Administrative fees. Depending on the specific case, the following fees must be paid:

– Fee on sports and leisure yachts (T-5)

– Fee on aids to navigation (T-0)

– Fees for registration in the Registry of Ships and Shipping Companies

– Fee for the provision of inspection and control services by the Directorate General of the Merchant Navy

– Notary and Registry fees

On the other hand, the seller resident in Spanish territory will have to pay taxes in Spain on the capital gain, if any: individuals will do so under Personal Income Tax (Impuesto sobre la Renta de las Personas Físicas, tax rate: 19-23%), and legal entities under Corporate Income Tax (Impuesto sobre Sociedades, tax rate: 25%). If the seller is not a tax resident in Spain, it will be necessary to consult the applicable Double Taxation Agreement, which as a general rule will establish that the capital gain can only be taxed in the country of residence; however, it must be checked whether the seller had a permanent establishment in Spain because of the yacht, which may be the case in certain charter cases: in such a case, the capital gain may have to be taxed in Spain on the Income Tax of Non-Residents (Impuesto sobre la Renta de No Residentes, tax rate: 25%).

5. Conclusion

It is recommended that the purchase of a yacht is carried out with due legal and tax advice, is formalized through a contract of sale that includes the obligations and responsibilities of the parties, and is duly registered in the relevant registries.

Good advice from a lawyer and a tax adviser will avoid possible conflicts that may arise after the use of the yacht, impossible to foresee beforehand.

Please contact us for further information.

German Desk at Andersen
germandesk@es.andersen.com