Superyacht Tax Reduction for Gibraltar
The Government in its recent budget, has announced the abolition of import duty for vessels over 18 metres in length and the reduction of import duty for vessels under 18 metres from 12% to 6%.
This is a welcome move aimed at stimulating the growth of the super-yacht sector, by encouraging some of these vessels to use Gibraltar as their longer term berth in the Mediterranean.
If an analogy were drawn with hotels, the objective must surely be to increase occupancy.
So too with super-yachts, but occupancy is replaced by berthing in Gibraltar, for a longer period of time. It will be appreciated that in the case of super-yachts the ancillary benefit for every nights’ stay is substantial.
These yachts are large valuable vessels designed and built for lengthy voyages, many of these vessels regularly navigate through the Mediterranean passing Gibraltar but spending limited time here.
They have large crews who require use of land based facilities, not forgetting the not insignificant requirements of restocking and refuelling (some of which Gibraltar is already benefiting from). The amendment is aimed at encouraging the longer term berthing of some of these vessels here with all the ancillary benefits this will bring in terms of economic activity.
Under the pre-budget legislation vessels are classed by gross tonnage. At present vessels with a gross tonnage of less than 80 gross tons are liable to pay import duty upon importation into Gibraltar at the rate of 12%, whilst vessels with a gross tonnage above 80 tons were not liability to pay import duty. The move to class vessels from tonnage to metres is also a welcome decision as it is conceptually easier to explain and therefore market Gibraltar as a berthing destination. It also brings the classification in line with most European methods of vessel classification.
It is however important to note that import duty on vessels is only triggered upon importation of the vessel into Gibraltar, this means that in practice any Gibraltar resident can own, use a vessel and not be liable to pay any import duty, as long as the vessel is kept away and never imported into Gibraltar. The very nature of our importation laws dissuaded resident vessels owners, including high net worth individuals, from importing and berthing their vessels in Gibraltar.
The fact that payment of duty has been reduced and exempted above 18 metres will mean that there is no longer the incentive for resident vessel owners to keep their vessels outside Gibraltar. This should in turn generate growth in ancillary marine services such as providing supplies; vessels spare parts, equipment, maintenance, upkeep and berthing. Attracting even a small percentage of the super-yacht sector navigating the Mediterranean would undoubtedly provide an economic stimulus in a sector that is relatively untapped.
The Honourable Chief Minister in his budget speech said :
““At present vessels with a gross tonnage of less than 80 tons are subject to import duty at 12% and there is no import duty on vessels with a gross tonnage above 80 tons.
In order to stimulate the use of Gibraltar by vessels of this ‘Superyacht’ category, with immediate effect these vessels will be reclassified into ‘Seagoing vessels of over 18 metres in length’ which will not be subject to any import duty.
‘Vessels under 18 metres in length’ which will be subject to an import duty reduction of 50% to a reduced rate of 6 per cent.”
In welcoming the move Albert Mena, tax partner at Hassans commented
“this change should assist to market Gibraltar in a sector where there is potential for growth. This coupled with the other changes announced in import duty should encourage the further development of a competitive and thriving marine service and retail industry in Gibraltar, together with all the positive benefits associated with such an industry.”
Source provided by Hassans International Law Firm, 57/63 Line Wall Road, PO Box 199, GIBRALTAR
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