A yacht, whether to be used on a private or commercial basis, is a significant investment to any owner and carries with it important considerations in respect of ownership, registration and management.
Decisions made in these key areas are significantly influenced by an owner’s individual needs and objectives – choices in ownership are often driven by fiscal matters such as tax and VAT, whilst registration and management are more often determined by the owners intended operation of the yacht.
Many experts recommend that a high value luxury asset is not held in the personal name of its beneficial owner, but instead that ownership is placed into a Special Purpose Vehicle (SPV) such as a company, partnership or foundation. An owner may choose to own a yacht through an SPV for a number of reasons, including;
- Confidentiality and anonymity
- Asset protection
- Limitation of liability
- Succession planning
- Forced heirship
- Centralised holding and reporting taxation and VAT
- Tax and VAT advantages
- To charter the yacht.
For the purpose of tax registration, an SPV established in a jurisdiction that operates a low or zero rate of tax, such as Malta with its full imputation system and refund system typically resulting in an effective Malta tax rate of approximately 0% to 5%, could prove beneficial.
With regards to VAT, liability can arise when an owner intends to purchase or bring their yacht into the EU. For this reason, it is important that an owner always checks the VAT status of the yacht and identifies any VAT liability by obtaining professional legal and tax advice, which might also identify an opportunity for the owner to gain VAT exemption, minimise the VAT payment or mitigate the VAT liability. For example, the Maltese tax authority has issued favourable guidance which, subject to a number of conditions, permits a reduction in the rate of VAT applicable to the use of pleasure yachts in the EU which can result in an effective VAT rate as low as 5.4%.
Charter licence requirements can also impact upon the ownership structure and/ or impose additional taxes depending upon the owners intended cruise areas. It is important, where possible, to determine the intended use of the yacht in order to plan for such factors effectively and to be aware of any jurisdictional requirements in the areas the owner plans to charter.
The flag of choice is a significant decision and one that can impact owners and their vessel in a number of ways. Seeking professional advice before making a decision will help to ensure that the choice of flag does not restrict operational plans, affect tax and VAT planning or change crew manning requirements.
Once in the water, a yacht’s flag can impact the way in which it is received by its chosen cruising areas. Choosing a politically neutral, well-recognised and accepted flag is therefore recommended. There are a number of flags with good reputations and that are on the white list of the Paris Memorandum of Understanding (MoU) on Port State Control – the reputation of the Malta flag is held highly in the superyacht industry and it is reflected by its position on the Paris MoU’s White List.
One of the major attractions of the Malta maritime flag is that it offers a number of attractive advantages to owners and charterers of Malta registered vessels. These include tax incentives, no trade restrictions, low company formation and ship registration costs, no restrictions on the nationality of shareholders and directors of Maltese owning companies, eligibility of non-Maltese companies and individuals to own Malta flag vessels, limited restrictions on the nationality of crew carried on board Maltese vessels, and straightforward and quick registration procedures.
The choice of flag can also impact the naval support made available by the flag jurisdiction, the costs in relation to the initial survey, registration and annual fees, customer service, safety requirements, crew manning levels, crew certification requirements and finance availability. It will also determine the yachts treatment by the Port State Control authorities.
Yacht management is a generic description used to describe a variety of services provided to an owner and their yacht. It can be made up of one or more components, including, but not limited to; accounting services, shore support services, company formation and management, technical safety services, crew employment and payroll services, insurance and registration.
The level of service required will often depend upon the individual owner and their yacht, with consideration to the size of the vessel, its intended use and the efficiency and capability of the captain.
On a relatively small yacht, a captain may manage much of the administration and much of the technical safety requirements themselves. However, the larger the vessel, the more likely the need will be for management services to be contracted out; allowing the captain to focus on the vessel’s safe and smooth operation.
The financial commitment that comes with the purchase of a yacht and the technicalities that come with its operation are undeniable. Obtaining professional advice at the outset will ensure that each element is undertaken correctly to meet the individual objectives and requirements of the owner. Hiring a professional service provider to implement such advice can ensure that its ownership and operation are administered efficiently and effectively whilst reducing the administrative responsibilities on the yacht’s owner or captain.
If interested in discussing the considerable benefits of using Malta for the purpose of yacht ownership, registration and management, please contact Alex Beetham at firstname.lastname@example.org or call on +356 20650 510.
Written by Marta Bellamoli, Marketing Co-ordinator