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Yacht Registration - Yacht Ownership Structures
Every yacht has to be registered in an internationally recognised jurisdiction to provide proof of nationality and ownership. A yacht assumes the nationality of the jurisdiction where it is registered and is therefore subject to the regulations laid down by the governing register. Very often companies and private individuals enjoy major advantages and legal tax savings by registering their yachts in an appropriate jurisdiction, providing confidentiality and the protection and privileges offered by such registration. Which jurisdiction is most suitable for registering a particular yacht depends on a number of factors such as in which country the owner is resident, in which countries the yacht will be mainly used, whether the yacht will be chartered to third parties or only privately used, etc. Through our own offices as well as through highly specialised affiliates in all jurisdictions that are important for yacht registration and management, we are able to provide comprehensive services to yacht owners, including
The following is an outline of the key issues to be considered prior to the purchase, registration and use of private yachts. This overview is of course not exhaustive and all individual issues and factors are discussed with each client prior to the decision to proceed. Purchase When purchasing a yacht one should take care in reviewing the terms and conditions of the contract. This includes ensuring that the specification is sufficiently detailed and delivery of the vessel is suitably defined and provided for. In case of new yachts, often the builder's standard forms are used, which are normally one-sided in favour of the seller. For example, in most legal systems yachts are defined as being chattels so that title to them passes by delivery. Form contracts that provide for the builder to pass title upon completion are putting pre-completion deposits at risk. Where large yachts are concerned, it is even more important to use the services of a specialised lawyer rather than a standard sale contract. Although all key points are usually covered in such contracts, advice may be required on issues such as the warranties which a purchaser should request, security for port dues or other liens, the documents which should be taken up (e.g. a VAT paid certificate), the tax implications of the sale for a seller, and liens and mortgages concerning a purchaser. Registration All yacht owners have to register their vessels in an internationally recognised jurisdiction to provide proof of nationality and ownership. One of the most important decisions after the purchase is about the jurisdiction of registration and whether to register the yacht directly (under one's own name) or on a company, which usually provides several important advantages over direct ownership (see below under "Ownership structure"). Important points to consider when choosing the jurisdiction for registration include the reputation and respectability of the flag, the cost of registration and annual maintenance of the registration, the ease of registration, and the insurance, employment, regulatory, charging, succession and tax implications of the jurisdiction. We can register yachts as well as commercial vessels in any of the world's registers, but we have usually recommended to our clients to adopt the British flag. The strict requirements for British registration, including the provision of physical proof of the yachts existence and identity by way of a tonnage survey, mean that the owners of British registered yachts have definitive proof of legal title that is universally accepted. Registration under the British flag can be obtained in any of the following jurisdictions:
Alternatively, and depending on the client's individual circumstances, we register yachts in a number of carefully selected other jurisdictions, including Malta the Isle of Man, the United States, and St. Vincent & the Grenadines. Ownership Structure The majority of our clients choose to have their vessel owned by a company, which provides several important advantages over direct ownership. Many yacht owners prefer to keep their ownership confidential. The ownership of a yacht through a company provides for a good level of confidentiality. In addition, having a company owning the vessel limits the clients exposure to liabilities which can arise through the ownership of the yacht. Many of the countries in which clients are resident have complex inheritance laws which can frustrate clients wishes regarding the disposition of their assets on death. These problems can in certain cases be avoided by settling the shares of the company owning the vessel into a trust. We are able to incorporate companies in all key jurisdictions worldwide. For yacht ownership structures, we usually incorporate in Jersey, The Bahamas, St. Vincent or Malta, depending on the client's individual circumstances. Additionally, it may be advantageous to establish a trust or a foundation as the ultimate holding vehicle for the vessel. A trust or a foundation enables assets such as private yachts, which individuals may prefer not to hold themselves, to be accommodated in an effective legal structure. Through our own trust companies in several important jurisdictions we are best positioned to advise and assist in setting up the most appropriate structure. Our services are comprehensive, provided by specialist consultants and lawyers, independent trustees and other highly qualified professionals, and focused on each client's individual circumstances and requirements. We combine the expertise of these professionals in their relevant fields to provide excellent advice and service. VAT Implications in the European Union
Important points to be considered for determining whether or not VAT is payable are the place of purchase of the yacht, where the yacht will be used, who is the beneficial owner of the yacht, whether the yacht will be chartered out to third parties, and whether the yacht will be used by EU residents. Henley & Partners work closely together with VAT specialists to provide advice and facilities for the mitigation, deferment or even possible avoidance of VAT on private yachts as well as commercial vessels. Our VAT specialists will be glad to assist you in deciding whether you need to pay VAT on your newly purchased vessel. We are also be able to explain to you the various possibilities that may be available to mitigate, defer or avoid the payment of VAT. Furthermore, the application of VAT rules is far from uniform between different EU member states and it is highly advisable to take professional advice before a yacht is purchased or used by a EU resident. Through several carefully researched and structured programmes, qualifying European Union residents may be able save the VAT upon acquisition of their yachts maintained and navigated in EU waters. There are a number of such schemes available to reduce or completely avoid payment of VAT. These include registration of the yacht as a commercial vessel and various charter arrangements. In general, however, only in relatively few cases will it actually be advisable to consider such schemes, namely in the case of genuine charter arrangements. VAT rates throughout the EU vary substantially (from 13% in Madeira/Portugal to more than 20% in most other EU countries). It may therefore be advantageous to pay VAT in a country with a lower rate of VAT, and in some countries there are cash flow advantages due to the way VAT is levied. As an example, if an Isle of Man company acquires a vessel for the purpose of chartering the vessel, the yacht need not sail to the Isle of Man and VAT due on acquisition will not need to be paid up, the payment and repayment being made on an accounting basis only.
Marine Insurance Appropriate insurance cover in respect of the usual risks (e.g. collision, personal injury, employer's liability etc) must be looked at carefully. This is an important area because of the exposure to potentially significant third party risks (especially collision and pollution). Consequently, in addition to Hull and Machinery cover, Protection and Indemnity (i.e. third party risks) has to be placed. Depending on the areas where the yacht is to be operated, it may be desirable to cover war risks as well. Moorings Most EU-based yachts are kept in the Mediterranean. The ownership of moorings in certain exclusive ports, for example in Monaco or on the French or Italian Riviera, is viewed by some as a good investment. On the other hand it can be advantageous to keep the yacht moored in a non-EU country such as Malta or Croatia, indeed such mooring outside the EU may be necessary under a VAT-mitigation scheme. Before investing in moorings, however, it is wise to take advice on the tax consequences of ownership, use and letting. Rights to enjoy a particular mooring will be licensed to individual or corporate owners for a limited period of time. Those rights can generally be sold or assigned. This may give rise to tax issues. In France, for instance, when shares in the company are sold, the French tax authorities take the view that registration duty will be due by the purchaser at the rate applicable on the sale of French-sited real estate and French capital gains tax may be due by the seller. Administration Services Through our own offices as well as through specialised service companies we can provide ongoing budgetary advice, cash management and maintenance of financial and accounting records. We also control and process expenses relating to the yacht as well as handling the contracting and payment of crew. Settlement can either be made from funds held in the bank accounts of the holding company or itemised invoices can be prepared and forwarded to third parties for settlement.
Contact Henley & Partners Every day, individual clients as well as other law and consulting firms worldwide rely on us for specialised advice for all matters regarding yacht purchase and ownership structures. No matter how complex your needs are, Henley & Partners will be able to advise and assist you. Contact us today for individual advice and comprehensive, yet cost-effective solutions. |
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