Category: Yachts

The Key Principles and What you Need to Know Today About Marine Insurance 

Posted on | by Hristina Georgieva | Leave a Comment on The Key Principles and What you Need to Know Today About Marine Insurance 

Malta and the Marine Sector Plus a Definition of Insurance

Malta has a long, rich maritime history and has the largest shipping register in Europe. Insurance is a topic that requires a detailed understanding of the options available, by the companies operating in this sector and professional advisors such as Dixcart Malta.

The contract of insurance is a contract under which one person (the insurer) is legally bound to pay a sum of money or its equivalent to another person (the insured), upon the happening of a specified event involving some element of uncertainty as to time or likelihood of occurrence, which affects the insured’s interest in the subject-matter of the insurance.
The objective is to indemnify the insured against losses attributed to marine adventure. The three main principles of marine insurance are: indemnity, insurable interest and utmost good faith.

The First Principle of Indemnity

The principle of indemnity, in the context of insurance, essentially has two elements:

  1. To ensure that the amount compensated or reimbursed shall not increase the assets of the insured in any way. An insurance policy can never be a source of benefit or profit for the insured;
  2. The amount of compensation or reimbursement should never exceed the value of the policy taken. The amount which has been agreed upon by the insured and the insurer, if any, is the upper limit of the compensation to be paid.

The Second Principle of Insurable Interest

This second principle is made up of the following:

  1. financial loss;
  2. the loss was caused by the peril insured against;
  3. the subject matter was covered by the policy;
  4. insurable interest.

An insurer normally requires:

  • The assured may benefit by the safety or due arrival of insurable property or be prejudiced by its loss, damage, or detention in respect of which he/she may incur liability;
  • The assured stands in a legal or equitable relationship to the adventure or to any insurable property at risk in such adventure; and

The benefit, prejudice or incurring of liability referred to in the first bullet point above, must arise in consequence of the legal or equitable relationship referred to in the second bullet point.

The Third Principal of Utmost Good Faith

The third and final principal of utmost good faith is embodied in The Marine Insurance Act.

A contract of marine insurance is a contract based upon the utmost good faith, and, if the utmost good faith is not observed by either party, the contract may be voided by the other party. The duty of utmost good faith requires both parties to ensure proper disclosure of all material circumstances and to avoid making misrepresentations about material facts, circumstances or beliefs.

If utmost good faith is shown not to have been observed by either party, the statutory duty enables the aggrieved party to rescind the contract ab initio, thereby restoring the parties to the position they were in, as if they had not entered into the contract.

The Courts have consistently ruled against allowing the insured’s duty of good faith, to be used by the insurer as an instrument to enable the insurer him/herself to act in bad faith. For the insurers to succeed in avoiding the contract, due to non-disclosure during the performance of the contract, the insurers would have to show that the claim was made fraudulently.

Types of Marine Insurance

The four main types of Marine Insurance are:

1.            Hull insurance: insurance of the vessel with its gear.

2.            Cargo insurance: insurance of goods carried by sea.

3.            Insurance against the liability of the carrier; protection and indemnity (P&I Clubs); 

              compulsory or mandatory insurance, voluntary insurance (e.g. liability for cargo).

4.            Other types of marine insurance; freight, salvage expenses and general  average

               contributions, insurance of containers, shipyards, oil rigs (“energy”), etc.

The Marine Insurance Policy

The contract must be in a policy that specifies: the name of the insured, the subject-matter, the risks, the voyage or period of time covered by the insurance, the sum insured, and the name of the insurer. It must also bear the signature of the insurer or his/her representative.

A policy is voided when there is:

  • Any implied condition as to the commencement of risk: the adventure shall be commenced within a reasonable time, otherwise the insurer may avoid the contract.
  • Alteration of port of departure: the risk does not attach and the insurer may avoid the contract.
  • Sailing to different destinations: the risk does not attach.
  • Change of voyage: the insurer is discharged from liability as from the time of the change. Manifest intention to change the voyage is sufficient. This must be a voluntary change of destination.
  • Deviation: the insurer is discharged from liability as from the time of deviation. Where there are several ports of discharge, these must proceed in the order designated by the policy. If not then there is a deviation.
  • Delay: the adventure must be commenced within a reasonable time period.

There are various ‘excuses’ for deviation or delay, the main ones being: lack of authorisation (“held covered” provisions), the safety of the ship, saving human life, and events beyond the master’s control.

Additional Information

For further information about the Malta Maritime matters please contact Jonathan Vassallo, at the Dixcart office in Malta: advice.malta@dixcart.com.

Alternatively, please speak to your usual Dixcart contact.

Cyprus – The Complete Superyacht Package

Posted on | by Charlotte Clabon | Leave a Comment on Cyprus – The Complete Superyacht Package

Cyprus is a key maritime centre and is recognised as one of the most accessible registries in the EU. It has not only grown in size in the last two decades but has also made a considerable effort to increase the quality of its fleet and related services.

Limassol Marina, the first and largest superyacht marina in Cyprus, is one of the most sought-after waterfront locations in the Mediterranean and since opening has seen approximately over 9,000 international arrivals, including 300+ unique superyachts, each stretching to over 140m. As a result, the Cyprus flag is now classified on the whitelist of the Paris and Tokyo MOUs (Flags securing the highest rating in relation to the Memorandum of Understandings on Port State Control).

Due to its strategic location at the gateway of Europe, Africa, Asia, and the Middle East, it is a hub for shipowners and investors from all over the world, and there has been a rapid growth in the number of Cyprus shipping companies in recent years.

The procedure for registering vessels under the Cyprus flag has been designed to attract foreign investment and to build a dependable reputation, to be recognised by all of the international shipping authorities.

Cyprus offers competitive yacht registration fees, low ongoing annual fees for yacht owners, and an attractive tax treatment for officers and crew working on a Cyprus registered yacht, whereby they are not subject to income tax, as well as a series of other tax advantages. These include; no tax on profits from the operational and/or management profit, no tax on income or dividends received from a ship management company, and a favourable tonnage tax scheme, based on gross tonnage.

Generally, those wishing to register a vessel under the Cyprus flag incorporate a company in Cyprus, which will either acquire the yacht in its name, or bareboat charter the yacht. Cyprus offers a competitive rate of corporate income tax at 12.5% and low operating costs for Cyprus-owned companies. In addition, there is no estate duty on the inheritance of shares in a Cyprus shipping company and no stamp duty is payable on the ship mortgage deeds.

Dixcart Services and Additional Information

Dixcart can assist in all aspects of registering a yacht in Cyprus. Services include the incorporation of the owner entity, coordinating the appropriate corporate and tax compliance, and registration of the vessel.

Find out more: Key advantages of registering your pleasure yacht in Cyprus

Superyacht Planning: Working Case Studies (2 of 2)

Posted on | by Akiko Design | Leave a Comment on Superyacht Planning: Working Case Studies (2 of 2)

Our short series on planning for a superyacht aims to provide a foundation of understanding for those considering building or purchasing a vessel. In this, the second article in the series, we will take a closer look at how the various elements come together in the operation of a superyacht, through two simple case studies.

If you have not read article one and would like to, please follow the link below:

In this article we will take a look at two case studies:

Case Study 1: MY-20

MY-20 is a new build 20m yacht, that has been purchased by a UK resident ultimate beneficial owner (UBO). The purpose of MY-20 is to cruise domestically within the Mediterranean waters, with no intention of sailing internationally. The UBO does not intend to engage a yacht management professional as it will be primarily utilised as a dayboat, and crew will be engaged on a day rate basis.

Ownership

Whilst MY-20 will be used as a private vessel, there are still many potential liabilities that need to be abated. An owning entity is always recommended to mitigate any unwarranted personal liabilities that the UBO may be exposed to through operating MY-20. For example ringfencing any exposure to personal claims e.g. tortious, contractual etc.

Further, to prevent the UBO being deemed an employee or de facto Director of the entity, it is best to utilise a transparent vehicle, such as a Limited Partnership. The Isle of Man Partnership can apply for separate legal personality, and therefore limited liability at outset.

For this arrangement our UBO will be the Limited Partner, whose liability is limited to their contributions to the Partnership. The General Partner has unlimited liability and therefore will be a Special Purpose Vehicle (SPV). Here, the SPV is an Isle of Man Private Limited Company (IOM Co Ltd) which of course also benefits from separate legal personality and therefore limited liability.

As General Partner, IOM Co Ltd will provide management and control of MY-20 and its operations. In doing so, IOM Co Ltd will administer the vessel, including holding board meetings, making decisions, making annual filings, accounts including the settlement of invoices, review and agree any applicable contractual agreements, and of course work closely with the Captain. It is imperative that the UBO is not seen to engage in any of this activity, lest they be deemed a General Partner and defeat the planning.

Flag

The UBO’s choice of flag will define the laws and regulatory standards that MY-20 will sail under. It will also have implications for the ease of administration. Therefore, the choice of registry is an important one.

As MY-20 is due to only sail within EU waters, an EU flag state will make most sense. From the available registries, the Malta Ship Registry is the largest in Europe and one of the biggest ship registers in the world. The Merchant Shipping Directorate defines MY-20 as a private registered yacht, because it is a pleasure yacht used for the sole purpose of the owner, is 6m+ in length, is not engaged in trade and does not carry passengers for consideration.

The Malta flag is beneficial in our case because:

The registration process is relatively straightforward as the Malta registry is a modern and administratively efficient shipping register.

Registration will only be granted once the Malta Maritime Administration is satisfied that the vessel conforms to all of the manning, safety and pollution prevention standards required by the applicable international conventions. During the registration process relevant evidential documentation is also required. The documentation must include evidence of ownership from a former registry unless the vessel is new.

You can read more about why Malta is a great location for flagging a vessel, here.

Import / Export

Whilst the UBO and owning entity are non-EU resident and MY-20 is a private vessel, Temporary Admission will not be an option as the ensign will be Maltase and the yacht will not be travelling outside of EU waters. Therefore, the UBO must pay VAT on the initial importation of the vessel to an EU Member State, and must carry evidence of this thereafter.

Whilst Luxembourg offers the lowest rate of VAT in the EU @ 17%, it is also landlocked, making it logistically unrealistic to import a yacht there. This means that Malta’s rate of VAT @ 18% is the lowest in the EU for the importation of yachts.

As MY-20 is a 20m yacht, special dispensation must be obtained from the Malta authorities for a one-off voyage to cross the Med and sail to Malta for importation. Malta Customs authority require a valuation of the yacht to approve MY-20’s importation.

Upon approval of the valuation and arrival in Malta, Customs authorities will inspect MY-20 and request the payment of VAT @ 18% based on the value of MY-20. After receipt of payment, Malta authorities will issue a VAT paid certificate, at their discretion.

In order to enact this a Malta VAT agent is required. IOM Co Ltd will engage with Dixcart Malta, who will act as VAT agent to ensure that the yacht is imported properly.

Case Study 1: In Summary

The UBO’s solution calls for an Isle of Man Limited Partnership with separate legal personality, which has an SPV acting as General Partner. MY-20 will be registered in Malta and VAT paid on importation. MY-20 will cruise the Med, and on the proviso that it does not leave EU waters for a period long enough to jeopardise its VAT paid status, then the yacht can continue to be in free circulation in EU waters.

Case Study 2: MY-50

For sake of ease, we will use the same UBO, except the vessel is a 50m superyacht. The UBO has purchased the superyacht with the intention of both private and charter usage, to assist with ongoing upkeep. The superyacht may be used to cruise in the EU and further afield.

Due to the intended arrangement, MY-50 will require a suite of professionals, including a yacht manager, yacht broker, tax adviser, a corporate service provider such as Dixcart and possibly a crewing specialist, if the yacht manager does not provide such services.

For our purposes, we will refer to the superyacht as MY-50.

Ownership

Due to the UBO being a UK resident, the same structuring can be used to ensure the individual is not deemed an employee or shadow Director of the owning entity – a Limited Partnership with an SPV acting as General Partner (IOM Co Ltd).

IOM Co Ltd will administer MY-50 in a similar way to MY-20, managing all board meetings, decisions, annual filings, contracts. This will include the management accounting associated with not only the ongoing maintenance and payment of invoices etc. but also the operation of any charter agreements.

IOM Co Ltd will work closely with the UBO, Captain, yacht manager, yacht broker and tax adviser to ensure that the structuring remains effective and the superyacht is managed efficiently.

Flag

In order to utilise the Temporary Admission VAT procedure when the superyacht is being used by the UBO, a non-EU flag will be required. Temporary Admission allows the vessel to cruise in EU waters for a period of time without VAT being due on import/export. You can read more about Temporary Admission here.

Further, as MY-50 will also be used for commercial charter, the UBO can elect to use the Yachts Engaged in Trade Scheme by registering the vessel in either the Cayman Islands or Marshall Islands. Both options qualify for both Temporary Admission and allow commercial chartering to take place, subject to conditions, and are highly regarded registries.

Yachts Engaged in Trade (YET) Scheme

For those with yachts flagged in the Cayman Islands and Marshall Islands the YET Scheme presents a hybrid approach, whereby the yacht can be used for both private and commercial charters, albeit subject to stringent conditions.

For example, the YET Scheme allows private yachts which are ensigned with the Cayman Island flag to sail under commercial charter in the territories of France and Monaco with VAT exemption. The use of the YET Scheme allows the skipper to switch between YET and Temporary Admission, pausing the 18-month Temporary Admission period, when using the boat for commercial purposes.

Whilst the YET Scheme provides clear benefits to the UBO, there are stringent conditions for use, e.g. the area for commercial charter is restricted whilst in EU waters, the period of commercial charter is restricted to a maximum of 84 days, the yacht must be 24m+ in length and requires a compliance verification survey, a French VAT agent is required etc.

If complied with, the YET Scheme can ensure that no VAT will be payable on the hull importation, and as such will not require disbursement. Correct application of the YET Scheme can provide a cashflow neutral VAT solution. Contravention of any of the requirements may be subject to the application of taxes, penalties or fines by the local authorities.

The YET Scheme is currently limited to the Marshall Islands and Cayman Islands registered vessels.

For our purposes, we will use the Cayman flag.

Case Study 2: In Summary

The ownership of MY-50 will also require an Isle of Man Limited Partnership with separate legal personality, once again meaning that the UBO must have no part in the superyacht’s ongoing management and administration. Further, the flag chosen is non-EU and the vessel is equipped to sail in international waters, therefore the Temporary Admission procedure is applicable when MY-50 is being used as a private superyacht.

As the chosen flag is the Cayman Islands, the UBO can use the YET procedure to commercially charter MY-50 in French and Monegasque waters, subject to conditions. How does this work?

The yacht broker engaged would market MY-50 for those seeking a luxury charter experience. Once a customer has requested to charter MY-50, they work with the yacht manager to create a standardised MYBA charter agreement, detailing the dates of the charter along with the costs applicable to the customer including VAT amongst other information.

Once the agreement has been signed and delivered to the Cayman Islands register, the superyacht is issued a Temporary Certificate of Registry for Yachts Engaged in Trade by the flag state. The certificate will state the limitation period regarding the commercial charter.

When the UBO is onboard, the superyacht is a private vessel and can have free circulation within the EU under Temporary Admission (i.e. there is no charter agreement, fee or VAT required).

Get in touch

If you require further information regarding yacht structuring and how we can assist, please feel free to get in touch with Paul Harvey at Dixcart.

Dixcart Management (IOM) Limited is licensed by the Isle of Man Financial Services Authority.

Planning for a Superyacht? Here is What you Need to Consider (1 of 2)

Posted on | by Akiko Design | Leave a Comment on Planning for a Superyacht? Here is What you Need to Consider (1 of 2)

When you or your client think about their new Superyacht it might conjure visions of luxurious relaxation, crystal clear blue waters and basking in the sun; conversely, I highly doubt the first thing that comes to mind is the need to meticulously plan for the tax and management implications that go hand in hand with such a prestigious asset.

Here at Dixcart, we wanted to create some helpful and informative articles to serve as easy to digest introductions to some key concepts for superyacht planning:

  1. The key considerations for Superyacht ownership; and,
  2. A closer look at the ownership structure, Flag, VAT and other considerations via working case studies.

In article 1 of 2, we’ll take a brief look at vital elements such as:

What Holding Structures Should I Consider For a Superyacht?

When considering the most effective ownership structure you must take into account not only direct and indirect taxation, but also mitigation of personal liability. 

One way of managing this position is through the establishment of a corporate entity, which acts as a holding structure, owning the vessel on the Beneficial Owner’s behalf.

The tax planning requirements and available structures will help define desirable jurisdictions. The entity will be subject to the local laws and tax regime, therefore modern offshore jurisdictions like the Isle of Man may provide tax neutral and globally compliant solutions.

The Isle of Man offers a wide variety of structures to the Ultimate Beneficial Owner (UBO) and their advisers; such as Private Limited Companies and Limited Partnerships. As noted, the form of structuring is generally determined by the client’s circumstances and objectives, e.g.:

  • The vessel’s intended use i.e. private or commercial
  • The UBO’s tax position

Due to their relative simplicity and flexibility, Limited Partnerships (LP) or Private Limited Companies (Private Co) are commonly elected. Typically, the LP is operated by a Special Purpose Vehicle (SPV) – often a Private Co.

Yacht Ownership and Limited Partnerships

LPs formed on the Isle of Man are governed by the Partnership Act 1909. The LP is an incorporated entity with limited liability and can apply for separate legal personality at outset under the Limited Partnership (Legal Personality) Act 2011.

An LP consists of at least one General Partner and one Limited Partner.  Management is vested in the General Partner, who engages in the activity carried out by the LP i.e. the day-to-day management and any requisite decision making etc. Importantly the General Partner has unlimited liability, and therefore is liable to the full extent of all burdens and obligations incurred. For this reason the General Partner would usually be a Private Co.   

The Limited Partner provides the capital held by the LP – in this instance, the method of financing the yacht (debt or equity). The Limited Partner’s liability is limited to the extent of their contribution to the LP. It is of vital importance that the Limited Partner does not participate in the active management of the LP, lest they be deemed a General Partner – losing their limited liability and potentially defeating the tax planning, leading to unintended tax consequences.

The LP must have an Isle of Man Registered Office at all times. You can read more about what a Registered Office is, here.

The General Partner would be a Special Purpose Vehicle (“SPV”) taking the form of a Private Co managed by the service provider – for example, Dixcart would establish an Isle of Man Private Limited Company as General Partner with Isle of Man Directors, and the Limited Partner would be the UBO.

Yacht Ownership and SPVs

It may be useful to define what we mean when we say SPV. A Special Purpose Vehicle (SPV) is a legal entity established to achieve a defined purpose, normally incorporated to ringfence risk – be it legal or fiscal liability. This can be to raise financing, conduct a transaction, manage investment or in our instance, act as General Partner.

The SPV would arrange any matters required for the effective and efficient management of the yacht; including the provision of financing where appropriate. For example, instructing the build, purchase of tenders, working with various third-party experts to crew, manage and undertake maintenance of the Yacht etc.

If the Isle of Man is the most appropriate jurisdiction of incorporation, there are two types of Private Co available – these are Companies Act 1931 and Companies Act 2006 companies.

Companies Act 1931 (CA 1931):

The CA 1931 company is a more traditional entity, requiring Registered Office, two Directors and a Company Secretary.

Companies Act 2006 (CA 2006):

By comparison the CA 2006 company is more administratively streamlined, requiring Registered Office, a single Director (which can be a corporate entity) and a Registered Agent.

You can read more about what the role of Registered Office and Registered Agent are here.

Since 2021, CA 2006 companies can re-register under the CA1931 Act, whereas the inverse was always possible since the commencement of the CA 2006 – thus, both types of Private Co are convertible. You can read more about re-registration here.

We tend to see the CA 2006 route elected by most yachting structures, due to the relative simplicity offered. However, the choice of corporate vehicle will be governed by the planning requirements and the objectives of the UBO.

Where Should I Register The Superyacht?

By registering the vessel to one of the many shipping registries available, the owner is choosing whose laws and jurisdiction they will sail under. This choice will also govern the requirements regarding the regulation and inspection of the vessel.

Certain registries offer more developed tax and registration procedures, and the jurisdiction may also offer various legal and tax benefits. For these reasons, the British Red Ensign is often the flag of choice – available through Commonwealth countries, including:

In addition to Cayman and Manx registrations, we tend to also see clients favour the Marshall Islands and Malta. All four of these jurisdictions offer administrative benefits, modern legislative environments and are compliant with the Paris Memorandum of Understanding on Port State Control – an international agreement between 27 Maritime Authorities.

The choice of flag should again be determined by the UBO’s objectives and how the boat is intended to be used.

What Are The Implications For The Import/Export of a Superyacht?

Depending on a mix of factors relating to ownership and registration etc. sailing between territorial waters will often require serious consideration. There can be significant Customs Duties due, in mishandled circumstances.

For example, non-EU yachts must be imported into the EU and are subject to full rate VAT on the value of the yacht, unless an exemption or procedure can be applied. This can present significant costs for the owner of a superyacht, now potentially liable for up to 20%+ of the yacht value, at the time of importation.

As noted above, with proper planning, procedures can be applied which can abate or extinguish this liability. To name a few:

VAT Procedures for Private Charter Yachts

Temporary Admission (TA) – Private Yachts

TA is an EU Customs procedure, which allows certain goods (including private Yachts) to be brought into the Customs Territory with total or partial relief from import duties and taxes, subject to conditions. This can provide up to 18 months of exemption from such taxes.

In brief:

  • Those non-EU vessels must be registered outside of the EU (e.g. Cayman Islands, Isle of Man or Marshall Islands etc.);
  • The legal owner must be non-EU (e.g. an Isle of Man LP and Private Co etc.); and
  • The individual operating the vessel must be non-EU (i.e. the UBO is not an EU citizen). 

You can read more about TA here.

VAT Procedures for Commercial Charter Yachts

French Commercial Exemption (FCE)

The FCE procedure allows commercial yachts operating in French territorial waters to benefit from VAT exemption.

In order to benefit from the FCE, the yacht needs to comply with 5 requirements:

  1. Registered as a commercial yacht
  2. Used for commercial purposes
  3. Have a permanent crew onboard
  4. The vessel must be 15m+ in Length
  5. At least 70% of charters must be conducted outside of French Territorial Waters:
    • Qualifying voyages include those cruises outside of French and EU waters, for example: a trip starts from another EU or non-EU territory, or where the yacht cruises in international waters, or starts or ends in France or Monaco via international waters.

Those that meet the qualifying criteria can benefit from VAT exemption on importation (normally calculated on the value of the hull), no VAT on the purchase of supplies and services for the purposes of trading commercially, including no VAT on the purchase of fuel.

As you can see, whilst beneficial, the FCE can be operationally complex, particularly with regard to complying with point 5. A “non exemption” alternative is the French Reverse Charge Scheme (FRCS).

French Reverse Charge Scheme (FRCS)

Article 194 of the EU Directive on the Common System of Value Added Tax was brought into force to reduce the administrative VAT burden of both the EU Member States and non-established persons doing business in EU member states. Due to the discretion afforded with regards to implementation, the French Authorities were able to extend this Directive to offer non-established entities certain VAT benefits via the implementation of the FRCS.

Whilst EU entities must make 4 importations in a 12 month period, to be eligible for the FRCS, non-EU entities (such as incorporated Isle of Man LPs) do not need to meet this criterium. They will however still need to engage a French VAT agent to assist with the local administrative duties and formalities.

No VAT will be payable on the hull importation under the FRCS, and as such will not require disbursement. Albeit, VAT on goods and services will still be payable, but can be reclaimed later. Therefore, correct application of the FRCS can provide a cashflow neutral VAT solution. 

Once the FRC importation has been completed and the yacht has been imported into France, the yacht is granted free-circulation and can operate commercially within any EU territory without restriction.

As you can see, due to the formalities and potential tax liabilities at stake, importation needs to be carefully planned and Dixcart work with specialist partners to ensure proper compliance with formalities.

Crewing Considerations

It is common for the crew to be employed via a third-party agency. Under such circumstances, the third-party agency will hold a crewing agreement with the owning entity (i.e. the LP). The agency will be responsible for vetting and supplying crew members of every level of seniority and discipline – from Captain to Deckhand. They will work alongside service providers like Dixcart to ensure the best possible experience for the UBO and their guests.

How Dixcart can Support your Superyacht Planning

Over the last 50 years, Dixcart has developed strong working relationships with some of the yachting industry’s leading experts – from tax and legal planning, to building, yacht management and crewing.

When combined with our extensive experience in the effective and efficient operation of corporate entities, registration and administration of yacht structures, we are well placed to assist with superyachts of all sizes and purposes.

Get in Touch

If you require further information regarding yacht structuring and how we can assist, please feel free to get in touch with Paul Harvey at Dixcart.

Alternatively, you can connect with Paul on LinkedIn

Dixcart Management (IOM) Limited is licensed by the Isle of Man Financial Services Authority.

Yacht Registration is on The Rise – Where to Register Your Pleasure Yacht?

Posted on | by Akiko Design | Leave a Comment on Yacht Registration is on The Rise – Where to Register Your Pleasure Yacht?

The global tourism industry was brought to a halt as COVID-19 restrictions saw holidays being cancelled ‘en masse’ last year. As international travel looks to be opening up again, HNWIs will play a key role in reviving the sector and one particular trend we have seen them be part of, is the purchase and registration of private yachts and/or the chartering of private yachts.

Registering your Yacht

As with any valuable asset, the ownership structure of your yacht must be carefully considered and the jurisdiction in which the yacht is to be registered is also very important. The flag chosen for registration is one of the most important decisions. Dixcart has extensive expertise in registering yachts in a variety of jurisdictions, where we have offices, in order to help simplify the process.  Here are also some top tips to think about when registering your yacht: Luxury Yachts – Top Tips for Tax Efficient Registration.

Here is a snapshot of some of the best jurisdictions for yacht registration around the world:

CYPRUS

Cyprus is a key maritime centre and is recognised as one of the most accessible registries in the EU. It has not only grown in size in the last two decades but has also made a considerable effort to increase the quality of its fleet and related services. As a result, the Cyprus flag is now classified on the whitelist of the Paris and Tokyo MOUs (Flags securing the highest rating in relation to the Memorandum of Understandings on Port State Control).

Due to its strategic location at the gateway of Europe, Africa, Asia, and the Middle East, it is a hub for shipowners and investors from all over the world, and there has been a rapid growth in the number of Cyprus shipping companies in recent years.

The procedure for registering vessels under the Cyprus flag has been designed to attract foreign investment and to build a dependable reputation, to be recognised by all of the international shipping authorities. 

Cyprus offers competitive yacht registration fees, low ongoing annual fees for yacht owners, and an attractive tax treatment for Officers and crew working on a Cyprus registered yacht (whereby they are not subject to income tax), as well as a series of other tax advantages including no tax on profits from the operational or management profits, no tax on income or dividends received from a ship management company, and a favourable tonnage tax scheme, based on gross tonnage.

The common practice for those wishing to register a vessel under the Cyprus flag is to incorporate a company in Cyprus, which will either acquire the yacht in its name, or bareboat charter the yacht. Cyprus offers a competitive rate of corporate income tax at 12.5% and low operating costs for Cyprus-owned companies. In addition, there is no estate duty on the inheritance of shares in a Cyprus shipping company and no stamp duty is payable on the ship mortgage deeds.

Find out more: Key advantages of registering your pleasure yacht in Cyprus

GUERNSEY

As a crown dependency, Guernsey has a very reputable yacht registry. It is a member of the ‘Red Ensign Group’ of British ship registries and its yachts enjoy the high standards associated with the red ensign flag.

By registering a yacht in Guernsey, owners can benefit from the advantages of a tax efficient and stable jurisdiction and the favourable tax laws of the Bailiwick of Guernsey. There is also the advantage of using a Guernsey Corporate structure to own and operate a yacht which can provide asset protection for the owner, together with other benefits.

Guernsey registration is valid internationally and all documentation is issued in English which is widely accepted around the world. There are no requirements for a Guernsey-registered yacht to physically visit Guernsey and owners have the ability to obtain a provisional registration to cover the vessel for navigation immediately after purchase. 

Another very attractive factor is that Guernsey is outside the VAT territory of the EU making the register useful for non-EU resident owners wanting to operate their vessel VAT free in Europe, and who are eligible to do so under Temporary Admission (Temporary Importation) relief.

Find out more: Benefits of Registering a Yacht in Guernsey

MALTA

Malta has the largest shipping register in Europe and is the sixth largest in the world. The procedure for registering a yacht in Malta is relatively straightforward; the Maltese authorities are approachable, whilst at the same time, meticulously follow a rigid framework of guidelines and regulations, creating a cutting edge for Malta within this sector.

The Malta flag is a European flag, a flag of confidence and a flag of choice.

Many leading international banks and financiers often recommend the Maltese register. This is due to the several advantages available:

  • No trading restrictions and preferential treatment in many ports.
  • The Maltese flag is on the white list of the Paris MoU, Tokyo MoU and on the Low Risk Ship List of the Paris MoU*. In addition, Malta has adopted all international Maritime Conventions.
  • All yachts can be registered in the name of legally constituted corporate bodies or entities (irrespective of nationality), or by European Union Citizens.
  • A Maltese yacht may also be bareboat charter registered under another flag.

Provisional registration is valid for six months, although this can be extended by a further six months; by this time all of the documentation must have been completed for the permanent registration. 

Individuals interested in registering their yacht in Malta, might wish to consider using a Maltese Cell Company. Shipping and Aviation Cell Company Regulations provide the opportunity to use a new cell structure for companies operating in the fields of shipping and aviation, and are treated as separate legal entities. This means assets and liabilities relevant to the individual cell can be segregated from the assets and liabilities of non-cellular elements, and from the other cells which may be held within the structure. A relatively simple example might be where one cell owns yacht A, the second cell owns yacht B, the third cell owns yacht C, and cell D owns the business matters in relation to ‘yacht management’. They can all be separated within the structure to ensure extra protection of the assets.

Malta is continuously reviewing their maritime legislation and introducing new regulations, ‘leading the way’ in terms of new initiatives in this sector. This includes yacht owners that have larger vessels and need to meet obligations for commercial passenger ships.

It is widely recognised when considering the operational pattern and risk profile of yachts, that these requirements, are in some instances disproportionately onerous and impractical in terms of design and implementation. As the trend for larger commercial yachts is growing, the 12-passenger limitation rule has become more problematic, resulting in an increase in administration for a number of organisations. This, combined with encouragement from the yachting industry, has provided impetus for Malta to develop the ‘Passenger Yacht Code’, to meet industry demands.

The introduction of the ‘Malta Passenger Yacht Code’ is applicable to passenger yachts which carry between 12 and 36 passengers, do not carry cargo, and which sail internationally. It is certainly a welcome development for those who plan to register larger commercial yachts under the Malta flag. It offers a solution to the many technical issues and concerns which were previously faced by prospective registrants.

Find out more: Why Malta is a great location for flagging or reflagging a yacht

PORTUGAL – MADEIRA

Madeira is part of Portugal and has full membership of the EU. This enables yacht purchasers to fully comply with EU legislation and the International Shipping Register of Madeira (MAR) is internationally recognised as a credible and competitive option in comparison to other shipping registers.

MAR maintains the high quality and safety standards of an EU register. It is regarded by the International Transport Workers’ Federation (ITF) as a flag of convenience and is included in the Paris Memorandum of Understanding (MOU) White List*.

An advantage of registering a yacht in Madeira is that it is an EU Register which allows full access to navigation in EU waters without any types of restriction for either commercial or private yachts.In addition, its EU standing has the advantage of providing substance to the VAT status of yachts registered in Madeira that operate within EU waters.

Madeira also takes into consideration the purchase of second-hand yachts. Portuguese VAT is applied to the lower acquisition price, as rules allow for devaluation suffered by the yacht (deemed market value). This can lead to a significant reduction in VAT.

Yachts that are commercially registered in MAR and are (i) used for navigation on the high seas and (ii) engaged in commercial/charter activities, benefit from several VAT exemptions:

  • the acquisition price of the yacht;
  • repair, modification and maintenance operations of the yacht;
  • fuel and oil supply;
  • the supply of goods (provisions) to have on board; and
  • the supply of equipment.

In addition, there are no citizenship requirements for the crew, and they are exempt from personal income taxes. The crew also benefit from a flexible social security regime; crew members are not obliged to contribute to the Portuguese social security regime, provided that an alternative pension scheme is guaranteed.

As mentioned above, when we have looked at other jurisdictions, many yacht owners choose to register their vessel via a company structure. The International Business Centre of Madeira (MIBC), with its advantageous tax regime, provides a highly competitive package of tax benefits. Its reduced direct taxation, with effective corporate income tax rate of 5% until 2027, combined with an exemption from withholding tax (providing the shareholders are resident in an EU jurisdiction) on payments of dividends, interest, and royalties to non-residents of Portugal, makes it an attractive location for yacht operating companies.

Madeira companies also benefit from automatic VAT registration on incorporation and are instantly provided with a VAT registration number. This makes it easier for such companies to take advantage of the various benefits available.

Madeira yacht owning companies are exempt from the initial yacht registration fee and receive a 20% reduction in the annual yacht registration fee. Plus, withholding taxes on dividends can be eliminated by routing the investment in the Madeira company through an EU holding company, for example a Maltese holding company.

Find out more: Why consider Portugal for yacht registration?

Summary

Dixcart Air Marine assists clients who own, or wish to own, a yacht. Our team of experienced professionals can provide a wide variety of services including; pre-structuring and ownership advice, registering the yacht, the accounting, added value services, tax planning, assistance with crewing and payroll (if required), and ongoing annual requirements. If you would like to speak to one of our professional advisers, please get in touch:

*White List Paris and Tokyo MOUs: Flags securing the highest rating in relation to the Memorandum of Understandings on Port State Control.

Full Fiduciary Licence granted by the Guernsey Financial Services Commission. Guernsey Registered Company Number: 6512.

Listed Company Services

Malta Implements a New Passenger Yacht Code: More Than Twelve Passengers

Posted on | by Akiko Design | Leave a Comment on Malta Implements a New Passenger Yacht Code: More Than Twelve Passengers
Background

Malta is a well-known and popular jurisdiction within the yachting sector. It has the largest shipping register of vessels in the EU and the 6th largest in the world. It is also a jurisdiction that is ‘leading the way’, with a number of initiatives in this sector.

Current Obligations

Yachts need to meet obligations for ‘commercial passenger ships’ and it is widely recognised when considering the operational pattern and risk profile of yachts, that these requirements, are in some instances disproportionately onerous and impractical in terms of design and implementation.

As the trend for larger commercial yachts increases, the 12 passenger limitation rule has become more problematic and has resulted in an increase in administration for a number of organisations, including the Malta Merchant Shipping Directorate. This, combined with encouragement from the yachting industry, has provided impetus for Malta to develop the ‘Passenger Yacht Code’, to meet industry demands.

The Malta Passenger Yacht Code

The Malta Passenger Yacht Code is applicable to passenger yachts, which carry between 12 and 36 passengers, do not carry cargo, and which sail internationally. The Code is intended to cater exclusively to the yachting sector of the market, it is not intended to apply to the excursion and/or ferry passenger sectors of the industry.

The new yacht code has been drafted by the Authority for Transport in Malta, in consultation with various industry stakeholders including; yacht designers, yacht builders, repair yards, specialised service providers and manufacturers, appointed surveyors and recognised organisations. This has been to ensure a wide representation of the industry.

Details of the Malta Passenger Yacht Code

A passenger yacht must be; surveyed, certified, audited and issued with Class and Statutory Certificates, applicable to passenger vessels, by a recognised organisation. Class Rules relating to passenger vessels will apply. Approval staff, auditors and surveyors must be experienced and qualified in passenger ship planning, audits, and surveys.

The Malta Passenger Yacht Code provides addition regulation, in particular in relation to safety, for example; life- saving appliances and arrangements, life at sea safety, navigation safety, and protection of personnel.

Passenger Yachts Chartered on a Static Basis

Where a passenger yacht remains static; berthed or anchored at sea, the yacht may be allowed to carry more than 36 passengers, as provided for in The Malta Passenger Yacht Code. For a passenger yacht to be able to be chartered on a static basis, the yacht would need to be issued with a statement by the Flag Authority, permitting static charters.

The Certification Process

Once owners submit the necessary documentation and complete the designated survey and inspections, the Maltese Flag Authorities will issue the vessel with a Statutory Certificate.

All passenger yachts must, in addition, be classified by a Recognised Organisation (RO), and must maintain a valid classification throughout the validity period of the yacht’s statutory certificate. The applicable RO Rules for classification purposes are those used for the classification of passenger ships. Upon satisfactory completion of  the required surveys or audits, the yacht’s RO needs to issue a certificate, confirming compliance with the Malta Code.

Passenger yachts certified under the remit of the Code may carry out International (Unrestricted) Voyages or Short International Voyages, as defined by The International Convention for the Safety of Life at Sea (SOLAS).

Advantages of the Malta Passenger Yacht Code

The introduction of the Malta Passenger Yacht Code is a welcome development for those who plan to register larger commercial yachts under the Malta flag. It enables larger yachts to carry between 12 and 36 passengers.

It offers a solution to the many technical issues and concerns which were previously faced by prospective registrants.

Additional Information

If you would like further information regarding the registration of a yacht and opportunities available through Malta, please speak to Jonathan Vassallo: advice.malta@dixcart.com, at the Dixcart office in Malta or your usual Dixcart contact.

Pleasure Boats in Malta

Dixcart Malta Managing Director – Co-opted to Malta Chamber’s Yachting Services Executive Committee

Posted on | by Akiko Design | Leave a Comment on Dixcart Malta Managing Director – Co-opted to Malta Chamber’s Yachting Services Executive Committee

Jonathan Vassallo has been co-opted to join the Yachting Services Executive Committee of the Yachting Services Business Section, within the Malta Chamber.

Jonathan Vassallo

This section represents one of the biggest categories within the Chamber in terms of members.

During the past couple of years the Chamber has been dealing with the challenges faced by the industry. It has continued to work closely with the authorities to propose new, and re-visit existing practical applications and procedures, designed to have a positive impact on the yachting industry in Malta.

This is an ongoing exercise to ensure that this yachting sector remains dynamic and at the forefront of the industry internationally. A number of procedures and guidelines have been adopted and fine-tuned, and this has helped to ensure that Malta remains an attractive jurisdiction for yacht owners and operators.

Jonathan is keen to be part of this team and use his experience to contribute to the Yachting Services Executive Committee for the benefit of this sector within the Malta economy.

For the next two years, the key objective of the Committee is to continue to offer a robust platform for the yachting industry and to collaborate with the authorities and stakeholders to improve Malta’s already strong position within the yachting world.

You can contact Jonathan, in the Dixcart Malta office at: advice.malta@dixcart.com