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)

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.

Why Should You Consider The Isle of Man for Yachting, Post-Brexit?

The Isle of Man for Yachting

2020 was mired with uncertainty, but with an end to Brexit negotiations, vaccines, and the promise of further freedoms around the corner, 2021 will hopefully be a return to calmer waters. You, or your clients, may even have started to consider what happens next with regards to their Yachting activities. Here’s why you should consider the Isle of Man for yachting:

With the dust settling in the wake of the UK’s departure from the EU, resulting in a nearly 1,300 page EU-UK Trade and Cooperation Agreement, there is now more clarity on the Agreement’s impact on Yachting activities and potential tax implications. One such clarification being that, following the UK’s exit from the EU, the Isle of Man is no longer deemed EU resident by association. As such, Yachts owned via an Isle of Man entity may qualify for Temporary Admission into EU waters.

In this article, we will be covering the following topics to provide a quick overview:

  • Temporary Admission (TA) for Private Yachts
  • How to Meet the Requirements of Temporary Admission (TA)
  • What Next? Things to Consider When Planning Your Yacht Fiduciary Services

Temporary Admission (TA) for Private Yachts

Temporary Admission (TA) is a Customs procedure, in line with the Istanbul Convention 1990, which allows certain goods (including means of transport – e.g., private Yachts) to be brought into the Customs Territory with total or partial relief from import duties and taxes, subject to conditions.

For example, the goods must be imported for ‘Specific Purpose’ and are intended for re-exportation within a specified period.

Whilst owners established outside of the Customs area are exempt from VAT under TA, Customs Duty relief varies, dependent on the jurisdiction’s classification of the vessel and its Specific Purpose for being imported.

For quick reference we have provided a table of the headline details/requirements below:

EU TA
The Vessel is registered outside of the Customs Union. (The flag state of the Yacht is non-EU)  
The vessel is used by an individual established outside of the Customs Union. (The owning entity is established outside the EU)  
The vessel must be operated by an individual established outside of the Customs Union. (Ultimate Beneficial Owner must be resident outside the EU)  
Some further conditions to note: The goods must be imported with the intention of re-exporting them at a later date (Maximum 18 months); No alteration of the goods is intended (allowing for maintenance/upkeep), i.e. no value is to be added; The goods can be clearly identified (e.g., hull identification number etc.); The overall Customs requirements are met; and A guarantee is provided, if required (specific to the Member State).  

How to meet the requirements of Temporary Admission (TA)

Thankfully there is a lot of scope for meeting the requirements for those wishing to set sail in the EU under TA:

  1. Registration of the vessel

For a TA procedure to apply with full VAT and Customs Duty relief, the Yacht must be registered in a jurisdiction outside of the EU (it will use the flag of a Non-Member State).

Following its departure from the EU, the Isle of Man now meets this criteria, alongside traditional favourites such as the Cayman Islands.

  • Establishment of the individual

For our purposes, ‘individual’ refers to both Natural Persons and Corporate Entities. In this way we can have an individual established in a separate jurisdiction to the Ultimate Beneficial Owner (UBO) – often by way of a holding company, that will own the Yacht and which in turn will be subject to the local tax regime.

The jurisdiction of establishment in this case does not necessarily have to be the same as the chosen flag of the vessel.

  • Establishment of the Ultimate Beneficial Owner (UBO) 

For the purposes of TA, so long as the UBO is resident outside of the EU, they will qualify.

What Next? Things to Consider When Planning Your Yacht Fiduciary Services

When selecting a suitable ownership structure for the registration of a Private Yacht, which will benefit from TA within EU waters, we would suggest checking the following broad criteria.

Choosing a Jurisdiction for the Holding Structure

  • Strong economic international standards – a minimum ‘A rating’. (S&P / Moody’s)
    • Robust legal standards.
    • An OECD Whitelisted jurisdiction with a strong reputation for compliance and transparency.
    • Beneficial tax regime taxes.

Choosing a Yacht Fiduciary Service

To assist with the specialist advice, corporate structuring, and administration of the Yacht, we would recommend ensuring that your service provider ticks the following boxes:

  • Geographic location – with relation to the local tax regime and time zone (for accessibility and ease of dealing). 
    • A proven track record –how established the provider is in the sector, as well as familiarity with this category of service.
    • Access to experts – with many providers, their scale often prevents direct and regular dealings with senior qualified staff members; you will want access to experts whenever you have a query or action that is required, and not to always have these dealt with by juniors.
    • Your business is valued – in an ideal situation, your business will be a priority to the provider, not just another client on the books. Finding a provider that is adaptable and responsive is key to service excellence.

What are Your Yacht Fiduciary Service Options?

With so many well-established shipping registrars and a wide selection of beneficial jurisdictions for incorporating a holding structure, you would be forgiven for having flashbacks of 2020’s uncertainty. This is where we can help.

At Dixcart, your needs are our priority – we provide a bespoke and personal service for those looking to manage and administer their luxury assets; giving you access to experts as and when you require them.

Because we are based in the Isle of Man, we benefit from our Aa3 rated jurisdiction’s political, economic and environmental stability. The Island is a self-governed Crown Dependency, setting its own laws and rates of taxation.

Whilst we can access any number of shipping registers, our local registrar has an exceptional track record of service excellence; providing an approach that blends modern flexible services and competitive rates without compromising on quality.

The beneficial tax regime, business friendly government and OECD ‘Whitelist’ status ensure that the tax vehicles we offer can help you achieve your goals whilst remaining globally compliant.

An Isle of Man registered Company enjoys the following benefits:

We have been assisting clients and their advisers for over 45 years with the effective structuring and administration of wealth, having experience of utilising multiple shipping registers to ensign vessels in line with their desired purpose. If you would like to discuss how we can assist you in achieving the effective and efficient administration of a vessel we would be delighted to hear from you. Please contact Paul Harvey at the Dixcart Office in the Isle of Man: advice.iom@dixcart.com.

Alternatively, you can connect with Paul on LinkedIn or find out more about our Dixcart Air Marine services here.

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

This information is provided as guidance as at 01/03/21 and should not be considered advice. The most appropriate vehicle is determined by individual client needs and specific advice should be sought.

Portuguese Tonnage Tax

The Isle of Man Shipping Registry – An Innovative Approach

Isle of Man Shipping Registry

Advisors often need to guide clients on the most suitable jurisdiction to flag an owner’s vessel. Historically, advisors have preferred tried and tested jurisdictions, but in today’s competitive world there is increasing importance on other issues such as jurisdiction perception, international transparency, time differences, different legal systems, expertise and growing costs associated with certain jurisdictions.

Criteria to Select a Suitable Flag to Register a Vessel

“Best practice” to select a suitable flag would generally include the following criteria:

  • Strong economic international standards – a minimum ‘A rating’.
  • Robust legal and construction standards.
  • A commercially run register – emphasis on service and response.
  • A strong performance in the areas of safety, security and environmental protection.
  • A jurisdiction that is White Listed by the Paris & Tokyo Memorandum of Understanding (Paris/Tokyo MoU) – and low risk rating.
  • A jurisdiction strong on reputation, compliance and transparency.
  • Low registration costs, simplified bureaucratic procedures and minimal taxes.

What Additional Advantages Does the Isle of Man Register Offer?

The former Director of the Register in the Isle of Man once said “The Isle of Man used to be the best register you have never heard of”, but that has changed. It is clear the Isle of Man flag has become recognised within the industry as one of the leading international registers for quality, efficiency and innovation.

Whilst there is still a lot of uncertainty around Brexit, it has previously been pointed out that “the Isle of Man’s position in the merchant shipping world is very clear, the Isle of Man is a British register and will fly the British Ensign, but it is not recognised as an EU flag.” Consequently, the EU incentives in terms of tonnage tax and access to cabotage trades in Europe have never applied to the Isle of Man. The EU Maritime Directives have also not applied automatically. Therefore nothing really changes as far as the Isle of Man Register is concerned. The Isle of Man Register continues to hold a strong position as a British non-EU register, which operates as an international register and secures business through the financial and political stability of its jurisdiction. This might not be the same for all jurisdictions.

Over the past three decades the Register has grown substantially and benefited from further investment from the Isle of Man Government.  The Registry has sought to become one of the world’s leading Registers and targeted quality registrations in the process whilst aiming to increase efficiency and extend the service provided to owners.

The Ship Registry now has overseas representatives in China, Greece, Japan and Singapore.

Facts and Figures – the Isle of Man Register

The Isle of Man Ship Register can boast the following:

  • 17th largest Register in the world; gross tonnage 14 million.
  • 400 ships registered and 11,000 seafarers under its flag.
  • 24/7 emergency response by Principal Surveyors.
  • Lower costs on the majority of vessel sizes in comparison to Bahamas, Liberia, Marshall Islands and Panama.
  • In 2019 the Ship Registry was one of the first flags in the world to launch electronic digitally signed certification.
  • The Paris MOU produce a “White List” of the highest performing flag states in the world and in June 2019, the Isle of Man took the number one spot.
  • In December 2019, the Ship Registry was awarded “Best Ship Registry” for 2020 by World Commerce Review for the second year in a row.

Cost Competitiveness

Cost is understandably a topic of great importance to owners.

The Isle of Man Shipping Register provides a supportive function to the thriving financial services industry in the Isle of Man. The Register, therefore, does not need to act directly as a tax raising centre, which allows it to be more competitive.

Summary

The Isle of Man is a shipping centre with a maritime tradition. The Shipping Register is a commercial register with a very supportive Government and with vessels allowed to fly the British ensign. Registry staff have a strong technical, supportive and customer focused approach.

Additional Information

If you require any further information regarding the above article, please speak to your usual Dixcart contact or to Steve Doyle at the Dixcart office in the Isle e Isle of Man; steve.doyle@dixcart.com      

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

Shipping Advantages

Shipping Advantages in Cyprus, the Isle of Man, Madeira (Portugal) and Malta

Dixcart can provide clients with a number of alternative ship registration solutions. This note provides a brief overview of the regimes in Cyprus, the Isle of Man, Madeira (Portugal) and Malta and the shipping advantages they offer. More detailed information is available on request regarding shipping in each of the jurisdictions considered in this Information Note.

Shipping Advantages by Jurisdiction:

Cyprus

Cyprus is a major ship management centre attracting foreign ship owners through the highly favourable tax provisions available for shipping companies on the island. It is recognised as one of the most accessible registries in the EU.

The Cyprus shipping registry 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 white list of the Paris and Tokyo MOUs*.

Key shipping advantages relating to the shipping sector in Cyprus include:

  • Cyprus exempts international transport services from value added tax when these services are supplied outside of the EU.
  • The income of officers and crew on Cypriot registered vessels is not subject to income tax.
  • Cyprus offers a competitive rate of corporate income tax at 12.5%.
  • There is no estate duty on the inheritance of shares in a Cyprus shipping company and no stamp duty is payable on ship mortgage deeds.
  • A new tonnage tax system was enacted in May 2010. The tax system is in full compliance with EU requirements. The tonnage tax (TT) is calculated on the net tonnage of the ship according to a broad range of band rates proscribed in legislation. The Cypriot approved tonnage tax system provides for TT on the net tonnage of the vessel rather than corporation tax on the actual profit. This allows for mixed activities within a group, shipping activities are subject to TT and other activities are subject to 12.5% corporation tax.
  • Cyprus also offers a series of tax advantages which are applicable to ship and ship management companies: exemption from tax of dividend income (subject to limited conditions), exemption from tax on profits from foreign permanent establishments, and exemption from withholding tax on the repatriation of income (dividends, interest and nearly all royalties).

Isle of Man

The Isle of Man Registry is a Category One British Registry, and can therefore maintain international safety convention status for vessels of all sizes and classes. As a British ship, an Isle of Man flagged vessel is entitled to protection and assistance from the British Royal Navy and access to British consular services worldwide.

The Isle of Man shipping registry has a reputation for quality and for a customer focused approach:  

  • The Isle of Man registry is on the Paris and Tokyo MOU white lists. It is recognised by the United States Coast Guard as a Qualship 21 flag and it is at the top of the industry’s flags by country performance table.          
  • The ship registry in the Isle of Man offers in-house expertise and availability 24 hours of every day and provides a fast response to any queries.
  • The Isle of Man registry offers reasonable costs. There are no annual tonnage dues and in terms of tax obligations, corporate income tax in the Isle of Man is zero.       
     
  • There is flexibility in the requirements for registered owners, with a comprehensive list of accepted countries for ownership.  
  • The Isle of Man shipping registry allows ships to demise-in, enabling a transfer of registry and also allows ships to register on a demise charter registry other than in the Isle of Man (demise-out).        
  • It is a flag of choice for merchant vessels and commercial yachts and it is not designated as a flag of convenience.

Madeira (Portugal) Shipping Advantages

The International Shipping Register of Madeira (MAR) was established in 1989 as part of the Madeira International Business Centre (“MIBC”) “package” of taxation benefits. Vessels registered with MAR carry the Portuguese flag and are subject to the International Treaties and Conventions entered into by Portugal.

The key shipping advantages of ship registration in MAR are detailed below:

  • The register is of a high standard, has EU credibility, is not regarded as a flag of convenience and is included in the Paris MOU white list.          
  • There are no nationality requirements for ship-owners of vessels registered in MAR. They are not required to have their head office in Madeira. It is sufficient to have local legal representation with adequate powers.      
  • Only 30% of the safe manning must be “European”. This includes nationalities such as Polish, Russian and Ukrainian, as well as citizens of Portuguese-speaking countries. This requirement may also be derogated if duly justified. This allows for flexible manning.
  • Crew wages are exempt from income tax and from social security charges in Portugal.        
  • The existence of a flexible mortgage system allows the mortgagor and the mortgagee, by written agreement, to choose the legal system of a particular country that will govern the terms of the mortgage.   
  • Competitive registration fees, there are no annual tonnage taxes.   
  • Eight International Classification Societies are recognised in Portugal. MAR can delegate some of its functions to these societies. This can be simpler and more convenient for ship owners.          
  • Temporary registration is allowed by law (bareboat charter: “In” and “Out”).        
  • Shipping companies licensed to operate within MAR benefit from a corporate income tax rate of 5% until 2027. They also enjoy automatic VAT registration and have access to the Portuguese double taxation treaty network.

Malta Shipping Advantages

Malta provides a reputable flag and ensures compliance with international and European standards. Registration of vessels under the Maltese flag take place in two stages. A vessel is provisionally registered for a six month period. During this provisional registration period, the owner is required to submit additional documentation and the vessel is then permanently registered under the Maltese flag.

There are a number of attractive tax reasons and shipping advantages to consider ship registration in Malta:

•       The standard corporate tax rules do not apply to shipping activities in Malta, due to a specific exemption. No tax on profits from shipping activities is therefore due. Following recent amendments this exemption has also been extended to ship management companies.          

•       Shipping operations are subject to an annual tax comprising an annual registration fee and a tonnage tax based on the net tonnage of the vessel. The rates of tonnage tax are reduced according to the age of the vessel.

•       There is an exemption from stamp duty in Malta on the registration or sale of a ship, shares relating to a licensed shipping organisation and the registration of a mortgage relating to a ship.

•       Individuals not resident in Malta who are officers or employees of a licensed shipping organisation, and the organisation that they work for, are exempt from social security contributions.     

Dixcart Shipping Services and Additional Information

Dixcart can assist in all aspects of registering a ship in Cyprus, the Isle of Man, Madeira and Malta.  

Services include the incorporation of the owner entity, coordinating the appropriate corporate and tax compliance, and registration of the vessel.

If you would like additional information on this topic, please speak to your usual Dixcart contact or to:

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

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