Many wealthy families and individuals dream of owning a yacht. It can bring great freedom and enjoyment as well as often much needed time to relax. There are however many considerations when owning a vessel. We have noted just some of these below:
1. Think about the ownership structure
The most popular way to operate and own a yacht is through a limited liability company. This will ensure separation of the legal ownership from the shareholder and provides the individual owner with privacy.
Limited liability companies limit the owner’s liability in the event of a claim and provide some form of asset protection. We are also now seeing a number of limited liability partnerships being used, as well as foundations, to own vessels. There is no one size fits all, and each structure needs to be carefully considered to ensure that it meets the necessary requirements and that the structure is fit for purpose.
We will either work with the client’s existing legal advisors or provide introductions to our network of industry professionals. In our experience, getting the structure correct from the outset is of utmost importance, and the earlier we can be involved in the discussions, whether it be in connection with the acquisition, financing or day to day management, the more value JTC can add.
While in certain circumstances a vessel could be owned by a trust, a trust might typically be used specifically to own the shares of the company that owns and operates the yacht. Trusts can be used on occasions where the shareholder may wish to separate himself from the legal ownership of the asset holding company, or he may have a broader trust structure where the asset holding company forms just one part of the trust fund.
2. You may need assistance on flag
Most Ship Registers will only register yachts which are owned by nationals of their jurisdiction or their economic territory. However, most people can benefit from any flag state yacht registration as long as the vessel is owned by a company incorporated in the relevant jurisdiction or economic territory.
There are certain registration alternatives, such as the yacht engaged in trade scheme, which is available to Cayman flagged vessels and allows for a yacht to be operated both privately and be occasionally offered for charter, subject to certain strict conditions. The vessel will, however, need to be at all times commercially compliant.
This has proven to be a solution in such circumstance where some income is generated, but an owner may still enjoy the use of the vessel without having to pay a charter fee.
3. The Temporary Import Scheme might be helpful for you
Consider a client who is resident in the USA (non-EU) and has purchased a yacht through a structure which is exclusive of VAT and has registered the yacht purely for private use, in a Cayman Islands flag (non-EU flagstate) and who wishes to cruise in France (EU waters). In these circumstances we would recommend him to consider the Temporary Import Scheme, which is explained as follows:
“Vessels without duty paid, registered for private use outside of the EU and owned by non EU residents are entitled to tax-free temporary importation into the EU for a total period of 18 months. At the end of the 18 months, the vessel must be sailed to a country outside the EU, after which the vessel may then re-enter EU waters for a further 18 month period.”
It is however important to note that this scheme is not available to private yachts beneficially owned or used by EU residents operating non-EU flagged vessels in EU waters.
4. Ongoing management is time consuming
The ongoing vessel management can be wide-ranging and onerous. Most people will choose to outsource this to a family office, such as JTC, and we work closely with owners, their representative and their captains to ensure that the services offered are aligned to their specific requirements. These often include:
- oversight of owner obligations
- monitoring of yacht/safety manager
- crewing and employment contracts
- insurance for both vessel and crew
- accounting and reporting
- tax compliance
- Managing bank accounts
- general administrative and day-to-day support
These are just four things about owning a yacht. If you would like to find out more on how JTC’s yacht services team can help you or your clients to efficiently purchase or manage a yacht, please get in touch.