If you think about buying a super yacht for international cruises and chartering in the Caribbean and the Med, your attorney or broker will tell you to register and flag the yacht offshore.
The flag you decide on to travel from your transom could have a direct bearing on your privacy, taxes, exposure to liability and boarding, the vessel’s success as a commercial enterprise, and, ultimately, your satisfaction of the yacht. So how do you decide which flag best serves your purposes? There isn’t any easy answer that covers every owner, however some basic considerations do apply.
The choice of flag state has, throughout the last couple of years, become one of the most extremely important decisions owners and/or their representatives must make,’ says Mike Dean of Isle of Man-based Döhle Yachts.
A flag state is the country or government entity under whose rules a vessel is registered or licensed. This can be the country where the owner resides, or maybe more commonly in the super yacht world, an offshore ship registry in a country with laws that are attuned to the complexities of yacht ownership and charter operations.
The flag state has the responsibility and authority to enforce laws over vessels registered under its flag, including those relating to assessment, certification and issuance of safety and pollution avoidance documents.
Offshore flagging advantages
Owners who choose offshore yacht registration especially those who plan to produce their yachts available for charter into the EU can benefit in a variety of ways, including, however restricted to, mitigation of some income tax burdens, confidentiality of ownership, and lenders that are reassuring insurance companies. An owner whom intends to operate their vessel as a yacht that is private perhaps not charter might register the vessel in their home country.
However, many popular flag states have appealing and relatively easy avenues for setting up offshore corporate structures that offer favorable taxation and liability defenses under a stable fiscal and legal system. In addition they have construction, inspection and regulatory conformity regimes that can streamline the procedure of purchasing and operating a big yacht.
Registering as a non-EU flag also allows an owner to operate underneath the Temporary Importation regime in Europe in which a yacht can operate for approximately eighteen months without the vessel being susceptible to customs duties or the EU’s Value Added Tax (VAT).
Owners whom intend to actively pursue charter in the world’s most destinations that are popular in specific, the Med, which is ringed by EU states and the Caribbean, will generally choose to include flag offshore and register as a commercially operated vessel. As well as the benefits above, such structures can let the vessel to work inside the VAT system. VAT on charters is still chargeable to the end customer the charterer nevertheless the system allows operators of genuine charter companies to account for their input income tax in the business sense that is normal. For instance, if business buys food for a charter, it’s going to pay input tax on the supply but can subtract it being an operating expense
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