Genuine yacht charter structures are able to reclaim any VAT paid on the supply of the yacht or may even be zero-rated depending on the applicable intra-community rule. The yacht chartering entity must be VAT-registered and therefore it must be demonstrated that the yacht will be operated on a commercial basis. The commercial aspect of the company is not only important to obtain VAT registration but also for the on-going operation of the yacht.
Conditions for commercial exemption to apply
- The vessel must hold a commercial yacht registration and therefore comply with the safe manning requirements of the Maritime and Coastguard Agency (MCA) Code of Practice;
- It should be evident from the records of the business that the chartering entity seeks either to make a return on the investment in the yacht over a reasonable period, or at least seek to recover the capital outlay and the costs incurred in repair and maintenance over the period of the business venture. The type of evidence required would take the form of specific charter contracts with agents who undertake to advertise and introduce clients for chartering;
- The vessel is supplied with a permanent crew;
- It is available for high season charter;
- It is acknowledged that in some instances the beneficial owner of the company may wish to use the yacht. In such circumstances the owner is in effect the charterer and should expect to be charged by the company at the normal commercial rate, plus VAT. However the beneficial owner should not in any case be the preferred charterer.
The most popular jurisdictions for setting up yacht charter structures operating in the EU are Malta and the Isle of Man.
Please contact RegisterAYacht for further information or assistance.