There are many advantages to corporate ownership of a yacht. Yachts are necessarily movable assets and this involves a significant element of potential risk. One of the most substantial benefits offered by corporate ownership is the ability of the beneficial owner to protect their other personal assets in the event of a claim. Should the yacht be involved in an accident and a claim made against it, then any liability would be limited only to the value and assets of the company.
National yacht registries will generally only accept yachts that belong to their own citizens or those citizens of a wider economic territory, such as the EU, of which they are part. However companies have a legal personality and therefore can have a nationality, residence or domicile that is separate from that of their beneficial owner. Accordingly, if a yacht is owned through a company that is registered in an appropriate jurisdiction, it can be registered in virtually any flag state of the owner’s choosing.
Using a company to own and operate a yacht provides some measure of privacy to the ultimate beneficial owner by keeping their name off the register, while corporate ownership also allows any future sale to be effected much more easily, quickly and cheaply.
Changing the ownership of a vessel can be achieved through a simple transfer of the shares in the company, thereby avoiding the relatively expensive and protracted procedures that are necessary to change the ownership of the vessel at the registry. Similarly, a corporate structure may provide opportunities for legitimate tax mitigation, as well as simplifying estate and succession planning.
The annual operating costs of a yacht are estimated at about 10 to 12% of the initial purchase price. Structuring the ownership through a company will assist in accounting for yacht expenses and help optimise running costs. It will also avoid the need for the ultimate owner to entering into agreements and contracts directly when employing crew, negotiating the purchase or construction of a vessel and generally contracting with third parties.
Genuine yacht chartering corporate structures can reclaim any VAT paid on the supply of the yacht or may even be zero-rated depending on the applicable rules. 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 economic substance of the company is not only important when obtaining VAT registration but also must be demonstrated during the on-going operation of the yacht to maintain that registration.
While each case is different and should be assessed on case-by-case basis, SMS has the benefit of calling upon Sovereign’s three decades of experience in the provision of corporate and financial services on a global basis. For an initial consultation without fee or obligation, please contact SMS at your earliest convenience.