MBR_Issue_27 -January 2017 low res

Malta Business Review
YACHTING
YACHTING
Malta Business Review
Key considerations when
purchasing a superyacht
Ahead of Ayuk Ntuiabane’s attendance as a speaker at the ‘Opportunities
in Superyachts’ conference on 23 February, Equiom’s VAT Director discusses
the key areas to consider when purchasing a superyacht.
Yacht ownership for vessels operating in European waters has become increasingly complicated. The introduction of new
maritime and employment laws, changes to the VAT rules that apply to charters, and the requirement to obtain charter licences
and appoint fiscal agents represent some of the many challenges. One area which is often overlooked relates to setting up the
most appropriate ownership structure for the vessel as well as the ongoing administration.
There is a vast array of company, trust and foundation jurisdictions to select from and, accordingly, it is difficult to identify the optimum
structure without obtaining specialist advice. Making the wrong decision can be costly.
Some of the key areas owners should
consider are:
Ownership structures - ownership
can be by means of companies, trusts
or limited partnerships. For corporate
structures, consideration needs to be
given to the type of company and how
it is structured in terms of directors,
shareholding and capitalisation to ensure
any potential liabilities are ring fenced.
Tax - what is the corporate tax position for
the structure? Are there any tax treaties or
double taxation agreements relevant to
the structure? Are there benefit in kind
charges as a result of the structure? What
are the rules governing inheritance tax in
the chosen jurisdiction? Full consideration
of these tax issues ensures the structure
can be tax compliant from the outset.
VAT – is VAT registration required? If so,
in which jurisdiction should the company
register? VAT fiscal agents may also
need to be appointed for commercial
yachts. Owners should consider the VAT
implications both on acquisition and
disposal of the yacht. Suitable VAT planning
is necessary for all yachts operating in EU
waters regardless of the owner being non-
EU resident and operating within European
waters under temporary admission rules.
VAT planning is essential when VAT rates
vary from 18 to 27%.
Legislation - this is particularly important
where finance is required to purchase the
vessel. Sophisticated corporate laws are
a key consideration as disputes can arise
where there is joint or shared ownership
of the yacht. High regulatory standards
and reporting requirements are therefore
seen as an advantage when selecting a
jurisdiction.
Yacht registration - consider if the yacht
will be chartered, as this will impact on the
choice of flag, the manning requirements,
the registration type and the survey costs.
Many flag states, including the popular
Maltese flag, have qualified ownership
requirements. The flag choice may have
an impact for VAT purposes. There can
be significant variance in costs between
yacht registries as some registries charge
an annual tonnage tax and require the
appointment of a local Representative
Person. Lastly, flags of convenience should
be avoided as they are generally subject to
more frequent port state authority checks.
Insurance - insurance premium tax rates
are another consideration when choosing
a registry. Owners should also ensure the
appropriate level of hull and machinery
insurance and crew medical cover.
Finance - political and economic stability
of the owning vehicle is key where finance
is required to facilitate the new build or
purchase. Banks must be comfortable
with all aspects of the ownership structure
and are more willing to lend to quality
jurisdictions knowing that they can easily
enforce their charge if required.
Corporate administration -
some owners choose to delegate
the administration to their captains.
Invariably they often do not have the
time, particularly for active charter yachts.
The captain's time should be freed up to
manage his crew and concentrate on the
safe operation of the vessel. Delegating
these functions to a trusted corporate
service provider or a yacht management
company with specialist yachting
knowledge and expertise is a wise decision.
The maintenance of company records, VAT
and financial reporting may appear to be
straightforward but the financial penalties
can be significant for non-compliant
companies. The penalties in getting it
wrong, particularly with regard to VAT, can
By Ayuk Ntuiabane
often far outweigh any perceived savings.
In conclusion, professional advice should be
sought at an early stage of the acquisition
process. The legislation and regulations
governing the ownership and operation
of superyachts are continually changing
and what may be appropriate today may
change in the future. It therefore pays to
appoint a professional corporate service
provider which specialises in yachting in
order to ensure ongoing tax compliance
of the structure. This gives absolute peace
of mind for owners, leaving them free to
enjoy their yacht.
As experts in our field, Equiom can advise
you on the most efficient path when it
comes to yacht ownership and the most
effective structure plan for you. Looking
after a fleet of yachts worth €2.3 billion,
we manage a portfolio of ownership
structures for some of the world’s most
prestigious and valuable superyachts, with
all the hallmarks of outstanding service
and dynamic, innovative solutions. Equiom
operates across multiple jurisdictions
serving corporate and private clients on a
global scale. MBR
EDITOR’S
Note
Ayuk Ntuiabane works
with Equiom’s yachting
and aviation clients and
their advisers to optimise
the asset ownership structures and business
models required for secure and cost-effective
operation of yachts and aircraft within the
EU. This can include the exploitation of these
assets for income, or simply accessing the EU
for temporary use. Ayuk also provides VAT
support and opinions relating to yachting and
aviation financing and asset due diligence.
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