Yacht Charter Companies
Yacht charter companies differ from private yacht holding companies in that they are run as commercial trading business that are actively engaged in chartering the yacht that they own for a revenue earning purpose.
The charter of a yacht is primarily motivated by an owner’s desire to recoup some of their annual expenditure on the vessel and possibly even return a surplus over their annual investment.
Yacht chartering can also be of psychological benefit to the owner in that they might feel that a yacht that is lightly or seldom used by themselves is effectively put to work keeping both the yacht and its crew active.
In certain cases the commercialisation of a pleasure yacht and its subsequent operation as an asset of a business that is earnestly pursuing a bona fide business attempting to return a profit on its activities can lead to tax benefits in terms of the deferment or reclaim of sales tax, such as VAT within Europe, and the relief of duty upon fuel.
The choice of location for the establishment of a yacht charter business requires careful consideration as the majority of charter yachts will charter in not one but several different countries, (and even different continents).
Many countries do not permit cabotage. Cabotage is the transport of goods or passengers between two points in the same country by a yacht owned by and/or registered in another country. Usually to avoid cabotage it becomes necessary to register the yacht owning company fiscally in the jurisdiction where charter is to take place and in certain cases register the yacht in that jurisdiction. In some cases it is permitted for charter yachts to pick up and/or drop off outside the country in question but in these instances the fiscal rules of the country of pick-up and/or drop off need to be considered.
Whilst every case must be examined on its own merits the Isle of Man and Malta are both popular jurisdictions for the establishment of yacht charter companies. The reason for this is that both jurisdictions successfully combine the benefits of having VAT authorities that are familiar with and recognise the concept of the commercial yacht charter business model with a favourable taxation environment which is helpful for headquartering purposes.
In practice a yacht charter company established in the Isle of Man or Malta will also be required to fiscally register and/or submit to the local laws and fiscal regulations pertaining to yacht charter in every jurisdiction where the yacht will charter.
Regardless of the location of the yacht charter company it should be remembered that to work successfully the entire operation must at all times be conducted as a bona fide commercial business not only to obtain the VAT registration of the company in the first instance but then to maintain the vessel’s VAT deferred status as a commercial yacht.
This means, for example, that the vessel must be genuinely and seriously listed for charter, the client must at all times only use the yacht through a charter agreement (on which they will pay VAT) and client usage even under charter should not be disproportionate to the overall charter activity of the yacht itself in relation to the time spent on charter to third parties.
For further information please do not hesitate to contact us.