It is the purpose of this guide to set out some of the principal considerations for the charter of yachts in the EU from a legal and fiscal perspective.
1.) Yacht Ownership
One of the key first steps is to decide on a suitable location for the establishment of a corporate structure to own the yacht and act as the charter business.
Usually the owner will seek legal and tax advice from their accountants on where best to incorporate the yacht charter business as the best choice of jurisdiction will depend heavily on the client’s own personal circumstances.
EU companies or a company incorporated in a country or territory that holds a double taxation agreement with the relevant EU member state where the vessel will charter are commonly used to avoid withholding tax on charter income and cabotage restrictions in certain EU states.
2.) Yacht Registration
In parallel to the set up of the yacht charter business it is important to determine the most suitable flag state for the registration of the yacht.
The registration of the yacht is an important decision determining the vessel’s nationality and in turn the applicable operating system. Yachts operated for commercial activities such as charter must hold a registration allowing them to operate commercially under its flag state rules.
It is important to select a flag state that holds a high ranking under the Paris Memorandum of Understanding in respect of Port State Control as well as providing yacht friendly interpretations of international maritime standards for commercial yachts.
3.) Yacht Operation
In tandem with flag state selection consideration must be given to how the yacht will comply with operational rules and regulations including, for example, minimum safe manning levels, safety management systems and labour laws.
4.) Fiscal Compliance
It is important that the yacht charter operation is conducted in compliance with the relevant EU fiscal regulations and any local legislation, for example:
5.) VAT Exemption
Yachts that are run as earnestly pursued commercial businesses can in certain circumstances qualify for VAT exemption on the yacht itself and certain supplies.
There are many ‘business tests’ to ascertain whether the operation can benefit from VAT exemption varying between EU states but typically the authorities will expect to see a bona fide yacht charter business demonstrating the following commercial characteristics:
As a caution, yachts benefiting from VAT exemption face constant scrutiny from the EU authorities who take steps to check that owners are not using the yacht charter model as a method of VAT avoidance. In summary any arrangement whereby the principal purpose of which is to obtain a VAT advantage, and which is lacking is an underlying commercial objective, may be challenged by the EU authorities as being abusive.
“The existence of one or more of the following features might indicate an abusive structure (the list is not exhaustive – the indicators are illustrative of the points that HMRC might take into account, together with others):
Caveat & Conclusion
As a caveat we would stress that we are a yacht registration and documentation agency and not legal and/or tax advisers so none of the foregoing information should be treated as any kind of formal legal or tax advice. Readers are therefore advised to take appropriate professional advice specific to their individual circumstances before taking any action based on the contents of this or any other page of this website or any correspondence with ourselves.
As the rules for the charter of yachts varies considerably between EU member states we would always suggest taking local advice before the commencement of any charter activity in any particular country.
Join us for the final weekend of the 2020 edition of @nonstopboot BOOT Dusseldorf to discuss our yacht registration and crew payroll services… #Oceanskies #bootduesseldorf #duseldorf #boot2020 #bootdusseldorf #dusseldorfboatshow..pic.twitter.com/dMsmf8YeAUAU
The first four days of the 2020 edition of @nonstopboot BOOT Dusseldorf have flown by.... Please do not hesitate to contact us to meet up to discuss our yacht registration and crew payrollinstagram.com/p/B7l2ydWlcLf/…y4xR
The 2020 edition of @nonstopboot Dusseldorf Boat Show is open! Duncan is in Germany for the duration of the show and will be joined by Ryan later this week – please do not hesitate to contact us to meet up to discuss our yacht registration and crew payroll services… #boot2pic.twitter.com/n0DTuruHNTuHNT