In February 2017, the European Committee for Professional Yachting (ECPY) and The Worldwide Yachting Association (MYBA) jointly presented the new charter transport contract, as an alternative to the existing ‘rental’ contract, for tackling progressively stringent market conditions.
Though there are concerns of the contract’s practicalities for all parties – Toby Maclaurin, Ocean Independence’s commercial director, described it as being, potentially, “the thin end of the wedge” – look to have somewhat veiled the theoretical benefits of its introduction.
“We stand at a crossroads and we must take the right approach," Maclaurin said, during the MYBA Charter Show in Barcelona. "When it comes to yacht charter, we're luxury travel consultants first and we need to be very conscious of any barriers we put in the way of that.
What is the 'transport' contract?
“The yacht is operated by the owning company (the carrier) for business purposes. The client (no longer the ‘charterer’) becomes a passenger undertaking a cruise delivered by the carrier. Likewise, the carrier is responsible for the voyage, the itinerary and compliance with maritime and labour regulations. The pricing is inclusive and covers transport, accommodation, fuel and delivery/redelivery, port charges and use of watercraft. Meals, beverages and excursions on land are excluded.” – SOS Yachting, The Superyacht Report, issue 178.
"As an industry, we need to be lobbying the fiscal authorities to have one common approach to tax and yacht charter. The clients are not following it, and more importantly, owners are losing patience. We've had owners wanting to take their yachts off the charter market and that shouldn't be happening.”
He added: “Until last year, Cannes was the most popular port for embarking and disembarking charters, but now it's Palma. Let's just remind ourselves that in Palma, charterers are required to pay full rate VAT on charter and fuel, and there is no tax-free supply for yachts, yet the market is booming! France and Italy are the markets that are losing business at the moment. And guess why? Complicated tax structures." This shift in business is something Neil Moore of Burgess also highlights, in Part 1.
Maclaurin fears the brokers selling the charters are becoming less capable of giving straightforward answers to straightforward questions – i.e. ‘How much is my holiday going to cost?’ – and sell with confidence, leading to the clients not being able to buy with confidence.
What is the 'rental' contract?
“The yacht is rented under ‘time charter agreements’, which vest the charterer with employment of the yacht. The charterer hires the yacht for a specific period of time and pays daily hire, port charges and the yacht’s fuel consumption for the charter period. The yacht-owning company remains responsible for the yacht’s technical operation.” – SOS Yachting, The Superyacht Report, issue 178.
“We need to concentrate on simplicity and keeping the spirit of private yachting,” Maclaurin continued. “In the new contract, you have to have a set itinerary and set guests. I know supporters of the contract will say you can change this by adding addendums, but we’ve already got a draft of this contract and it’s about 29 pages.
“Are you going to add more addendums every time you change your mind? Why can’t the client just wake up in Monaco and be completely free to choose whether he goes to St. Tropez or Corsica, or nowhere at all? Every time we head down a commercial road, there are ramifications and implications that we just haven’t thought through for the sake of trying to dodge some tax.”
Because yachting is the ultimate holiday, we’re lucky that there will always be demand for charter yachts, but damaging yachting’s allure by becoming over-commercialised is something we must stay on top of as an industry.
More on the transport contract is revealed in the business commentary section of The Superyacht Report, issue 179.
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