Buying into the UBO brainstorm
Carla Bellieni lays out the key points for setting up an ownership structure when purchasing a superyacht…
Guest Author Carla Bellieni, of the International Yacht Arbitration Council, lays out the key considerations when setting up an ownership structure for purchasing a superyacht...
The purchase of a new yacht involves a number of strategic decisions, and one of the main focal points relates to the ownership structure. Often, new owners ask for ‘the best’ ownership structure as if the answer to the question was a standardised product or if there were, at most, two solutions: one for private/ pleasure and one for the commercial planned use.
However, there’s not a ‘one-size-fits-all’ strategy and the commercial/pleasure dichotomy in the possible uses is just one of the possible aspects to be taken into account during the strategy design. If we exclude ownership by a single person for reasons of protection of privacy and confidentiality, ownership structure decisions should take the following main aspects into consideration.
Commercial versus private/pleasure use
Decisions about the intended use of a yacht have not usually been taken when an Ultimate Beneficial Ownership (UBO) asks for a purchasing strategy. Experience shows that this decision is, at best, taken after a thorough analysis of all aspects governing ownership and management of a yacht.
New possibilities currently offered by some registries (such as the YET scheme, under the Marshall Islands,
the Cayman Islands and the Bermuda registries, and the Italian occasional charter) allow for limited charter activity for private yachts, meet the increasing need of UBOs for flexibility and so should also be considered.
Limits determined by flag or technical reasons
The viability of all hypothesised solutions must always take these aspects into account and cannot be left until an implementation stage.
Choice of the corporate structure
Decisions about the use of a pre-existing company as opposed to the incorporation of a newco (that is, either using a multi-activity company or one for a specific purpose) fall within this area, as well as the consideration of multi- stakeholders initiatives or the division of ownership entity from the shipowner.
Decisions about income tax should be taken with reference not only to the place of establishment but also with an eye on the countries where tax residency or a permanent establishment could be challenged and the possible application to withhold taxes (as may happen with bareboat agreements). Otherwise, there could be indirect taxation implications in the place where the charter activity is carried out (in general, the place of delivery at the beginning of the charter for VAT purposes). For example, issues related to matriculation tax (where applicable) cannot be forgotten and can impact on decisions about the best place of establishment.
Tax and customs status of the yacht
This is a vital issue. A breach in the conditions for non-EU yachts to stay in Europe may lead to a charge
for smuggling with serious – and also criminal – consequences. Any requirement to pay VAT on the purchase may depend on aspects related to ownership structure and residency.
The need for an efficient international approach
To prevent the choice of the ownership structure for a yacht from becoming just a theoretical exercise, an efficient, international, multi-skilled team must be involved. The purpose of the team should be to take each step in the best interests of the UBO and explain the reasons why. Other options should also be considered for second-best strategies in specific cases.
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