Commercial Yachts - Simplifying the process with Vistra Marine
Chartering a yacht is one of the best ways to become acquainted with superyachting. For prospective owners, it can also be an attractive wa…
Chartering a yacht is one of the best ways to become acquainted with superyachting. For prospective owners, it can also be an attractive way to realise their yacht-owning ambitions with commercial charters allowing them to offset a portion of the running costs. It can also help keep the yacht and her crew active during periods of reduced owner use.
Nevertheless, owning a charter yacht must be considered as a business in itself. Gone are the days of simply renting to third parties over the weekend by pulling out the commercial certificate from the closet and setting on with it!
As any business, the charter company must be licensed and comply with the rules imposed by industry, international conventions relating to safety measures on board, crewing and VAT, amongst others.
Here we share our 'How To' guide for commercial yacht registration, and how Vistra Marine & Aviation can help.
Setting up a company
We recommend that yachts be held in separate limited liability entities, distinct from the person of its owner, so as to protect the owner for any claims linked to the charter business, e.g. unhappy suppliers or crew, or even an accident.
Entities with limited liability, like Limited Companies or Limited Liabilities Partnerships, can be setup both offshore and onshore. The most suitable jurisdiction depends on various factors, paramount being the following considerations:
• Residence of the owner
• Area of charter activity
• Flag of the yacht
Registration of the yacht
To offer a yacht for charter, the yacht first needs to be registered as a commercial yacht and comply with:
• Commercial Yacht Code Regulations in accordance with the chosen registry
• International Maritime Conventions and Regulations
• Tax regulations.
All commercial yachts must be certified for such operation and the registration be made following a survey by a recognised Government/Flag surveyor or recognised classification society.
Being registered as a Commercial Yacht is the most challenging registration option, but it is necessary for charter operation within the EU. Maritime and customs officials are usually well aware of this type of registration status and the relative commercial yacht code, and on inspection will look out for proof of compliance.
The need for yacht owners to adhere to the laws, rules and regulations that apply to their yachts is important also for the following reasons:
• Primarily the safety and security of all on-board
• The proper maintenance and upkeep of the yacht, tenders, machinery and crew,
• Compliance with any insurance provision that may invalidate the yacht’s insurance if breached
• The avoidance of litigation in the event of an accident or incident involving the yacht and its tenders
• The avoidance of detention by Port State Control in the event of non-compliance.
To register your yacht you will need:
• A survey of your yacht to ensure she complies with the rules of the major flag states, e.g. Cayman Island/UK/Isle of Man (MCA Code), Malta Flag (Malta Commercial Yacht Code) or Marshall Islands Flag
• Certification of your yacht in line with international rules, e.g. MARPOL, ITC and Loadline
• Proper crewing in line with safe manning regulation and STCW
• Licensing in country where operations are undertaken if necessary, e.g. Spain
Tax and VAT
Before offering the yacht for charter activities you need to realize that each region provides for different rules:
• South East Asia
• European Waters
There have been many changes in recent years, e.g. implementation of GST in several countries in South East Asia, or VAT on charters in EU-countries. In the EU, the Sixth EU VAT Directive regulates VAT. The EU Directive sets out objectives, which require Member States to achieve a particular result, but it is up to the individual countries to devise their own laws on how to reach these goals. Indeed the rules are rather complex and it is easy for the inexperienced to fall foul of same, even if traditionally it is perceived that largely commercial yacht activities are VAT exempt. These exemptions concern VAT on the purchase of supplies and services, including fuel and refit, but even these rules are changing fast. In respect of charter fees some countries in Europe, like Malta, France and Italy offer a reduced VAT rate for charter activities in high seawaters. Important to mention is that each country has it own specific requirements for the application of a reduced VAT rate on the charter income. Customs Code in various zones should also be considered as they often provide additional procedures of paperwork for yacht owners to comply with.
Operation of the yacht
The commercial status of a yacht requires proper administration, so at Vistra we seek to support owners and their captain to fulfill this aspect, ensuring paperwork is always in order, invoices are checked and payments made in a timely fashion. For yachts over 35 meters, it is recommended to hire a Manager for technical matters.
The crew on board commercial yachts need specific maritime qualifications to work. All crew members will be required to hold STCW Basic Training Certificates and provide evidence they hold necessary Flag State approved qualifications specific to their position on board.
The following points also have to be considered for crew working on a commercial yacht:
• Holding proper employment contract and insurance
• Compliance MLC 2016 Conventions (minimum rights for seafarers)
• Payroll and social security
Clearly, it's a complex process. Vistra Marine & Aviation LTD is focused on giving private clients tailor-made solutions. We provide assistance with registration, asset administration, corporate structuring and services, accounting, payroll, yacht financing, customs, VAT, and tax compliance.
Utilising our extensive network, which includes lawyers, tax advisors and yacht brokers, we can provide assistance with purchasing a yacht, setting up a company and administering both company and yacht.
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