Yachting continues to be a popular pastime, especially in the summer playground of the Mediterranean. However, before purchasing a large yacht, either as a business asset or for personal pleasure sailing, there are taxation matters you should consider.
If you want your yacht to circulate freely in the EU, it is important to note that Value Added Tax (VAT) is applicable in all EU Member States, albeit at differing rates. It is essential therefore, to obtain professional advice before you begin the purchase as you will need to consider whether you are placing your yacht into an appropriate structure that properly supports your yacht and minimises or eliminates exposure to VAT.
Currently, most ultra-high-net-worth individuals buying a superyacht place them within an owning company for limited liability purposes. There are several locations where your company structure can be located and your choice of yacht register can also be a factor here. Your choice should be led by the needs of your structure, and may be also affected by matters relating to the crewing of the yacht as this too will require careful planning.
If your yacht is to be a new-build, then it is vital that the arrangements are correctly structured before the project commences, otherwise VAT may become an unnecessary expense. Even if your yacht is being built or supplied from outside the EU, you need to consider that VAT may be demanded in the first Member State that you sail into. Likewise, if your yacht has been built and then exported from the EU, care must be exercised before your yacht returns to the EU and expert advice should be sought.
It should also be noted that due to the current trade dispute between the US and the EU, US-built yachts are presently subject to an additional 25% duty, due upon entry into the EU.
Proper planning with regard to VAT is not considered abusive and indeed, given the amounts involved, is essential in ensuring that all applicable rules are followed while arriving at the most advantageous arrangement for all parties concerned.
· Plan - Ensure careful business planning with compliance and adherence to the VAT regulations of the EU and the Member State where the yacht will be based for the purposes of its free circulation status in the EU; fines and penalties can be applied by Member States where they consider that the VAT regulations have not been followed
· Perform - Check that the appropriate amount of VAT is declared and paid at the appropriate time, while ensuring no unnecessary VAT costs are accrued; timings of payments are very important, especially as the sums involved can be considerable
· Evaluate - Administer your yachting structure in such a way that compliance with the VAT requirements in the Member States is achieved. Careful record keeping of all transactions and knowledge of the mechanisms and easements available cannot be undervalued.
The Superyacht Buyer Report provides a comprehensive reference tool for any client and their advisory team throughout the buyer’s journey. The report features 16 sequential chapters that outline this journey, with respected experts from every sector advising on best practice at each stage of the ownership process. Above are a selection of extracts from the sixth chapter – ‘Taking the right tax advice’ – which clearly defines how to do exactly that.
To read the ‘Taking the right tax advice’ chapter in full, please click here.
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