Category: Air Marine

The Isle of Man is a leading jurisdiction for luxury asset holding vehicles and post the UK’s departure from the Single Market, it is particularly well suited to enable client’s planning for privately operated superyachts.

This short article highlights some of the most important features of the Isle of Man and the reasons why it is an ideal home for superyacht holding structures.

A Modern & Reliable Legal System

The Isle of Man is a self-governing Crown Dependency with an independent legal system developed on the principles of English Common Law. This provides a familiar and reliable legal framework for many international clients. This can also give third parties like yacht builders, financial institutions, suppliers etc. comfort.

The Isle of Man’s corporate laws also offer flexibility in the choice of holding structures and how they are managed. For instance, the island possesses two Companies Acts, each with distinct features, and a wide variety of corporate vehicles, from Companies to Limited Partnerships with separate legal personality to Foundations.

For instance, the dynamic Companies Act 2006 provides for a procedurally streamlined corporate entity, suitable for holding a wide range of assets, including superyachts.

A Favourable Tax Regime

The Isle of Man famously offers a favourable tax regime which can be very beneficial for asset holding structures, offering headline rates such as:

• 0% Capital Gains Tax
• 0% Inheritance Tax
• 0% Corporate Tax Rate
• No Stamp Duty

Importantly, the Isle of Man is in a Customs Union with the UK, and therefore the Isle of Man falls under the UK for VAT purposes.

Since the UK departed from the EU, private use Superyachts held by an Isle of Man entity can now benefit from Temporary Admission (TA) to the EU, provided they meet the wider TA criteria. You can read more about Temporary Admission here.

A Globally Recognised Regulatory Environment

The Isle of Man is held in the highest regard by all major developed economies and is committed to maintaining the highest standards of global compliance. The island’s leadership has been recognised by the OECD and the G20 by placing the Isle of Man on its ‘Whitelist’ of co-operative countries.

The Isle of Man Financial Services Authority (FSA) supports the Island’s strong economy and ensures its global standing. Through modern and effective regulation and enforcement, the Isle of Man FSA maintain confidence in the island’s flourishing financial services sector.

The Isle of Man FSA issue licenses and regulate Isle of Man Trust & Corporate Service Providers, giving clients and third parties peace of mind.

The strong regulatory environment has allowed the island to maintain robust relationships with the banks and financial institutions across the world. Further, the Isle of Man Companies Registry maintains a publicly available copy of the Company’s Charges Register. This can provide the lenders with further comfort.

For all of these reasons, superyacht holding structures can benefit from their association with a well-run financial centre like the Isle of Man.

A Heritage in Trust & Corporate Services for Superyachts

The Isle of Man has a long history of delivering Private Client planning solutions through leading Trust & Corporate Services Providers, such as Dixcart.

Since 1989, Dixcart has assisted clients and their advisers with their Isle of Man superyacht holding structures and more. During this time we have developed strong working relationships with some of the yachting industry’s leading experts, including Yacht Builders, Shipping Registers, Yacht Managers, Maritime Lawyers and Tax professionals etc.

Get in Touch

Whether you are preparing to acquire a vessel, or you are seeking to rehome your superyacht holding structure, please feel free to get in touch with David Walsh at Dixcart: advice.iom@dixcart.com

Alternatively, you can connect with David on Linkedin.

Dixcart Management (IOM) Limited is Licensed by the Isle of Man Financial Services Authority

Our short series on planning for a superyacht aims to provide a foundation of understanding for those considering building or purchasing a vessel. In this, the second article in the series, we will take a closer look at how the various elements come together in the operation of a superyacht, through two simple case studies.

If you have not read article one and would like to, please follow the link below:

• Planning for a Superyacht? Here is What you Need to Consider (1 of 2)

In this article we will take a look at two case studies:

• Case Study 1 considers a 20m yacht (MY-20) for private use only; and
• Case Study 2 takes a look at a 50m superyacht (MY-50) used for both private and charter.

Case Study 1: MY-20

MY-20 is a new build 20m yacht, that has been purchased by a UK resident ultimate beneficial owner (UBO). The purpose of MY-20 is to cruise domestically within the Mediterranean waters, with no intention of sailing internationally. The UBO does not intend to engage a yacht management professional as it will be primarily utilised as a dayboat, and crew will be engaged on a day rate basis.

Ownership

Whilst MY-20 will be used as a private vessel, there are still many potential liabilities that need to be abated. An owning entity is always recommended to mitigate any unwarranted personal liabilities that the UBO may be exposed to through operating MY-20. For example ringfencing any exposure to personal claims e.g. tortious, contractual etc.

Further, to prevent the UBO being deemed an employee or de facto Director of the entity, it is best to utilise a transparent vehicle, such as a Limited Partnership. The Isle of Man Partnership can apply for separate legal personality, and therefore limited liability at outset.

For this arrangement our UBO will be the Limited Partner, whose liability is limited to their contributions to the Partnership. The General Partner has unlimited liability and therefore will be a Special Purpose Vehicle (SPV). Here, the SPV is an Isle of Man Private Limited Company (IOM Co Ltd) which of course also benefits from separate legal personality and therefore limited liability.

As General Partner, IOM Co Ltd will provide management and control of MY-20 and its operations. In doing so, IOM Co Ltd will administer the vessel, including holding board meetings, making decisions, making annual filings, accounts including the settlement of invoices, review and agree any applicable contractual agreements, and of course work closely with the Captain. It is imperative that the UBO is not seen to engage in any of this activity, lest they be deemed a General Partner and defeat the planning.

Flag

The UBO’s choice of flag will define the laws and regulatory standards that MY-20 will sail under. It will also have implications for the ease of administration. Therefore, the choice of registry is an important one.

As MY-20 is due to only sail within EU waters, an EU flag state will make most sense. From the available registries, the Malta Ship Registry is the largest in Europe and one of the biggest ship registers in the world. The Merchant Shipping Directorate defines MY-20 as a private registered yacht, because it is a pleasure yacht used for the sole purpose of the owner, is 6m+ in length, is not engaged in trade and does not carry passengers for consideration.

The Malta flag is beneficial in our case because:

The registration process is relatively straightforward as the Malta registry is a modern and administratively efficient shipping register.

Registration will only be granted once the Malta Maritime Administration is satisfied that the vessel conforms to all of the manning, safety and pollution prevention standards required by the applicable international conventions. During the registration process relevant evidential documentation is also required. The documentation must include evidence of ownership from a former registry unless the vessel is new.

You can read more about why Malta is a great location for flagging a vessel, here.

Import / Export

Whilst the UBO and owning entity are non-EU resident and MY-20 is a private vessel, Temporary Admission will not be an option as the ensign will be Maltase and the yacht will not be travelling outside of EU waters. Therefore, the UBO must pay VAT on the initial importation of the vessel to an EU Member State, and must carry evidence of this thereafter.

Whilst Luxembourg offers the lowest rate of VAT in the EU @ 17%, it is also landlocked, making it logistically unrealistic to import a yacht there. This means that Malta’s rate of VAT @ 18% is the lowest in the EU for the importation of yachts.

As MY-20 is a 20m yacht, special dispensation must be obtained from the Malta authorities for a one-off voyage to cross the Med and sail to Malta for importation. Malta Customs authority require a valuation of the yacht to approve MY-20’s importation.

Upon approval of the valuation and arrival in Malta, Customs authorities will inspect MY-20 and request the payment of VAT @ 18% based on the value of MY-20. After receipt of payment, Malta authorities will issue a VAT paid certificate, at their discretion.

In order to enact this a Malta VAT agent is required. IOM Co Ltd will engage with Dixcart Malta, who will act as VAT agent to ensure that the yacht is imported properly.

Case Study 1: In Summary

The UBO’s solution calls for an Isle of Man Limited Partnership with separate legal personality, which has an SPV acting as General Partner. MY-20 will be registered in Malta and VAT paid on importation. MY-20 will cruise the Med, and on the proviso that it does not leave EU waters for a period long enough to jeopardise its VAT paid status, then the yacht can continue to be in free circulation in EU waters.

Case Study 2: MY-50

For sake of ease, we will use the same UBO, except the vessel is a 50m superyacht. The UBO has purchased the superyacht with the intention of both private and charter usage, to assist with ongoing upkeep. The superyacht may be used to cruise in the EU and further afield.

Due to the intended arrangement, MY-50 will require a suite of professionals, including a yacht manager, yacht broker, tax adviser, a corporate service provider such as Dixcart and possibly a crewing specialist, if the yacht manager does not provide such services.

For our purposes, we will refer to the superyacht as MY-50.

Ownership

Due to the UBO being a UK resident, the same structuring can be used to ensure the individual is not deemed an employee or shadow Director of the owning entity – a Limited Partnership with an SPV acting as General Partner (IOM Co Ltd).

IOM Co Ltd will administer MY-50 in a similar way to MY-20, managing all board meetings, decisions, annual filings, contracts. This will include the management accounting associated with not only the ongoing maintenance and payment of invoices etc. but also the operation of any charter agreements.

IOM Co Ltd will work closely with the UBO, Captain, yacht manager, yacht broker and tax adviser to ensure that the structuring remains effective and the superyacht is managed efficiently.

Flag

In order to utilise the Temporary Admission VAT procedure when the superyacht is being used by the UBO, a non-EU flag will be required. Temporary Admission allows the vessel to cruise in EU waters for a period of time without VAT being due on import/export. You can read more about Temporary Admission here.

Further, as MY-50 will also be used for commercial charter, the UBO can elect to use the Yachts Engaged in Trade Scheme by registering the vessel in either the Cayman Islands or Marshall Islands. Both options qualify for both Temporary Admission and allow commercial chartering to take place, subject to conditions, and are highly regarded registries.

Yachts Engaged in Trade (YET) Scheme

For those with yachts flagged in the Cayman Islands and Marshall Islands the YET Scheme presents a hybrid approach, whereby the yacht can be used for both private and commercial charters, albeit subject to stringent conditions.

For example, the YET Scheme allows private yachts which are ensigned with the Cayman Island flag to sail under commercial charter in the territories of France and Monaco with VAT exemption. The use of the YET Scheme allows the skipper to switch between YET and Temporary Admission, pausing the 18-month Temporary Admission period, when using the boat for commercial purposes.

Whilst the YET Scheme provides clear benefits to the UBO, there are stringent conditions for use, e.g. the area for commercial charter is restricted whilst in EU waters, the period of commercial charter is restricted to a maximum of 84 days, the yacht must be 24m+ in length and requires a compliance verification survey, a French VAT agent is required etc.

If complied with, the YET Scheme can ensure that no VAT will be payable on the hull importation, and as such will not require disbursement. Correct application of the YET Scheme can provide a cashflow neutral VAT solution. Contravention of any of the requirements may be subject to the application of taxes, penalties or fines by the local authorities.

The YET Scheme is currently limited to the Marshall Islands and Cayman Islands registered vessels.

For our purposes, we will use the Cayman flag.

Case Study 2: In Summary

The ownership of MY-50 will also require an Isle of Man Limited Partnership with separate legal personality, once again meaning that the UBO must have no part in the superyacht’s ongoing management and administration. Further, the flag chosen is non-EU and the vessel is equipped to sail in international waters, therefore the Temporary Admission procedure is applicable when MY-50 is being used as a private superyacht.

As the chosen flag is the Cayman Islands, the UBO can use the YET procedure to commercially charter MY-50 in French and Monegasque waters, subject to conditions. How does this work?

The yacht broker engaged would market MY-50 for those seeking a luxury charter experience. Once a customer has requested to charter MY-50, they work with the yacht manager to create a standardised MYBA charter agreement, detailing the dates of the charter along with the costs applicable to the customer including VAT amongst other information.

Once the agreement has been signed and delivered to the Cayman Islands register, the superyacht is issued a Temporary Certificate of Registry for Yachts Engaged in Trade by the flag state. The certificate will state the limitation period regarding the commercial charter.

When the UBO is onboard, the superyacht is a private vessel and can have free circulation within the EU under Temporary Admission (i.e. there is no charter agreement, fee or VAT required).

Get in touch

If you require further information regarding yacht structuring and how we can assist, please feel free to get in touch with Paul Harvey at Dixcart.

Dixcart Management (IOM) Limited is licensed by the Isle of Man Financial Services Authority.

When you or your client think about their new Superyacht it might conjure visions of luxurious relaxation, crystal clear blue waters and basking in the sun; conversely, I highly doubt the first thing that comes to mind is the need to meticulously plan for the tax and management implications that go hand in hand with such a prestigious asset.

Here at Dixcart, we wanted to create some helpful and informative articles to serve as easy to digest introductions to some key concepts for superyacht planning:

1. The key considerations for Superyacht ownership; and,
2. A closer look at the ownership structure, Flag, VAT and other considerations via working case studies.

In article 1 of 2, we’ll take a brief look at vital elements such as:

• What Holding Structures Should I Consider For a Superyacht?
• Where Should I Register The Superyacht?
• The VAT Implications of Import/Export of a Superyacht?
• Crewing Considerations
• How Dixcart can Support your Superyacht Planning

What Holding Structures Should I Consider For a Superyacht?

When considering the most effective ownership structure you must take into account not only direct and indirect taxation, but also mitigation of personal liability. 

One way of managing this position is through the establishment of a corporate entity, which acts as a holding structure, owning the vessel on the Beneficial Owner’s behalf.

The tax planning requirements and available structures will help define desirable jurisdictions. The entity will be subject to the local laws and tax regime, therefore modern offshore jurisdictions like the Isle of Man may provide tax neutral and globally compliant solutions.

The Isle of Man offers a wide variety of structures to the Ultimate Beneficial Owner (UBO) and their advisers; such as Private Limited Companies and Limited Partnerships. As noted, the form of structuring is generally determined by the client’s circumstances and objectives, e.g.:

• The vessel’s intended use i.e. private or commercial
• The UBO’s tax position

Due to their relative simplicity and flexibility, Limited Partnerships (LP) or Private Limited Companies (Private Co) are commonly elected. Typically, the LP is operated by a Special Purpose Vehicle (SPV) – often a Private Co.

Yacht Ownership and Limited Partnerships

LPs formed on the Isle of Man are governed by the Partnership Act 1909. The LP is an incorporated entity with limited liability and can apply for separate legal personality at outset under the Limited Partnership (Legal Personality) Act 2011.

An LP consists of at least one General Partner and one Limited Partner.  Management is vested in the General Partner, who engages in the activity carried out by the LP i.e. the day-to-day management and any requisite decision making etc. Importantly the General Partner has unlimited liability, and therefore is liable to the full extent of all burdens and obligations incurred. For this reason the General Partner would usually be a Private Co.   

The Limited Partner provides the capital held by the LP – in this instance, the method of financing the yacht (debt or equity). The Limited Partner’s liability is limited to the extent of their contribution to the LP. It is of vital importance that the Limited Partner does not participate in the active management of the LP, lest they be deemed a General Partner – losing their limited liability and potentially defeating the tax planning, leading to unintended tax consequences.

The LP must have an Isle of Man Registered Office at all times.

The General Partner would be a Special Purpose Vehicle (“SPV”) taking the form of a Private Co managed by the service provider – for example, Dixcart would establish an Isle of Man Private Limited Company as General Partner with Isle of Man Directors, and the Limited Partner would be the UBO.

Yacht Ownership and SPVs

It may be useful to define what we mean when we say SPV. A Special Purpose Vehicle (SPV) is a legal entity established to achieve a defined purpose, normally incorporated to ringfence risk – be it legal or fiscal liability. This can be to raise financing, conduct a transaction, manage investment or in our instance, act as General Partner.

The SPV would arrange any matters required for the effective and efficient management of the yacht; including the provision of financing where appropriate. For example, instructing the build, purchase of tenders, working with various third-party experts to crew, manage and undertake maintenance of the Yacht etc.

If the Isle of Man is the most appropriate jurisdiction of incorporation, there are two types of Private Co available – these are Companies Act 1931 and Companies Act 2006 companies.

Companies Act 1931 (CA 1931):

The CA 1931 company is a more traditional entity, requiring Registered Office, two Directors and a Company Secretary.

Companies Act 2006 (CA 2006):

By comparison the CA 2006 company is more administratively streamlined, requiring Registered Office, a single Director (which can be a corporate entity) and a Registered Agent.

Since 2021, CA 2006 companies can re-register under the CA1931 Act, whereas the inverse was always possible since the commencement of the CA 2006 – thus, both types of Private Co are convertible. You can read more about re-registration here.

We tend to see the CA 2006 route elected by most yachting structures, due to the relative simplicity offered. However, the choice of corporate vehicle will be governed by the planning requirements and the objectives of the UBO.

Where Should I Register The Superyacht?

By registering the vessel to one of the many shipping registries available, the owner is choosing whose laws and jurisdiction they will sail under. This choice will also govern the requirements regarding the regulation and inspection of the vessel.

Certain registries offer more developed tax and registration procedures, and the jurisdiction may also offer various legal and tax benefits. For these reasons, the British Red Ensign is often the flag of choice – available through Commonwealth countries, including:

• Bermuda (Category 1)
• British Virgin Islands (Category 1)
• Cayman Islands (Category 1)
• Gibraltar (Category 1)
• Guernsey (Category 2)
• Isle of Man (Category 1)
• Jersey (Category 2)
• Turks & Caicos (Category 1)

In addition to Cayman and Manx registrations, we tend to also see clients favour the Marshall Islands and Malta. Dixcart has an office in Malta who can fully explain the benefits that this jurisdiction offers and have extensive experience flagging vessels.

All four of these jurisdictions offer administrative benefits, modern legislative environments and are compliant with the Paris Memorandum of Understanding on Port State Control – an international agreement between 27 Maritime Authorities.

The choice of flag should again be determined by the UBO’s objectives and how the boat is intended to be used.

What Are The Implications For The Import/Export of a Superyacht?

Depending on a mix of factors relating to ownership and registration etc. sailing between territorial waters will often require serious consideration. There can be significant Customs Duties due, in mishandled circumstances.

For example, non-EU yachts must be imported into the EU and are subject to full rate VAT on the value of the yacht, unless an exemption or procedure can be applied. This can present significant costs for the owner of a superyacht, now potentially liable for up to 20%+ of the yacht value, at the time of importation.

As noted above, with proper planning, procedures can be applied which can abate or extinguish this liability. To name a few:

VAT Procedures for Private Charter Yachts

Temporary Admission (TA) – Private Yachts

TA is an EU Customs procedure, which allows certain goods (including private Yachts) to be brought into the Customs Territory with total or partial relief from import duties and taxes, subject to conditions. This can provide up to 18 months of exemption from such taxes.

In brief:

• Those non-EU vessels must be registered outside of the EU (e.g. Cayman Islands, Isle of Man or Marshall Islands etc.);
• The legal owner must be non-EU (e.g. an Isle of Man LP and Private Co etc.); and
• The individual operating the vessel must be non-EU (i.e. the UBO is not an EU citizen). 

You can read more about TA here.

VAT Procedures for Commercial Charter Yachts

French Commercial Exemption (FCE)

The FCE procedure allows commercial yachts operating in French territorial waters to benefit from VAT exemption.

In order to benefit from the FCE, the yacht needs to comply with 5 requirements:

1. Registered as a commercial yacht
2. Used for commercial purposes
3. Have a permanent crew onboard
4. The vessel must be 15m+ in Length
5. At least 70% of charters must be conducted outside of French Territorial Waters:
   • Qualifying voyages include those cruises outside of French and EU waters, for example: a trip starts from another EU or non-EU territory, or where the yacht cruises in international waters, or starts or ends in France or Monaco via international waters.

Those that meet the qualifying criteria can benefit from VAT exemption on importation (normally calculated on the value of the hull), no VAT on the purchase of supplies and services for the purposes of trading commercially, including no VAT on the purchase of fuel.

As you can see, whilst beneficial, the FCE can be operationally complex, particularly with regard to complying with point 5. A “non exemption” alternative is the French Reverse Charge Scheme (FRCS).

French Reverse Charge Scheme (FRCS)

Article 194 of the EU Directive on the Common System of Value Added Tax was brought into force to reduce the administrative VAT burden of both the EU Member States and non-established persons doing business in EU member states. Due to the discretion afforded with regards to implementation, the French Authorities were able to extend this Directive to offer non-established entities certain VAT benefits via the implementation of the FRCS.

Whilst EU entities must make 4 importations in a 12 month period, to be eligible for the FRCS, non-EU entities (such as incorporated Isle of Man LPs) do not need to meet this criterium. They will however still need to engage a French VAT agent to assist with the local administrative duties and formalities.

No VAT will be payable on the hull importation under the FRCS, and as such will not require disbursement. Albeit, VAT on goods and services will still be payable, but can be reclaimed later. Therefore, correct application of the FRCS can provide a cashflow neutral VAT solution. 

Once the FRC importation has been completed and the yacht has been imported into France, the yacht is granted free-circulation and can operate commercially within any EU territory without restriction.

As you can see, due to the formalities and potential tax liabilities at stake, importation needs to be carefully planned and Dixcart work with specialist partners to ensure proper compliance with formalities.

Malta VAT Deferral

In the case of a commercial chartering activity, Malta provides an additional benefit when it comes to importation.

Under normal circumstances, importing a yacht into Malta would attract Vat at the rate of 18%. This would need to be paid upon importation. At a later date, when the company uses the yacht for  commercial activity, the company would claim the Vat refund back in the Vat return.

The Malta authorities have devised a Vat deferral arrangement which eliminates the need to physically pay out the VAT on importation. The VAT payment is deferred, until the first VAT return of the company, where the VAT element will be declared as paid and claimed back, resulting in a VAT neutral position from a cashflow point-of-view upon importation.

There are no further conditions attached to this arrangement.

As you can see, due to the formalities and potential tax liabilities at stake, importation can be complex and needs to be carefully planned. 

Dixcart has offices in both the Isle of Man and Malta, and we are well placed to assist, ensuring proper compliance with formalities.

Crewing Considerations

It is common for the crew to be employed via a third-party agency. Under such circumstances, the third-party agency will hold a crewing agreement with the owning entity (i.e. the LP). The agency will be responsible for vetting and supplying crew members of every level of seniority and discipline – from Captain to Deckhand. They will work alongside service providers like Dixcart to ensure the best possible experience for the UBO and their guests.

How Dixcart can Support your Superyacht Planning

Over the last 50 years, Dixcart has developed strong working relationships with some of the yachting industry’s leading experts – from tax and legal planning, to building, yacht management and crewing.

When combined with our extensive experience in the effective and efficient operation of corporate entities, registration and administration of yacht structures, we are well placed to assist with superyachts of all sizes and purposes.

Get in Touch

If you require further information regarding yacht structuring and how we can assist, please feel free to get in touch with Paul Harvey at Dixcart.

Alternatively, you can connect with Paul on LinkedIn

Dixcart Management (IOM) Limited is licensed by the Isle of Man Financial Services Authority.

Background

Malta has gained a high reputation in the shipping and yachting world, not only because of its geographical location but also because it offers attractive and competitive incentives, thereby making Malta one of the top flags in the world. Malta’s solid roots as a maritime location continue to enhance and expand the island’s footing in the maritime industry.

As well as creating a complete service offering for yachts; from shipyards to berthing facilities, to chandlers to maritime professionals, Malta offers ship and yacht owners several attractive solutions, including attractive VAT incentives for yacht and superyacht owners.

Reduced VAT Rate for short term charters as from the Start of 2024

As from 1^st January 2024, short term charters commencing in, Malta have benefited from a reduced 12% VAT rate, subject to the fulfilment of certain criteria.

The Tax & Customs Administration of Malta have released new Guidelines, specifically tailored for the application of the 12% Value Added Tax (VAT) rate, pertaining to the rental of pleasure yachts.

The Guidelines can be accessed by clicking this link.

VAT Treatment of Yachts Intended for Private Use

In March 2020, Malta published its guidelines establishing the means by which leased pleasure yachts are to be treated for VAT purposes, with a particular focus on the use and enjoyment provisions on yacht leasing supplies. The Guidelines issued on the subject matter reflect EU developments and practices.

With respect to operating leases, it is possible for a lessor/owner of a yacht to lease out their yacht to a lessee for a consideration, for a specified period of time. Through such a structure, VAT would be payable by the lessee on the monthly lease instalments, depending on the actual use and enjoyment.

In order to benefit from the said VAT treatment, the following conditions must be  satisfied:

• The lessor must be a Maltese entity, to be eligible for the Yacht leasing Scheme;
• There must be a yacht leasing agreement in place between the lessor and lessee setting out the conditions of the lease;
• The lessee must be a non-taxable person i.e. not using the yacht for commercial business purposes;
• The yacht must be placed at the disposal of the lessee in Malta;
• The lessor must maintain documentary and/or technological data to determine the actual use and enjoyment of the pleasure boat within and outside EU territorial waters;

This VAT treatment works depending on the ratio of use and enjoyment of the yacht in or outside EU territorial waters.

As a rule, full VAT payment at the rate of 18% is payable when the place of supply of the service is in Malta; however, in cases where the actual effective use and enjoyment of the pleasure yacht would be outside EU waters, there is an adjustment method that would apply.

The result will be that VAT would only be charged on the actual use and enjoyment of the yacht by the lessee in EU territorial waters. To this end, no VAT shall be due on the portion of the lease where the yacht is effectively used and enjoyed outside EU territorial waters.

Therefore, Malta VAT will be applicable solely on the use of the yacht within EU territorial waters; depending on the effective use and enjoyment of the yacht, possibly making it amongst the lowest VAT rates within the EU Member States.

Importantly, the VAT treatment options also provides an element of flexibility when it comes to exiting or terminating the lease. In the eventuality that at the end of the lease the lessor decides to contract the sale of the yacht in Malta, then VAT, at the prevailing standard rate, is charged on the value of the yacht upon subsequent sale.

In such a case should the Maltese VAT Department be satisfied that the necessary rules and regulations have been duly observed, a VAT Paid Certificate would be issued at their sole discretion.

VAT Treatment of Yachts intended for Commercial Use

Yachts intended for commercial use may opt for VAT deferment on the importation as follows:

• Obtaining a VAT deferment on the importation of the commercial yacht by a Maltese owning entity having a Maltese VAT registration; without needing to set up a bank guarantee (as historically required); or
• Obtaining a VAT deferment on the importation of the commercial yacht by an EU owning entity having a Maltese VAT registration, provided that the company duly appoints a VAT representative in Malta, without needing to set up a bank guarantee (as previously required); or
• Obtaining a VAT deferment on the importation of the commercial yacht by a non-EU owning entity, on provision by the importing entity, of a bank guarantee amounting to the VAT payable on 0.75% of the value of the yacht, capped at one million euros.

To opt for the first proposed VAT deferment structure, one would need to incorporate a company in Malta, and this company would need to obtain a valid Malta VAT identification number. In each instance, the importation of the commercial yacht will require the yacht to physically sail to Malta to undergo VAT and Customs procedures.

Following which, the yacht would be imported into the European Union, with the VAT payment deferred accordingly, rather than paid upon importation. In such a case, the yacht would be able to sail freely and circulate within EU waters.

Services Available from Dixcart Malta

At Dixcart Malta we have a dedicated team of professionals dealing with yachting matters including, but not limited to; yacht importation, flag registration, resident agent services, crew payroll. We are also able to assist with a number of your Yachting related needs.

Additional Information

For further information about Malta Maritime services please contact Jonathan Vassallo, at the Dixcart office in Malta: advice.malta@dixcart.com.

The Isle of Man has a long history of maritime structuring, and Superyacht planning in particular. In recent times, there has been a growing trend in the use of Isle of Man Corporate vehicles for the ownership of Non-EU clients’ Superyachts.

In this short article we will take a flying look at why the Isle of Man has become a first-choice jurisdiction for Non-EU Superyacht Owners. Although there are specific planning opportunities depending on the owner’s jurisdiction of Tax Residency, we will take a focus on the more general advantage that Temporary Admission offers.

1. About The Isle of Man

The Isle of Man is a self-governing Crown Dependency, possessing its own Government which sets the island’s laws and tax regime. The Isle of Man offers a tax-friendly environment for corporate entities, making it a prime location for establishing Special Purpose Vehicles (SPVs) for luxury asset holding and more. Notably, the island features zero rates for Corporate Tax and Capital Gains Tax.

In almost all facets the Isle of Man is independent from the United Kingdom – almost all. Importantly, as a Crown Dependency, the UK is responsible for the island’s international affairs. Prior to Brexit, the Isle of Man had a special relationship with the European Union that allowed the island to take part in the EU Customs Union and the Single Market enjoyed by Member States.

When the UK left the EU, the island’s special relationship also came to an end, meaning the Isle of Man also lost its unique access to the EU Customs Union and Single Market.

Whilst the end of the special relationship undoubtedly had mixed results, one positive outcome was access to a VAT importation procedure known as Temporary Admission. Temporary Admission applies to the importation of a wide range of goods, including Superyachts for our purposes.

You can read more about why you should consider the Isle of Man for Yachting Post-Brexit here.

2. Temporary Admission Overview

Superyachts originating from outside the EU must be imported into the Customs Union, which can subject them to VAT at the local standard rate. This would result in a VAT liability based on the vessel’s value at the time of importation at the prevailing rate within the country of importation. Therefore, this represents a significant cost for owners of boats in excess of 24m+ in length. However, Temporary Admission (TA) can help mitigate this for private yachts.

The Istanbul Convention on TA is a Customs procedure and allows defined goods, such as means of transportation like Superyachts, to be brought into the Customs Territory with total or partial relief from import duties and taxes, subject to meeting certain conditions. For example, the goods must be imported for ‘Specific Purpose’ and are intended for re-exportation within a specified period (Article CUSTMS.16(1)).

Where TA is applicable, owners established outside of the EU who are operating private Superyachts are exempt from VAT on import, albeit Customs Duty relief varies, dependent on the jurisdiction’s classification of the vessel and its Specific Purpose for being imported.

We have provided a quick reference diagram that covers the headline details and requirements below:

Superyacht Holding Structure for Temporary Admission

Rarely is it a good idea to own a luxury asset directly, especially in the instance of a Superyacht or Aircraft. Utilising a corporate holding entity is not only helpful for mitigating indirect tax implications, but also ringfencing the legal liability of financing and operating the craft.

You can read more about the benefits of utilising an Isle of Man SPV for the ownership and financing of your Superyacht here.

As corporate ownership is the preferred method of ownership in 99% of cases, the domicile of the company will be particularly relevant if cruising in EU waters is desirable. Therefore, the owner will need to incorporate a holding entity in any Non-Eu jurisdiction to utilise Temporary Admission.

Note that the jurisdiction of establishment in this case does not necessarily have to be the same as the chosen flag of the vessel. You can read more about the various popular shipping / yacht registries here.

The Isle of Man presents a neutral tax base and stable legislative environment that is well-regarded globally for its professional services and approach to regulation. Where the Isle of Man is elected for the holding vehicle, typically either an Isle of Man Companies Act 2006 Company and/or an Isle of Man Limited Partnership incorporated with Limited Liability are the vehicles of choice. You can read more about these corporate vehicles and more in this article.

You can find some relevant case studies that cover the use of Isle of Man corporate structuring for Superyacht holding here.

3. Your Trust & Corporate Service Provider

Choosing the right Trust & Corporate Service Provider (TCSP) for your Superyacht holding vehicle is a crucial decision that requires the careful consideration of several key factors. Below you will find a short list of questions to help ensure that you select a provider that aligns with your objectives.

Is the Trust and Corporate Service Provider Well Established?

Dixcart Isle of Man has been providing Corporate Services to the owners of High Net Worth Individuals and Family Offices for over 30 years and are exceptionally well positioned to assist clients seeking to undertake corporate structuring regarding their Superyachts.

Does the Trust and Corporate Service Provider Have Professionally Qualified and Experienced Staff and Will you Have a Dedicated Point of Contact?

Our qualified accountants, trustees, chartered Secretaries, compliance professionals and more will always be on hand to assist. Due to our low levels of staff turnover, you can be confident that the relationships you build with our team will be long lasting. The Directors appointed to your holding structure will be your dedicated points of contact from beginning to end.

Does the Trust and Corporate service provider have a Transparent Fee Structure?

As most admin and compliance carried out by Trust and Corporate Service Providers is delivered on a ‘time-spent’ basis (i.e. at hourly rates), you need to ensure that the fees are transparent and that you will never be billed without understanding what it is you are paying for. At Dixcart, we prioritise transparency and undertake regular reviews to ensure a fair and open relationship with our clients and advisers. We always provide advance notice and secure client approval before taking any fee-related actions, as we believe trust is essential in nurturing sustainable relationships.

Does the Trust & Corporate Service Provider have robust compliance and regulatory standards?

Whilst it may not initially seem like the highest priority, it cannot be understated just how important the internal governance and compliance controls of the Trust and Corporate Service Provider are. This essential work is the backbone of any risk management, providing the front line of defence when it comes to any legal or tax challenges. Additionally, as the Trust & Corporate Service Provider will likely have a number of clients, you will want to ensure that their working practices are robust and in line with best practices. For example, where the TCSP runs into regulatory issues it can lead to clients having to search for a new service provider – which can be a costly and time-consuming job. At Dixcart we identify compliance as a competitive advantage, simply because it means we’re here for the long run. Our clients can rest assured that all activity is undertaken with a view to true sustainability.

Does the Trust & Corporate Service Provider have access to a body of industry professionals?

Dixcart Isle of Man have cultivated robust partnerships with leading experts across various relevant fields in the yachting industry, ranging from tax and legal planning to yacht construction, yacht management and more. This means that no matter what stage you are at, whether a new build or existing structure, we can assist clients in achieving their objectives.

4. More Than Just Superyachts

This last section is just to simply note that, where we can undertake Superyacht structuring for clients and their advisers, there are often other planning opportunities that we can assist with.

For instance, where the client is living in a jurisdiction that is not their country of origin or there is some form of international investment being undertaken, there can be significant benefits to utilising an Isle of Man Trust & Corporate Services Provider, such as Dixcart.

You can read more about all of the ways in which a Trust & Corporate Service Provider can augment your worldwide activities.

Get in Touch

If you require further information regarding the use of Isle of Man corporate structures for the purpose of holding assets such as a Superyacht, please feel free to get in touch with David Walsh at Dixcart: advice.iom@dixcart.com

Alternatively, you can connect with David on Linkedin.

Dixcart Management (IOM) Limited is Licensed by the Isle of Man Financial Services Authority

Resident Agency Services for Yachts

Malta has now been established as a reputable maritime jurisdiction for many years. A number of factors have contributed to making Malta a leading maritime hub: a strategic location in the centre of the Mediterranean, natural harbours, and an extensive range of maritime services, including; shipbuilding and repair works, a freeport, bunkering, ship supplies and towage services.

The island’s geographic location has given it significant importance and Malta is now recognised as being a port of entry into the EU.

Malta offers attractive and competitive incentives, making Malta one of the top flags in the world.

Who Can Register a Yacht/Vessel under the Malta Flag?

Under Maltese law, yachts may be owned and registered by; any Maltese, EU/EEA or Swiss national or company, or any third country national who enjoys legal personality that meets the criteria specified by the Registrar of Shipping. Maltese companies are considered to beacceptable ownership vehicles for yachts.

Maltese companies may be established by any person, for the purpose of yacht ownership. The owner, through the company, must be clearly identifiable, and non-Maltese owners must appoint a Maltese resident agent to liaise with the authorities.

Once a yacht is registered in the Maltese registry there are no restrictions on the nationalities of the individuals manning the yacht, and where the yacht may sail to.

What are the Advantages of Registering a Commercial Yacht under the Malta Flag?

1. No trading restrictions imposed on Maltese registered commercial yachts.
2. Fast crew-acknowledgement certification process with STCW endorsements processed within a maximum period of three months from acknowledgement.
3. A VAT deferment can be obtained, when a yacht to be used for a commercial operation, is imported into Malta. This means that no VAT outlay will occur which provides the owner with a significant cashflow benefit. The yacht owner will also be able to recover VAT incurred on goods and services used, during the chartering operations.
4. When a shipping organisation licensed in Malta sells a yacht, no Malta tax is liable.
5. On the sale of shares in a yacht owning company by a non-Maltese resident owner, no capital gains tax will arise as this is exempt under Malta Tax Law.

Requirement for a Malta Registered Agent

When an owner is a non-Maltese entity, a Malta resident agent needs to be appointed. Dixcart Malta offers this service and is very experienced in representing international owners in Malta.

A resident agent, such as Dixcart Malta will provide the following services:

1. The channel of communication between the international owner and the Maltese Government departments and authorities.
2. The signing and filing, of all declarations and forms required by Maltese law, with Maltese Government departments and authorities, on behalf of the international owner.
3. Acting as the judicial representative of the international owner for judicial proceedings in Malta.

At Dixcart Malta we have a department consisting of qualified accountants and lawyers dedicated to Resident Agent Services and are able to assist with your Maltese Yachting related needs.

Additional Information

For further information about Malta Maritime services please contact Jonathan Vassallo, at the Dixcart office in Malta: advice.malta@dixcart.com.

Background

The objective of the Madeira International Shipping Register (MAR) is to offer a credible alternative to other international registers. The high quality and safety standards of a conventional register have been maintained within an attractive tax environment designed to encourage inward investment to the island of Madeira. Vessels registered with MAR carry the Portuguese flag and are subject to the International Treaties and Conventions entered into by Portugal.

Over half a million vessels are now registered with MAR and it is ranked the fourth international shipping register in the EU. Four of the largest ship-owners in the world, APM-Maersk, the Mediterranean Shipping Company (MSC), CMA CGM Group and Cosco Shipping, have ships registered with MAR, as recorded by the international analyst firm, Alphaliner.

Key Developments in 2017

In 2017 a number of significant developments took place, increasing the attractiveness of registering a vessel in MAR:

• The Madeira Shipping Register was “White Listed” on both the Paris MOU and the Tokyo MOU.*
• Vessels under the Portuguese flag are included in the Qualship 21 Index of the United States of America. This certificate recognises the exceptional standards of the Register
• The Korean Register (KR), a member of the International Association of Classification Societies (IACS), was granted authorisation by the Portugal Maritime Authority (DGRM) to deliver statutory services on behalf of the Portuguese flag. This authorisation enables the Korean Register to act as a Recognised Organisation (RO), conducting surveys and audits, and issuing certificates to Portuguese flagged ships, including those in Madeira, to ensure full compliance with SOLAS, MARPOL, ITC, ILL and MLC regulations.

*MOU: Paris Memorandum of Understanding on Port State Control (MoU) and Tokyo (MoU).

Advantages of Registering a Vessel with MAR

The key advantages of ship registration in MAR are detailed below:

• Shipping companies licenced to operate within MAR benefit from a corporate income tax rate of 5% until 2027. They also enjoy automatic VAT registration and have access to the Portuguese double taxation treaty network.
• The Register is of a high standard, has EU credibility and full access to EU cabotage.
• It is not regarded by the International Transport Workers’ Federation as a flag of convenience.
• There are no nationality requirements for ship owners of vessels registered in MAR and they are not required to have their head office in Madeira; it is sufficient to have local legal representation with adequate powers. Dixcart in Madeira can provide this service.
• The existence of a flexible mortgage system allows the mortgagor and the mortgagee, by written agreement, to choose the legal system of a particular country that will govern the terms of the mortgage.
• Registration fees are competitive and there are no annual tonnage taxes.
• Generally, the captain and 50% of the crew of the ship must be “European”. This includes nationalities such as Polish, Russian and Ukrainian, as well as citizens of Portuguese-speaking countries, which allows for flexible manning.
• Crew wages are exempt from income tax and social security charges in Portugal.
• Temporary registration is allowed by law (bareboat charter: “In” and “Out”).
• Eight International Classification Societies are recognised in Portugal. MAR can delegate some of its functions to these societies. This can be simpler and more convenient for ship owners.

Additional Tax Advantages for Shipping Companies in Madeira

In addition, to the reduced corporate tax rates, Madeira shipping companies also enjoy exemption from withholding taxes on the distribution of dividends, exemption from withholding taxes on interest, royalties and service fees paid to non-residents, and exemption from capital duty, notary and registration fees. If certain requirements are met, shipping companies may also be exempt from capital gains tax when subsidiaries are sold.

Shipping companies can benefit from the Double Taxation Treaties with Portugal and Investment Protection Treaties signed by Portugal.

Summary

The approach adopted by MAR allows for flexibility. Depending on the circumstances, the ship can be registered on MAR with the shipping company licensed in another jurisdiction, OR the shipping company can be registered in Madeira with the vessel registered elsewhere, OR both the vessel and the shipping company can be licensed in Madeira. Each of these options offer various advantages.

How Can Dixcart Help?

Dixcart has extensive experience working with the owners and operators of commercial vessels as well as pleasure and commercial yachts. We can assist with the permanent and/or bareboat registration of vessels, re-flagging, mortgages, and the establishment of corporate owning or operational structures for the holding or management of vessels.

Additional Information

If you require additional information regarding the International Shipping Register of Madeira and the tax efficiencies available to ships owned by Portuguese companies registered in MAR, please contact the Dixcart office in Madeira: advice.portugal@dixcart.com

See our Air Marine service.

Malta and the Marine Sector Plus a Definition of Insurance

Malta has a long, rich maritime history and has the largest shipping register in Europe. Insurance is a topic that requires a detailed understanding of the options available, by the companies operating in this sector and professional advisors such as Dixcart Malta.

The contract of insurance is a contract under which one person (the insurer) is legally bound to pay a sum of money or its equivalent to another person (the insured), upon the happening of a specified event involving some element of uncertainty as to time or likelihood of occurrence, which affects the insured’s interest in the subject-matter of the insurance.
The objective is to indemnify the insured against losses attributed to marine adventure. The three main principles of marine insurance are: indemnity, insurable interest and utmost good faith.

The First Principle of Indemnity

The principle of indemnity, in the context of insurance, essentially has two elements:

1. To ensure that the amount compensated or reimbursed shall not increase the assets of the insured in any way. An insurance policy can never be a source of benefit or profit for the insured;
2. The amount of compensation or reimbursement should never exceed the value of the policy taken. The amount which has been agreed upon by the insured and the insurer, if any, is the upper limit of the compensation to be paid.

The Second Principle of Insurable Interest

This second principle is made up of the following:

1. financial loss;
2. the loss was caused by the peril insured against;
3. the subject matter was covered by the policy;
4. insurable interest.

An insurer normally requires:

• The assured may benefit by the safety or due arrival of insurable property or be prejudiced by its loss, damage, or detention in respect of which he/she may incur liability;
• The assured stands in a legal or equitable relationship to the adventure or to any insurable property at risk in such adventure; and

The benefit, prejudice or incurring of liability referred to in the first bullet point above, must arise in consequence of the legal or equitable relationship referred to in the second bullet point.

The Third Principal of Utmost Good Faith

The third and final principal of utmost good faith is embodied in The Marine Insurance Act.

A contract of marine insurance is a contract based upon the utmost good faith, and, if the utmost good faith is not observed by either party, the contract may be voided by the other party. The duty of utmost good faith requires both parties to ensure proper disclosure of all material circumstances and to avoid making misrepresentations about material facts, circumstances or beliefs.

If utmost good faith is shown not to have been observed by either party, the statutory duty enables the aggrieved party to rescind the contract ab initio, thereby restoring the parties to the position they were in, as if they had not entered into the contract.

The Courts have consistently ruled against allowing the insured’s duty of good faith, to be used by the insurer as an instrument to enable the insurer him/herself to act in bad faith. For the insurers to succeed in avoiding the contract, due to non-disclosure during the performance of the contract, the insurers would have to show that the claim was made fraudulently.

Types of Marine Insurance

The four main types of Marine Insurance are:

1.            Hull insurance: insurance of the vessel with its gear.

2.            Cargo insurance: insurance of goods carried by sea.

3.            Insurance against the liability of the carrier; protection and indemnity (P&I Clubs); 

              compulsory or mandatory insurance, voluntary insurance (e.g. liability for cargo).

4.            Other types of marine insurance; freight, salvage expenses and general  average

               contributions, insurance of containers, shipyards, oil rigs (“energy”), etc.

The Marine Insurance Policy

The contract must be in a policy that specifies: the name of the insured, the subject-matter, the risks, the voyage or period of time covered by the insurance, the sum insured, and the name of the insurer. It must also bear the signature of the insurer or his/her representative.

A policy is voided when there is:

• Any implied condition as to the commencement of risk: the adventure shall be commenced within a reasonable time, otherwise the insurer may avoid the contract.
• Alteration of port of departure: the risk does not attach and the insurer may avoid the contract.
• Sailing to different destinations: the risk does not attach.
• Change of voyage: the insurer is discharged from liability as from the time of the change. Manifest intention to change the voyage is sufficient. This must be a voluntary change of destination.
• Deviation: the insurer is discharged from liability as from the time of deviation. Where there are several ports of discharge, these must proceed in the order designated by the policy. If not then there is a deviation.
• Delay: the adventure must be commenced within a reasonable time period.

There are various ‘excuses’ for deviation or delay, the main ones being: lack of authorisation (“held covered” provisions), the safety of the ship, saving human life, and events beyond the master’s control.

Additional Information

For further information about the Malta Maritime matters please contact Jonathan Vassallo, at the Dixcart office in Malta: advice.malta@dixcart.com.

Alternatively, please speak to your usual Dixcart contact.

Background

Malta’s strategic geographical position has assisted its aviation industry to present numerous economic opportunities, for many years. The importance of the Malta aviation sector has led the Maltese Authorities to strengthen its aviation framework to further enhance aircraft registration and aircraft operator licensing.

Malta and the Aircraft Registration Act

Malta has aimed to position itself as one of the primary aviation hubs in the EU by continually reviewing and bolstering its aviation registry. The available aviation legislation provides the aviation industry with a solid foundation. This is further complemented by; competitive aviation registration costs, the authority’s practical understanding of the aviation sector, and favourable corporate structures. As a result, the aviation framework provides several benefits to individuals seeking to register an aircraft on the island.

The importance of Malta’s flag has already been proved within the aviation industry and the inception of the Malta Aircraft Registration Act in 2010, positioned Malta as having one of the most reputable aircraft registers, within the aviation sector.

The Aircraft Registration Act has helped to enhance the aviation framework on the island. Malta has also implemented the ‘Cape Town Convention in Interests in Mobile Equipment’ and its ‘Aircraft Protocol’. Malta took additional measures to boost the aviation industry in 2012, by establishing the Safi Aviation Park, providing a number of aviation services, including training and repairs.

Benefits of Aircraft Registration in Malta

There are many benefits and innovative concepts relating to aircraft registration in Malta.

Amongst these, as mentioned above, was the enactment of the Aircraft Registration Act (Chapter 503, Laws of Malta), which came into force on 1st October 2010. This new regime was implemented to regulate the registration of aircraft, mortgages, and other securities relating to aircraft.

• In terms of Maltese legislation, an aircraft may be registered by; an owner who operates an aircraft, or an owner of an aircraft under construction (or an aircraft temporarily not being used or managed), or an operator of an aircraft under  temporary title (subject to certain conditions), or a buyer of an aircraft under a condition of sale or title reservation agreement.

Additional benefits include:

A. More visibility of rights and interests in relation to aircraft, through the updating of the National Register;

B. Incentives to encourage the development of finance and operating leases relating to aircraft. Legislation provides clear rules on the tax treatment of the finance charge, available tax deductions to finance lessors, and capital allowances for lessees;

C. Broader registration options, extending to aircraft under construction or temporarily not in service and aircraft under a temporary title;

D. Recognition of fractional ownership of aircraft;

E. No withholding tax on lease payments where the lessor is not a tax resident of Malta;

F. Competitive minimum depreciation periods for aircraft;

G. The private use of an aircraft by an individual who is not resident in Malta and is an employee/officer of an employer/company/partnership, whose business activities include the ownership/leasing/operation of aircraft used for international transport, does not constitute a taxable fringe benefit.

H. Legislation implementation including the provision of the Cape Town Convention on ‘International Interests in Mobile Equipment’ and its ‘Aircraft Protocol’, thereby granting secured lenders more protection and more effective remedies whilst also enabling lower borrowing costs.

Tax, Standards and Flexibility Advantages of Private and Commercial Aircraft Registration in Malta 

Tax

Since 2007, Malta has offered an attractive corporate tax system whereby non-residents can claim tax refunds. In practical terms, the standard 35% corporate tax rate is often effectively reduced to between 0% and 5%.

If you are considering aircraft registration in Malta, another tax benefit is that income, from the international transport of goods and passengers outside the country, is exempt from Maltese tax.

As an EU member state since 2004, the Maltese aircraft register permits free circulation of aircraft in the eurozone, which allows tax-free commercial operation.

VAT Treatment

The VAT treatment for aircraft leasing makes Malta an attractive jurisdiction for private and commercial aircraft registration, whilst ensuring full adherence to EU laws and regulations. The rules take into account the amount of time spent by an aircraft within EU airspace.

The imposition of VAT in Malta varies according to how an aircraft is used. The key differentiation is between, an aircraft being used by an airline operator mainly for ‘reward’ in relation to the international transport of goods or passengers, or an aircraft that is being used purely for private use.

VAT implications, such as those applicable in other EU member states, are also relevant in relation to; importations, intra-community acquisitions, and/or supply of aircraft. The intra-community purchase, importation or supply of aircraft destined for use by an airline operator chiefly for international transport of passengers or goods is classified as an exempt credit supply.

The following are additional exempt credit supplies:

(a) Supplies of equipment to constructors, owners, or operators of an aircraft;

(b) Supplies of services consisting of the modification, maintenance, chartering and hiring of an aircraft.

The VAT treatment applies to all aircraft, other than those used by airline operators for international traffic, as a VAT exemption applies in this latter case.

According to Malta’s VAT legislation, the lease of an aircraft, which airline operators do not use for international traffic, is the supply of a service subject to VAT, with the right of deduction of input VAT by the lessor.

In terms of the VAT simplification procedure, the portion of the lease that will be subject to VAT, depends on the amount of time that the aircraft is used in EU airspace. As it is difficult to identify the movement of a plane in advance and the period in which the aircraft will be operated in EU airspace, Malta applies an ‘expert technical test,’ to estimate the portion of the lease that will be subject to VAT. The standard Malta VAT rate of 18% is applicable on the established percentage of the lease that is deemed to be related to the use of the aircraft in EU airspace.

In addition, Malta offers a very solid legislative environment, with an extensive double-tax treaty network and transparency of rights and interests.

Standards

Falling under the jurisdiction of the European Union Aviation Safety Agency (EASA),  the Maltese aircraft register implements some of the highest levels of regulation in the world. Aircraft registration in Malta offers business jet owners peace of mind, with its International Civil Aviation Organisation (ICAO) rating, testament to stringent safety and security standards.

In addition, Malta adheres to the Cape Town Convention on ‘International Interests in Mobile Equipment’, which specifies international standards for leases, security interests and the registration of contracts.

Flexibility

Aircraft registration in Malta offers unparalleled flexibility for international operators. Aircraft on the Maltese aircraft register can be based and freely operated from anywhere globally.

It is also possible to add an aircraft that is currently under construction or ‘out of action’ to the Malta aircraft register.

Aircraft registration in Malta allows operators to take advantage of fractional ownership of a single aircraft. The potential benefits are enormous, with several co-owners being able to detail a percentage stake, each financed by a separate creditor.

How Can Dixcart Help?

Through our team of experienced professionals, Dixcart Management Malta Limited will assist you in all aspects of registering your aircraft in Malta. Services range from incorporation of the entity owning the aircraft in Malta and full corporate and tax compliance, to the registration of the aircraft under the Maltese Registry, whilst ensuring full compliance with Maltese Aviation legislation.

Additional Information

If you would like further information regarding Aircraft Registration in Malta, please speak to Jonathan Vassallo: advice.malta@dixcart.com, at the Dixcart office in Malta or to your usual Dixcart contact.

The global tourism industry was brought to a halt as COVID-19 restrictions saw holidays being cancelled ‘en masse’ last year. As international travel looks to be opening up again, HNWIs will play a key role in reviving the sector and one particular trend we have seen them be part of, is the purchase and registration of private yachts and/or the chartering of private yachts.

Registering your Yacht

As with any valuable asset, the ownership structure of your yacht must be carefully considered and the jurisdiction in which the yacht is to be registered is also very important. The flag chosen for registration is one of the most important decisions. Dixcart has extensive expertise in registering yachts in a variety of jurisdictions, where we have offices, in order to help simplify the process.  Here are also some top tips to think about when registering your yacht: Luxury Yachts – Top Tips for Tax Efficient Registration.

Here is a snapshot of some of the best jurisdictions for yacht registration around the world:

CYPRUS

Cyprus is a key maritime centre and is recognised as one of the most accessible registries in the EU. It has not only grown in size in the last two decades but has also made a considerable effort to increase the quality of its fleet and related services. As a result, the Cyprus flag is now classified on the whitelist of the Paris and Tokyo MOUs*.

Due to its strategic location at the gateway of Europe, Africa, Asia, and the Middle East, it is a hub for shipowners and investors from all over the world, and there has been a rapid growth in the number of Cyprus shipping companies in recent years.

The procedure for registering vessels under the Cyprus flag has been designed to attract foreign investment and to build a dependable reputation, to be recognised by all of the international shipping authorities. 

Cyprus offers competitive yacht registration fees, low ongoing annual fees for yacht owners, and an attractive tax treatment for officers and crew working on a Cyprus registered yacht (whereby they are not subject to income tax), as well as a series of other tax advantages including no tax on profits from operational or management profits, no tax on income or dividends received from a ship management company, and a favourable tonnage tax scheme, based on gross tonnage.

The common practice for those wishing to register a vessel under the Cyprus flag is to incorporate a company in Cyprus, which will either acquire the yacht in its name, or bareboat charter the yacht. Cyprus offers a competitive rate of corporate income tax at 12.5% and low operating costs for Cyprus-owned companies. In addition, there is no estate duty on the inheritance of shares in a Cyprus shipping company and no stamp duty is payable on the ship mortgage deeds.

Find out more: Key advantages of registering your pleasure yacht in Cyprus

GUERNSEY

As a crown dependency, Guernsey has a very reputable yacht registry. It is a member of the ‘Red Ensign Group’ of British ship registries and its yachts enjoy the high standards associated with the red ensign flag.

By registering a yacht in Guernsey, owners can benefit from the advantages of a tax efficient and stable jurisdiction and the favourable tax laws of the Bailiwick of Guernsey. There is also the advantage of using a Guernsey Corporate structure to own and operate a yacht which can provide asset protection for the owner, together with other benefits.

Guernsey registration is valid internationally and all documentation is issued in English which is widely accepted around the world. There are no requirements for a Guernsey-registered yacht to physically visit Guernsey and owners have the ability to obtain a provisional registration to cover the vessel for navigation immediately after purchase. 

Another very attractive factor is that Guernsey is outside the VAT territory of the EU making the register useful for non-EU resident owners wanting to operate their vessel VAT free in Europe, and who are eligible to do so under Temporary Admission (Temporary Importation) relief.

Find out more: Benefits of Registering a Yacht in Guernsey

MALTA

Malta has the largest shipping register in Europe and is the sixth largest in the world. The procedure for registering a yacht in Malta is relatively straightforward; the Maltese authorities are approachable, whilst at the same time, meticulously follow a rigid framework of guidelines and regulations, creating a cutting edge for Malta within this sector.

The Malta flag is a European flag, a flag of confidence and a flag of choice.

Many leading international banks and financiers often recommend the Maltese register. This is due to the several advantages available:

• No trading restrictions and preferential treatment in many ports.
• The Maltese flag is on the white list of the Paris MoU, Tokyo MoU and on the Low Risk Ship List of the Paris MoU*. In addition, Malta has adopted all international Maritime Conventions.
• All yachts can be registered in the name of legally constituted corporate bodies or entities (irrespective of nationality), or by European Union Citizens.
• A Maltese yacht may also be bareboat charter registered under another flag.

Provisional registration is valid for six months, although this can be extended by a further six months; by this time all of the documentation must have been completed for the permanent registration. 

Individuals interested in registering their yacht in Malta, might wish to consider using a Maltese Cell Company. Shipping and Aviation Cell Company Regulations provide the opportunity to use a new cell structure for companies operating in the fields of shipping and aviation, and are treated as separate legal entities. This means assets and liabilities relevant to the individual cell can be segregated from the assets and liabilities of non-cellular elements, and from the other cells which may be held within the structure. A relatively simple example might be where one cell owns yacht A, the second cell owns yacht B, the third cell owns yacht C, and cell D owns the business matters in relation to ‘yacht management’. They can all be separated within the structure to ensure extra protection of the assets.

Malta is continuously reviewing their maritime legislation and introducing new regulations, ‘leading the way’ in terms of initiatives in this sector. This includes yacht owners that have larger vessels and need to meet obligations for commercial passenger ships.

It is widely recognised when considering the operational pattern and risk profile of yachts, that these requirements, are in some instances disproportionately onerous and impractical in terms of design and implementation. As the trend for larger commercial yachts is growing, the 12-passenger limitation rule has become more problematic, resulting in an increase in administration for a number of organisations. This, combined with encouragement from the yachting industry, has provided impetus for Malta to develop the ‘Passenger Yacht Code’, to meet industry demands.

The introduction of the ‘Malta Passenger Yacht Code’ is applicable to passenger yachts which carry between 12 and 36 passengers, do not carry cargo, and which sail internationally. It is certainly a welcome development for those who plan to register larger commercial yachts under the Malta flag. It offers a solution to the many technical issues and concerns which were previously faced by prospective registrants.

Find out more: Why Malta is a great location for flagging or reflagging a yacht

PORTUGAL – MADEIRA

Madeira is part of Portugal and has full membership of the EU. This enables yacht purchasers to fully comply with EU legislation and the International Shipping Register of Madeira (MAR) is internationally recognised as a credible and competitive option in comparison to other shipping registers.

MAR maintains the high quality and safety standards of an EU register. It is regarded by the International Transport Workers’ Federation (ITF) as a flag of convenience and is included in the Paris Memorandum of Understanding (MOU) White List*.

An advantage of registering a yacht in Madeira is that it is an EU Register which allows full access to navigation in EU waters without any types of restriction for either commercial or private yachts.In addition, its EU standing has the advantage of providing substance to the VAT status of yachts registered in Madeira that operate within EU waters.

Madeira also takes into consideration the purchase of second-hand yachts. Portuguese VAT is applied to the lower acquisition price, as rules allow for devaluation suffered by the yacht (deemed market value). This can lead to a significant reduction in VAT.

Yachts that are commercially registered in MAR and are (i) used for navigation on the high seas and (ii) engaged in commercial/charter activities, benefit from several VAT exemptions:

• the acquisition price of the yacht;
• repair, modification and maintenance operations of the yacht;
• fuel and oil supply;
• the supply of goods (provisions) to have on board; and
• the supply of equipment.

In addition, there are no citizenship requirements for the crew, and they are exempt from personal income taxes. The crew also benefit from a flexible social security regime; crew members are not obliged to contribute to the Portuguese social security regime, provided that an alternative pension scheme is guaranteed.

As mentioned above, when we have looked at other jurisdictions, many yacht owners choose to register their vessel via a company structure. The International Business Centre of Madeira (MIBC), with its advantageous tax regime, provides a highly competitive package of tax benefits. Its reduced direct taxation, with effective corporate income tax rate of 5% until 2027, combined with an exemption from withholding tax (providing the shareholders are resident in an EU jurisdiction) on payments of dividends, interest, and royalties to non-residents of Portugal, makes it an attractive location for yacht operating companies.

Madeira companies also benefit from automatic VAT registration on incorporation and are instantly provided with a VAT registration number. This makes it easier for such companies to take advantage of the various benefits available.

Madeira yacht owning companies are exempt from the initial yacht registration fee and receive a 20% reduction in the annual yacht registration fee. Plus, withholding taxes on dividends can be eliminated by routing the investment in the Madeira company through an EU holding company, for example a Maltese holding company.

Find out more: Why consider Portugal for yacht registration?

Summary

Dixcart Air Marine assists clients who own, or wish to own, a yacht. Our team of experienced professionals can provide a wide variety of services including; pre-structuring and ownership advice, registering the yacht, the accounting, added value services, tax planning, assistance with crewing and payroll (if required), and ongoing annual requirements. If you would like to speak to one of our professional advisers, please get in touch:

• Cyprus: advice.cyrpus@dixcart.com
• Guernsey: advice.guernsey@dixcart.com
• Malta: advice.malta@dixcart.com
• Portugal/Madeira: advice.portugal@dixcart.com

*White List Paris and Tokyo MOUs: Flags securing the highest rating in relation to the Memorandum of Understandings on Port State Control.

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