Category: Air Marine

In an increasingly complex regulatory and fiscal landscape, yacht owners and their advisers are looking for stable, well-regulated jurisdictions that offer clarity, flexibility, and efficiency. The Isle of Man has long been a respected centre for yacht ownership and management, and it continues to offer advantages for those involved in both private and commercial yachting.

In the Private Yachting space the Island facilitates access to Customs reliefs such as Temporary Admission for privately used yachts, provided specific criteria are met.

In this article we cover the following topics to provide a quick overview:

• Temporary Admission Relief (TAR) for Private Yachts
• How to Meet the Requirements of Temporary Admission Relief (TAR)
• What Next? Things to Consider When Planning Your Yacht Fiduciary Services
• What are Your Yacht Fiduciary Service Options? Jurisdictions & Providers

Temporary Admission Relief (TAR) for Private Yachts

Temporary Admission Relief (TAR) is a Customs procedure which allows certain goods (including means of transport – e.g., private Yachts) to be brought into the Customs Territory with total or partial relief from import duties and taxes, subject to conditions.

For example, the goods must be imported for ‘Specific Purpose’ and are intended for re-exportation within a specified period.

Whilst owners established outside of the Customs area are exempt from VAT under TAR, Customs Duty relief varies, dependent on the jurisdiction’s classification of the vessel and its Specific Purpose for being imported.

For quick reference we have provided a table of the headline details/requirements below:

EU TAR

The Vessel is registered outside of the Customs Union. (The flag state of the Yacht is non-EU)

The vessel is used by an individual established outside of the Customs Union. (The owning entity is established outside the EU)

The vessel must be operated by an individual established outside of the Customs Union. (Ultimate Beneficial Owner must be resident outside the EU)

Some further conditions to note: a. The goods must be imported with the intention of re-exporting them at a later date (Maximum 18 months); b. No alteration of the goods is intended (allowing for maintenance/upkeep), i.e. no value is to be added; c. The goods can be clearly identified (e.g., hull identification number etc.); d. The overall Customs requirements are met; and e. A guarantee is provided, if required (specific to the Member State).

How to Meet the Requirements of Temporary Admission Relief (TAR)

Thankfully there is a lot of scope for meeting the requirements for those wishing to set sail in the EU under TA:

1. Registration of the Vessel

For a TA procedure to apply with full VAT and Customs Duty relief, the Yacht must be registered in a jurisdiction outside of the EU (it will use the flag of a Non-Member State).

Following its departure from the EU, the Isle of Man now meets this criteria, alongside traditional favourites such as the Cayman Islands.

2. Establishment of the Individual

For our purposes, ‘individual’ refers to both Natural Persons and Corporate Entities. In this way we can have an individual established in a separate jurisdiction to the Ultimate Beneficial Owner (UBO) – often by way of a holding company, that will own the Yacht and which in turn will be subject to the local tax regime.

The jurisdiction of establishment in this case does not necessarily have to be the same as the chosen flag of the vessel.

3. Establishment of the Ultimate Beneficial Owner (UBO) 

For the purposes of TA, so long as the UBO is resident outside of the EU, they will qualify.

What Next? Things to Consider When Planning Your Yacht Fiduciary Services

When selecting a suitable ownership structure for the registration of a Private Yacht, which will benefit from TAR within EU waters, we would suggest checking the following broad criteria.

Choosing a Jurisdiction for the Holding Structure

• Strong economic international standards – a minimum ‘A rating’. (S&P / Moody’s)
  • Robust legal standards.
  • An OECD Whitelisted jurisdiction with a strong reputation for compliance and transparency.
  • Beneficial tax regime taxes.

Choosing a Yacht Fiduciary Service

To assist with the specialist advice, corporate structuring, and administration of the Yacht, we would recommend ensuring that your service provider ticks the following boxes:

• Geographic location – with relation to the local tax regime and time zone (for accessibility and ease of dealing). 
  • A proven track record –how established the provider is in the sector, as well as familiarity with this category of service.
  • Access to experts – with many providers, their scale often prevents direct and regular dealings with senior qualified staff members; you will want access to experts whenever you have a query or action that is required, and not to always have these dealt with by juniors.
  • Your business is valued – in an ideal situation, your business will be a priority to the provider, not just another client on the books. Finding a provider that is adaptable and responsive is key to service excellence.

What are Your Yacht Fiduciary Service Options?

With so many well-established shipping registrars and a wide selection of beneficial jurisdictions for incorporating a holding structure, you would be forgiven for having flashbacks of 2020’s uncertainty. This is where we can help.

At Dixcart, your needs are our priority – we provide a bespoke and personal service for those looking to manage and administer their luxury assets; giving you access to experts as and when you require them.

Because we are based in the Isle of Man, we benefit from our Aa3 rated jurisdiction’s political, economic and environmental stability. The Island is a self-governed Crown Dependency, setting its own laws and rates of taxation.

Whilst we can access any number of shipping registers, our local registrar has an exceptional track record of service excellence; providing an approach that blends modern flexible services and competitive rates without compromising on quality.

The beneficial tax regime, business friendly government and OECD ‘Whitelist’ status ensure that the tax vehicles we offer can help you achieve your goals whilst remaining globally compliant.

An Isle of Man registered Company enjoys the following benefits:

• No capital gains taxes
• No stamp duty (including on share transfers)
• No inheritance tax or death duties

We have been assisting clients and their advisers for over 45 years with the effective structuring and administration of wealth, having experience of utilising multiple shipping registers to ensign vessels in line with their desired purpose. If you would like to discuss how we can assist you in achieving the effective and efficient administration of a vessel we would be delighted to hear from you. Please contact Paul Harvey at the Dixcart Office in the Isle of Man: advice.iom@dixcart.com.

Alternatively, you can connect with Paul on LinkedIn or find out more about our Dixcart Air Marine services here.

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

This information is provided as guidance and should not be considered advice. The most appropriate vehicle is determined by individual client needs and specific advice should be sought.

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.

Our Malta office had the pleasure to interview Capt. Charles Pace, the Director of the Civil Aviation Directorate. Capt. Pace shared his views on the current status of the aviation sector in Malta, the competitive edge that Malta has compared to other jurisdictions, new market segments and his vision for the future.

Malta is now an aviation hub, with a Maintenance, Repair and Overhaul (MRO) sector, flight training and aviation software providers, as well as increased interest in Unmanned Aerial Vehicle Development. Malta is also part of important international agreements such as the Cape Town Convention. International players such as Lufthansa, Malta Air, Wizz Air, Lauda Air and more have chosen Malta as one of the bases for their operations. What are the main drivers that led these companies to take such decisions?

“The robust legal framework, the use of the English language, a favourable taxation and also the efficiency of the Civil Aviation Directorate are the main reasons mentioned by many companies. It is a fact that many companies move operations to Malta from other jurisdictions. They tell us how difficult it can be to do business in certain countries and that we give them a level of efficiency that is highly appreciated. The fact that our staff go the extra mile to process applications and to travel at short notice is extremely appreciated, as well as the availability, accessibility and willingness of our inspectors to assist during the application process. We also have an online system through which all applications are received. This cuts down on time and paperwork and is a transparent way of processing applications. The team at CAD has grown in size and, at the same time, is also much more proficient. Through a balanced pragmatic approach, we try to tick all the boxes.”

Malta is also an interesting jurisdiction for aircraft leasing structures, and there is a strong intention to further reinforce Malta’s offering in this space. How does this work? What are the current advantages for leasing structures in Malta and, in your opinion, what are the elements needed to further reinforce Malta’s offering in aircraft leasing?

“Leasing has been present in Malta for a while now. A few years ago, we carried out an analysis of our laws and made some tweaks to improve Malta’s position. Today, we have a very good product and companies have started to look at Malta as an alternative jurisdiction. In this period, we would need more exposure as well as buy in by the local banks. This being said, there are several companies that already operate through Malta. I would estimate around 400 aircraft are leased through Malta based companies, and this could easily double in the near future with other companies taking the plunge. We will have to prepare for an increase of the market size, for instance by creating university degrees that include modules related to leasing, and aviation accounting practices. We need more visibility both internationally and locally, to attract more business but also to create the talent that is needed to service a growing industry.”

In recent years, there is the tendency for airlines to lease their aircraft, rather than buying them. Many Malta AOCs owners offer this kind of services to commercial airlines – do you see space for further growth? Why is Malta better positioned, compared to other jurisdictions?

“Aircraft, crew, maintenance, and insurance (ACMI) has been very popular even pre COVID-19. Today, with the delays in production of new aircraft and also groundings due to engine problems, ACMI operators are very much in demand.  The Phenomena allows legacy carriers to increase capacity on demand and to replace grounded aircraft. I believe that this will remain a strong market for at least 3 more years due to lack of capacity. The problem is that many carriers are not letting go of aircraft as the new ones on order are delayed. With this scheme, we need to keep in mind however that the margins are tight, and many airlines will struggle despite the high demand. Cost is continuing to increase due to labour demands, fuel (even more with the introduction of SAF mandates kicking in next year) and overflying charges. This leaves airlines in precarious situations as we have seen with first quarter results of at least two major groups lately.”

Since you became Director of the Civil Aviation Directorate, in 2016, the industry grew and so did the Malta Aircraft Registry, which now counts over 880 aircraft and 52 Air Operator Certificate owners. Such growth needs to be constantly supported by the various administrative structures. What were the main challenges that the CAD had to face, to keep up with this growth? 

“Working within the public sector might present, at times, significant challenges because you often need a private sector mentality and the flexibility of a private enterprise to be able to give stakeholders what they need. For instance, some of the main issues were improving the remuneration for staff, getting enough headcount and have the agility to change things quickly.

The industry has gone through highs and lows both of which have brought challenges. High demand for flying means airlines recruit and offer better conditions. This makes it difficult to find people to take up regulatory posts and therefore retention becomes even more crucial. During the pandemic, the situation was the opposite, with many looking for a job but unfortunately for us, some of those who came to us for a job in those dark days left as soon as things improved in the industry. Loosing people at short notice after giving them training is a bitter pill to swallow but is something that happens in many economic sectors. 

A significant change that happened in recent years is that when I first joined, we did not accept helicopters or simulators. Today, on the contrary, we regulate the full range of activities. We have examination centres in other countries and have quite a few projects in the pipeline. Malta offers a low fixed rate of income tax to attract individuals to Malta and this has proven to be a very successful initiative that distinguishes Malta from other countries. In a way, we have been victim of our own success, and it is now difficult to match expectations of the industry while following the procedures of the public sector.”

Unmanned Aerial Vehicles are another sub sector in which Malta aims to become a main player at the international level. UAVs open the door to a multitude of services and operations. What are the main opportunities that you see, in this space?

“Since legislation was introduced by the EU, we have been monitoring the developments. We have a dedicated portal for UAVs and are actively seeking to bring to the island a testing facility that will allow research or testing of larger drones. I am very much interested in using new technology to improve urban mobility: I believe that this will be the future and we need to embrace it. The size of Malta makes it even easier as trips are short favouring electric aircraft which might not be that yet suitable for longer flights. One of the main challenges with new technology is the rather lengthy process of certification by EASA. Although millions are poured into Research and Development, the process to obtain certification and start commercial operations is taking longer than expected.”

You have recently returned from Geneva, where the CAD participated at the European Business Aviation Convention & Exhibition (EBACE) 2024. Was the event successful and do we expect further growth?

“Once again, the CAD participated with a stand at EBACE, in conjunction with the Malta Business Aviation Association. It was yet another opportunity to network, promote Malta and I must say that even this year CAD was very much busy meeting prospective clients and discussing future investments in Malta. The response was very strong, even more than expected, which indicates that we might be in for a productive period in the coming months.”

A look at the future: what do you think Aviation in Malta will look like, in 2035?

“I honestly think that the demand will peak in the next 5 years. I think there will be less airlines around and larger airlines will control the market.  I hope that, by then, we would deploy more aerial vehicles which would replace cars and even certain ferry boats between the islands.”

Dixcart Air Marine

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 Malta’s Small Commercial Yacht Code is the latest addition to the Maltese yacht legislation. Malta offers deep natural harbours, a strategic position in the middle of the Mediterranean, a climate with 300 days on sunshine per year, widespread use of English and an attractive lifestyle. Add these elements to a robust regulatory framework, state of the art marinas, refit and repair facilities, highly professional international operators and service providers and you will obtain a fully-fledged, international maritime hub. Malta has lined up, over the years, all requirements to be attractive in the yacht and superyacht industry.

The advantages of the Malta Flag

Malta has a long maritime tradition, with a very deep understanding of the industry and a reputable and an internationally recognised register, all supported by a clear, business-oriented vision. Having a yacht flying the Malta flag has numerous advantages, and we invite all those interested to read our article on why considering to register a vessel under the Malta flag.

A forward-looking authority that listens to the operators

The Merchant Shipping Directorate introduced Malta’s Small Commercial Yacht Code (sCYC), effective from the 1^st of April 2024, following an extensive consultation process that involved all relevant industry stakeholders. The small commercial yacht segment has been in constant increase in recent years, and the introduction of the sCYC aims to meet the needs, demands and technological advancements of the yachting industry while, at the same time, ensuring compliance with international safety standards.

Applicability and exclusions

The Code is applicable to yachts under commercial use that:

1. Are at least 12 metres in hull length;
2. Are less than 24 metres in length;
3. Are engaged in commercial operations;
4. Carry no more than 12 passengers.

The code does not apply to Category D vessels, Rigid Inflatable Boats (RIBs), military vessels and any other vessel that is operated for non-commercial use.

The code also states that yachts may be exempted, on a case-by-case basis, and at the sole discretion of the Administration, from any of the Code’s requirements which are proven to be disproportionately onerous and technically impracticable for the yacht.

What changes for the small commercial yachts

One of the most relevant changes is that, under the sCYC, yachts from 12 metres, which previously fell outside the scope of the Commercial Yacht Code (CYC), may also be registered commercially under the Malta flag.

The sCYC updates and replaces the requirements included in the CYC, and all CYC certified yachts are deemed, automatically, to be compliant with the sCYC. However, the sCYC states that any small commercial yacht must be compliant with the new requirements at the time of the vessel’s first renewal survey conducted after 1^st June 2024. In addition, sCYC Certified Yachts operating in the territorial waters of other countries must also adhere to any additional requirements stipulated by those specific countries.

The Small Commercial Yacht Code identifies the requirements in terms of safety, crew welfare and pollution prevention that are appropriate to vessels sized between 12 and 24 metres. The regulator addresses the needs of the operators while maintaining these requirements in line with those set out in international conventions and EU Regulations and Directives. This approach of using the EU Recreational Craft Directive (2013/53/EU, as amended) as the basis for the Code is clearly visible with regards to yacht’s design, stability and structure.

Conclusion

The new Small Commercial Yacht Code caters for the specific needs of this niche market. The code encourages more yacht owners to adopt the Malta flag and join the charter market by operating commercially in the Mediterranean and beyond. With this Code, the regulator addresses and accommodates the unique features of this niche market that has been gaining relevance in recent years.

Dixcart in 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 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. Alternatively, please speak to your usual Dixcart contact.

The Isle of Man is a self-governing Crown Dependency that has become a leading non-EU jurisdiction for luxury asset holding vehicles, particularly for superyacht ownership structures.

In the below video we highlight the key features that make the Isle of Man an ideal location for superyacht ownership entities:

How Dixcart Can Assist with your Isle of Man Superyacht Planning

Since 1989, Dixcart has supported clients and their advisers with the establishment and management of Isle of Man holding structures. They have developed strong ties with industry leaders, including yacht builders, shipping registrars, yacht managers, maritime lawyers, and tax professionals. Dixcart can draw on this expertise to ensure client structuring is effective and run efficiently.

Dixcart Isle of Man excels in all aspects of superyacht planning, including the use of Temporary Admission, making their team exceptionally well-placed to support your structuring needs.

Get in touch

If you or your client are considering the establishment of an offshore luxury asset holding strucutre, please feel free to get in touch with Paul Harvey: advice.iom@dixcart.com

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

The aviation sectors in Malta and Cyprus are experiencing significant growth, leveraging their strategic geographic locations and favourable regulatory environments. These islands are becoming pivotal aviation hubs in Europe, offering a range of services from aircraft registration to appealing leasing schemes.

Expansion and Regulation in Malta’s Aviation Sector

Over the past decade, Malta has solidified its position as a key player in the aviation industry. The government’s proactive approach has helped establish a supportive ecosystem, including a Maintenance, Repair, and Overhaul (MRO) centre that caters to the needs of a growing fleet. The establishment of flight training providers and flight software operators has further enhanced Malta’s aviation infrastructure.

Recent years have seen Malta develop robust drone regulations, creating lucrative opportunities for companies in the Unmanned Aerial Vehicles (UAVs) space, particularly those involved in photo and videography. This regulatory framework makes Malta an appealing destination for aviation-related businesses.

Malta’s Strategic Aviation Benefits

As a regional aviation hub of international repute, Malta’s Aircraft Registry has grown to include over 800 aircraft and 40 Air Operator Certificate owners (AOCs). The presence of international airlines such as Lufthansa, Malta Air, WizzAir, and Lauda Air underlines Malta’s status as a base for operational excellence.

Moreover, Malta offers attractive leasing structures, facilitated by favourable taxation policies. Notably, income from aircraft ownership, operation, or leasing is not taxable in Malta unless remitted to the country. Additionally, there is no withholding tax on lease payments where the lessor is not a tax resident, alongside opportunities related to tax depreciation and shareholder tax refunds.

Malta is a member of the Cape Town Convention on International Interests in Mobile Equipment (or Cape Town Treaty), which standardises transactions involving movable property. These international standards supersede national legislation, therefore the presence of a clear set of rules for aircraft transactions, lowers the risks of lessors (who enjoy preferential ranking remedies in case of default) and, therefore, reduces borrowing costs.

These aspects are complemented by an extensive network of over 80 Double Taxation Agreements (DTAs) and by the possibility, for aviation companies resident in Malta, to claim the notional interest deduction.

Cyprus’s Private Aircraft Leasing Scheme

Cyprus has established itself as prominent jurisdiction for individuals purchasing Aircraft for private use. This is all down to its underutilised Private Aircraft Leasing Scheme which can result in an attractive VAT rate being charged on the purchase of the aircraft. The reduced VAT rate is calculated based on the aircraft’s operational time within EU airspace, the type of aircraft and its maximum take-off weight. However, it should be noted that the eligibility criteria for the scheme are rigorous, but it can result in substantial savings for qualifying purchases.

Cyprus’ host of Advantages for Individuals Purchasing an Aircraft

The private aircraft must be owned by a company registered for VAT in Cyprus (the Lessor) and leased to any physical or legal person that is established in, or resident in, the Republic of Cyprus and not engaged in any business activity (the Lessee).

When you couple this with the fact that Cyprus has one of the lowest corporate tax rates in the EU at 12.5%, you can start to see why the opportunities with leasing private use aircraft have put Cyprus’ aviation industry on the map.

Additionally, the aircraft in question can be registered under any global aircraft registry and is not limited to the Cyprus Aircraft Register.

Qualification Requirements

As can be expected, due to the savings that can be made by applying this scheme there are a number of specific requirements that need to be met.

The key qualification requirement is the receipt of prior approval from the VAT Commissioner. This is done on a case-by-case basis and the VAT Commissioner reserves the right to refuse any application they wish.

Other additional qualification requirements are needed as well in order for the Private Aircraft Leasing Scheme to apply.

How Dixcart Facilitates Aviation Operations

In Cyprus, Dixcart’s services encompass establishing and managing VAT-compliant leasing structures, drafting lease agreements, and securing approvals from the VAT Commissioner. We also handle the importation of aircraft into Cyprus, assisting with all related customs clearance processes.

Dixcart Management Malta Limited offers extensive services to assist with every aspect of aviation operations in Malta. These include the incorporation of entities owning aircraft, full corporate and tax compliance, and registration under the Maltese Registry while ensuring adherence to local aviation legislation.

How can Dixcart Help?

Both Malta and Cyprus offer unique advantages for aviation-related activities, making them ideal jurisdictions for entities and individuals looking to optimise their operational and financial efficiencies. Dixcart is well-equipped to provide detailed guidance and comprehensive services in both regions.

For further information regarding aircraft registration in Malta, please contact Jonathan Vassallo at advice.malta@dixcart.com. For details on the Cyprus Private Aircraft Leasing Scheme and other services, please contact us at advice.cyprus@dixcart.com.

To Learn more about Dixcart’s aviation services visit www.dixcartairmarine.com or read our comprehensive article.

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 Paul Harvey at Dixcart: advice.iom@dixcart.com

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.

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 Paul Harvey at Dixcart: advice.iom@dixcart.com

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