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How to choose a flag for a Super Yacht?

A yacht is purchased for enjoyment. But there are still legal, fiscal, financial, technical and contractual issues which require careful planning and consideration.

One of the most important decisions for a new owner to make is the ownership structure and registration.

The choice of jurisdiction of the legal entity to own the yacht is an important one. Whether onshore or offshore a corporation may provide privacy, tax mitigation, facilitate estate planning and limit liabilities in the event of a claim. This choice should be made in tandem with the choice of the best jurisdiction in which to register the yacht. This does not need to be in the same country as the owning company. Together these decisions will have a huge effect on the operation of the yacht. We focus here on the registration issues.

Factors to take into account include the place of residence of the owner, area of navigation, use (pleasure, commercial or dual), characteristics of the yacht (year of built, length, tonnage, conformity with commercial regulations and International Conventions), VAT/tax status of the yacht, and even the nationality of the crew.

The chosen jurisdiction should be universally accepted, whilst providing political and economic stability without subjecting the owner and the yacht to unnecessary regulation and bureaucracy. Choosing a registry with a poor reputation or one that is targeted by Port States and Customs could have a detrimental effect on the smooth running of the vessel.
 
Lenders and insurance companies will also consider the reputation of a Flag State and their enforcement of environmental, safety, procedures, standards, compliance with international regulations and casualty record.
 
The political stability and reputation associated with the British Red Ensign jurisdictions[1] make these jurisdictions popular. They have repute for efficient management and administration and benefit from British Consular support which may be useful for crewing matters. The relative merits of these flags need to be compared for matters such as registration fees, manning restrictions, or vessels age restrictions.
 
Beyond the Red Ensign group, the Marshall Islands (RMI) is a popular choice. RMI has adopted many of the IMO regulations, while working closely with the US Coast Guard to ensure that RMI registered yachts have automatic rights to a cruising permit for US territorial waters.
 
In common with St Vincent & the Grenadines, the RMI allows qualifying private yachts to charter up to 84 days a year, but subjects them to detailed surveys and specific conditions (only outside of EU waters for St Vincent).
 
For EU waters the pragmatic approach of Malta with tax advantages for commercial yachts and a leasing scheme for pleasure yachts has become an inevitable registry.

Pleasure vessels in commercial service (i.e. commercial yachts) need to comply with stricter rules than yachts that are only used privately, and each Flag State will have a different set of rules for commercial yachts.
 
After purchasing, structuring, registering, insuring...it’s finally time to cruising! But make sure to review the choice of flag is still appropriate before setting off to new waters.


[1] including UK, Bermuda, British Virgin Islands, Cayman Islands, Gibraltar, Guernsey, Isle of Man, Jersey and Turks and Caicos


For more information please contact Janet Xanthopoulos;
j.xanthopoulos@rosemont-yacht.com
+377 97 97 21 41


28/08/2017

Article published on Monaco Seaside magazine here.

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