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ARTICLE TO BOATSCAPE - YACHT REGISTRATION

With the world growing ever so smaller. The use of foreign corporations in US taxpayer's tax strategies has grown in complexity and in use over the last few years in an exponential rate. The sex appeal of savings income and other taxes for those who can afford to worry, need to consider foreign corporations not just for the savings of taxes on the purchase of the yacht, but estate taxes, income taxes, and liability protections as well.

There are many reasons why to register a yacht overseas. Although the average of yacht to be registered overseas is above 75 ft, I am asked to register yachts over 40 ft more and more at an ever-increasing rate. Registering a yacht overseas has many benefits, some of which are tax savings on the yacht purchase, income tax savings on the crew, asset protection,

Depending on the country we choose to register in, we are able to save on some or all of the following taxes Sales, VAT, GST, Luxury, and Personal Property Tax. Therefore saving the potential yacht owner sizeable amounts of money. However, the intended yacht usage would be a determining factor for such registration and the potential for tax savings.

Payroll taxes may be saved as well, when the yacht is used and operated outside the United States. Depending on the residency of the crewmember and the country in which we registered the yacht there may be no payroll or income taxes required to be withheld on that particular crewmember. The treaty of the crewmember and of the yacht-registered country becomes paramount here.

In the litigious society we live in, I can not emphasize enough the setting up of an offshore trust. We suggest registering your yacht overseas for two main reasons. First is in the case of losing a lawsuit in the states unrelated to the yacht. Losing some lawsuits will subject you to losing your assets, your yacht being one of them if owned in your personal name. The other main reason is for any lawsuits that are directly the result of yacht ownership. Lawsuits coming from this direction will subject the yacht owners other assets to liability as well. Insurance does play a big role here under both these scenarios. However, insurance premiums do cost money and judgements are known to adjudicate for more than the insured amount. To point, the yacht is a moving vehicle, an accident waiting to happen and a shark (lawyer) waiting to collect. By forming a foreign corporation either, as a limited liability company or limited duration corporation will help limited the liability for those yacht owners who hope to charter, and foreign trust to protect those yacht owners who do not.

The fees for registering a yacht overseas depend of course on the foreign country utilized and the tonnage of the yacht. The fees ranging from $1,500 to $2,500 for the yacht registration alone. I normally recommend registering the yacht in a country that upholds the fine traditions and customs of the British Flag. There are many countries to choose from, the sun never sets on the British Empire. However the country that is right for the particular yacht owner depends on the facts and circumstances and on a case by case basis.


For those engaged in chartering their yacht, forming a foreign corporation becomes even more advantageous. US shareholders of a foreign corporation, under certain circumstances may be able to defer paying US income taxes on earnings of the foreign owned corporation until the earnings are actually "distributed "to them. Providing of course that the corporation is not actively conducting business in the US. US taxpayers must complete, and attach certain filing requirements including form 5471. This is merely an information return. No tax required, but it must be filed.


There are other benefits to foreign registration of your yacht. US Coast Guard rules state that a US vessel must have a US captain. With the proliferation of the yachting community a good US captain's come with a premium. Why limit the marketplace and open up your deck to other possibilities. A Foreign owned and registered yacht can have foreign and US citizens as captain and as crew.

To sum, there are many choices in yacht registration and many different advantages. Depending on the facts and circumstances of each yacht and the yacht owner intentions will depend on the choices of the tax planning strategy. Those who fail to plan will plan to fail.

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