Tax-avoidance experts are forever thinking-up new stratagems and schemes to help their clients work their way around the complex legislation. Those owning real property, or with family or business connections, in Europe may well be caught out. However, the application of this rule especially the definition of residency varies across Europe. It is sometimes possible not to pay this by relying on 'temporary importation' provisions, which allow those resident outside the EU to use yachts in the EU for up to 18 months. The method of financing a superyacht can have added benefits of additional privacy protection and a reduced tax burden.įor would-be owners perhaps the greatest benefit to be gained from financing is that it can form the basis of a structure for the effective avoidance of VAT. So as the centre of the world's ship finance sector is London, it makes sense to ensure that all the contractual relationships are governed by English law and subject to English jurisdiction, as far as this is compatible with any wider tax avoidance scheme.īy convention, mortgages are governed by the law of the country where the yacht is registered, and there may be no way round this under the law of that flag state. A greater concentration of shipping lawyers and case law, coupled with an innovative banking culture and a legal regime which promotes settlement over argument, may help save legal costs and maintain good relations among the parties. The vessel must normally be maintained to certain standards, with surveys and independent valuations being carried out from time to time.Īlthough it is not easy to think of yachts as being ships, that is exactly what they are in the eyes of the law. The lender may also require charter money and any insurance pay-outs to be paid directly to it first, and for further insurance in case the yacht's insurance becomes invalid. Even where the security is the vessel itself, a personal or corporate guarantee will normally be requested. Other forms of security include charges, assignments and pledges, although these are generally considered to be less effective. When buying a completed build (whether new or used) the best form of security from the bank's point of view is the marine mortgage, registered on the yacht in her flag registry, by which title is conveyed to the lender, but which becomes void under certain pre-determined circumstances.īecause the mortgage is automatically governed by the law of the vessel's flag, the choice of registry is a key factor in build planning as it affects the ease with which it may be purchased by another party later. Should the buyer default, then the lender should have a saleable project to sell, capable of being towed away for completion elsewhere if need be. The lender will then fund the remainder of the build, in return for an assignment of the build contract and the yard's refund guarantee. For those still on the drawing board, owners will normally have to pay for the first two or three stages themselves.
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