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Doing It Properly. VAT Registration for Charter Yachts

posted by Darryl Sharman

In cases where a yacht is used for genuine charter purposes Sarnia Yachts can arrange for VAT on the hull value to be mitigated through VAT registration of the  owning company usually in Malta, or alternatively through the Isle of Man (UK) if preferred, on the basis of the owning company being able to demonstrate its intentions of commercial activity.

A pay and reclaim or zero rating the supply of yacht builds (by following the intra-community rules) can be achieved as the yacht would constitute part of the charter company’s working capital. The commerciality is critical, not only in the initial VAT registration of the company but also the ongoing operation of the yacht in order to prove commerciality to the relevant tax authorities in order to retain the VAT registration of the company.

If the yacht is not being built in an EU shipyard, it will be necessary to import the yacht into the EU and for VAT to be accounted for in Malta or Isle of Man (UK). If the yacht is not imported into the jurisdiction of VAT registration and to avoid having to reclaim VAT from another member state, such as Italy, we will need to import the yacht into a member state, which will allow VAT to be accounted for in the country of VAT registration. For VAT mitigation purposes we usually incorporate a non EU company to act as the registered owner of the yacht and through which VAT registration is obtained. The yacht would usually be registered at the port of London as a commercial yacht on evidence of compliance to the MCA Code of Practice. If the yacht will be over 24 metres Load Line Length, the MCA Large Yacht unit will issue the compliance documentation via Ensign.

Ongoing the yacht must be seen to charter and if used by the owner a charter contract must be in place with evidence of payment of a market charter fee to the owning company. The owner should not be the preferred charterer when booking periods of charter and we recommend that owner use is not excessive.

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