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The Evolution of Yacht Charter

posted by Bruce Maltwood

 

The yacht charter industry has been around for several decades now and in the early days, yacht chartering was a less formal and rigorous transaction than it is today. Fast forward to 2018 and what we have now is a complex arrangement involving a myriad of various agents and requiring careful monitoring to avoid the numerous pitfalls.

Charter brokers, stakeholders, fiscal agents, technical agents, yacht managers and owners are required to navigate a myriad of complexities associated with yacht charter to operate correctly and avoid penalties, fines, taxes and possible detainment.

Maintaining fiscal registrations, obtaining charter licences, technical inspections, applying and charging the correct levels of VAT and duty, picking up and dropping off guests in the correct locations, adherence to local rules (e.g. French 70% trip rule) are all examples of the elements that need to be carefully managed. Added to this is the requirement for some yachts to switch from private to commercial and vice versa which throws up another dimension of issues.

Having one party oversee all the various elements is imperative to avoid duplications or omissions, enabling the charter party to enjoy their time on board the yacht.

Charter Contract

Most people are familiar with the MYBA charter contract which has become the go-to contract and the industry standard. It has evolved over the years to the latest electronic version downloadable for eligible MYBA members to use. With regular reviews from a legal and tax perspective, this contract provides a fair and balanced contract looking after both the yacht owner and the yacht charterer.

The stakeholder (usually the same as the Central agent) is party to the charter contract and holds the charter fee and any applicable VAT until the charter commences. VAT is calculated in the jurisdiction where the yacht is put at the disposal of the charterer and can vary depending on the cruising itinerary of the yacht. Looking at the main cruising areas, the VAT rates are as follows:

Country

Type

Standard

Domestic use

High Seas

France

Charter

20%

20%

10%

France

Cruise

20%

10%

0%

Italy

Charter

22%

22%

6.6% (>24m)

Spain

Charter

21%

21%

21%

Croatia

Charter

25%

13%

13%

Transport Contract

With charter fees rising in line with yacht values, there has been an increasing appetite for alternatives to the standard charter contract and we saw the emergence of the Transport Contract in France in 2017. The Transport Contract is based on the operation of cruise ships which attract a different VAT interpretation to that of yacht charter.

The way that the yacht operates is the same as a cruise ship with each passenger buying a travel ticket. There are similarities between a yacht cruise and a yacht charter; such as:

  • The captains’ powers and responsibilities
  • Instalment payments
  • Contractual modifications
  • Non-performance of the contract
  • Use of water sports equipment and due diligence requirements.

It is important however that the contract is completed correctly with a detailed cruise itinerary (to include each stopover and port) and full passenger details. Using a stakeholder who is affiliated with a reputable travel agent association such as Atout France or ABTA is strongly recommended for third-party cruises, and beneficial for owner cruises.

Description

Yacht Charter (MYBA)

Transport Contract (ECPY)

Title of guests

Charterer

Passenger

Where can you start        

Any country

France

Cruising limits

None

None

What is included

Yacht, accom & crew

Yacht, accom, crew, fuel & port fees

What is excluded

Fuel, berthing, food/drink

Food/drink, services on land

Captain answers to

Charter guests

Yacht Owner

Set itinerary

No

Yes

Amendments to itinerary

Unlimited

Restricted

Fuel costs in France

VAT free

VAT & Duty Free

The market does have a place for the Transport Contract but it will not replace the charter contract as many charterers require the freedom and flexibility associated with a charter.  

To ensure the future success of our industry we must look after the best interests of our clients at all times. Although the flexibility of a charter over a cruise is important to most, especially for third-party charters, the Transport Contract should at least be tabled for discussion.

Sarnia Yachts has been providing both ownership and operational services to clients for 47 years and is experienced in all aspects of both private and commercial operation.

Please get in touch to discuss your individual requirements and how Sarnia can help reduce the administration burden for your yacht.