Withholding Tax Implications for Charter Yachts

Yacht owners established in territories such as Cayman, BVI, Isle of Man, Guernsey and Jersey need to be aware that withholding tax of up to 33% is being applied to charters in some EU territories.

Spain, France and more recently Greece are applying this tax and we suspect that this list of countries will grow in the future.

Tax Triggers

How the tax is applied does differ between these countries. However, the common theme is that the tax is triggered when the yacht-owning company is established in a territory without a double tax treaty with the country where the yacht is put at the disposal of the charterer.

Spain, France and Greece

In Spain and the Balearics, withholding tax has been applied since 2014 and is collected by the fiscal agent who has been appointed by the yacht owner as part of the pre-requisite arrangements before any yacht can commence charter operations.

The French authorities are only currently enforcing this tax when the charter brokers hold funds on a French bank account & funds are transferred to yacht-owning companies from non-tax treaty territories. The responsibility falls to the French management or charter company to pay the withholding tax over to the French government; however, most charter brokers bank outside of France.

Withholding tax in Greece is being applied in a similar format to Spain and the Balearics.

Restructuring Advice

All yacht-owning companies established in these territories that are undertaking charter activity should consider restructuring arrangements. Migration of the existing company or establishing a new yacht-owning company in a more suitable jurisdiction that does not trigger withholding tax issues is the preferred option. One such territory for migration or to set up a new yacht-owning company is Malta and our Sarnia’s Malta office and Praxis Group’s In House Tax team is on hand to help with such matters.

There are several other factors to consider in the restructuring arrangements including crew employment and payroll, suitability of flag, the yacht’s ‘in free circulation’ status, financial arrangements, and the physical location of the yacht, to name but a few.

Please note that this article is intended to provide a general overview of the matters to which it relates. It is not intended as professional advice and should not be relied upon as such. Any engagement in respect of our professional services is subject to our standard terms and conditions of business and the provision of all necessary due diligence. © Praxis 2023